Investors have plenty of tools to tackle market upheaval, but few compare to the power of a well-managed active ETF. Active ETFs have come a long way since the ETF rule dropped in 2019, taking strides this year, too. For investors considering an allocation, consider three keys to active ETF investing that have emerged so far in 2023.
Active ETF Investing Trends
First off, investors may be familiar with the idea of the ETF wrapper as a vessel for stocks — but what about their tradability? Investors should consider how ETF trading spreads compare to trading the stocks inside the ETF. Actively trading individual stocks in a given asset class can really add up in spread cost. By trading an active ETF backed by managers specializing in an asset class, investors can save on spread cost.
Secondly, investors and advisors should take note of the rising tide of interest in active ETFs overall. Previously, mutual fund mavens and longtime market watchers had been concerned about liquidity in ETFs. Those concerns don’t go away overnight, but rising interest in active ETFs may equip those strategies with more overall liquidity.
While some investors may flock to massive, inflexible index funds, flexible, dedicated active ETFs are picking up interest – and assets. A growing list of available active ETF investing options helps, too.
Finally, advisors and investors should keep an eye on how active ETFs can play the rebound in fixed income. Fixed income struggled for a while in a red hot disruptive tech and e-commerce market. Rising rates have resurrected the “income” part of the equation, and active strategies are poised to harvest those yields. With so much uncertainty surrounding the yield curve, the Fed’s plans, and the dollar, active ETFs offer a valuable tool.
T. Rowe Price offers a roster of active ETFs investing in different asset classes. The firm’s managers average more than 20 years of experience as part of T. Rowe’s 80 years in investing overall. Investors can consider active strategies like the (TCHP ) and the (THYF ).
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