When assets move in and out of the fund at a slower pace, it results in fewer transaction costs and realized capital gains, which can lead to potential savings when tax filing season arrives.
In addition, the hands-off approach means fund managers charge lower fees given the less work required vs. active management. The passive investing strategy has the benefit of lower turnover. When assets move in and out of the fund at a slower pace, it results in fewer transaction costs and realized capital gains, which can lead to potential savings when tax filing season arrives.