With some major news items dominating markets, namely rate cuts and China stimulus, investors may be tempted to make short term moves. Dipping out of some U.S. equities themes for another, for example, to capture the upside there or to avoid potential risks. For many investors, however, especially those nearing retirement, deviating too much from a long-term plan can be harmful. Instead, it may be worth picking a long-term active ETF that can adjust within its own holdings without being sold.
See more: Tax-Loss Harvesting? This Active Income ETF Could Intrigue
For many mutual fund investors, for example, selling at the wrong time can incur challenging tax events. That already makes efforts to adapt in the near term more harmful. Even in a tax-friendly passive ETF, an investor’s decision to stick or twist doesn’t always have the same supporting research managers of an active ETF can employ.
Volatility & Long-Term Active ETF Investing
Yes, market volatility may be on the rise, especially as the election nears. Volatility is not just a near-term phenomenon, however. Geopolitical, macroeconomic, and even public health challenges can throw markets a curveball. Selling a passive ETF at a loss to make a sideways move can even potentially incur a problem from the wash sale rule.
Per research from T. Rowe Price, a long-term growth view can offer some improved potential for outperformance.
That’s where a long-term active ETF can present an alternative. An active equity ETF with a broad remit and long time frame can also offer near-term adaptability. That would also not require the fund to be sold, either. Unlike static index strategies, active ETF managers can make changes within their portfolio so the investors don’t have to.
The T. Rowe Price Capital Appreciation Equity ETF (TCAF ), for example, may fit the bill. Managed by David Giroux, TCAF charges just a 31 basis point (bps) fee for its approach to capital appreciation. Having gathered more than $2 billion in just over a year of operation, the strategy could present a long-term play that can also ride out volatility. Through active management, this core equity portfolio can adapt to shorter-term market environments, while staying true to its longer-term objectives.
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