With 2025 hours away, many investors are likely finalizing their plans for the new year. ETFs, and active ETFs, specifically, have had a very strong 2024, and look primed to continue that momentum into 2025. Of course, as much as the end of one year provides an opportunity to look ahead, it also offers the opportunity to reflect. New Year’s resolutions can help turn insight into action, so here are three New Year’s resolutions for active investors to consider.
Don’t Ignore Active Core
Many investors in active ETFs are familiar with a core and satellite model, with passive funds at the core and friskier active strategies as satellites. While that has its merits, those investors with active satellite funds may want to consider active core, too.
Active investors can look to active core funds to adapt more quickly than passive core offerings, with more freedom than index trackers. Leaning on research, they can potentially outperform, while also adapting to risks. Concentration risk deserves special mention. Many passive core funds have massive weights to large-cap tech, which poses a risk if AI, for example, disappoints in 2025. An active core fund can still provide broad market exposure while screening hot sectors like tech for more durable opportunities.
Look to Active Investors’ Secret Weapon: Active Fixed Income
2024 saw fixed income investing roar back to life with a live rate market. While that initially made cash yields attractive enough to sit and hold, many investors have now moved back into bonds and other debt securities. When doing so, it may be worth considering active strategies.
That’s because passive funds struggle to properly replicate bond indexes. Active approaches can adjust to bond expirations, rolling over bond contracts, and more. They also do so at the same time as offering tighter scrutiny.
Let’s Get Thematic
When the ETF rule first hit in 2019, the explosion in ETFs saw the arrival of plenty of so-called “thematic” funds. While that initial wave has since receded, active ETFs still offer thematic flavors from time to time. They can provide more adaptability and perhaps tighter scrutiny, powerful tools when making big swings in smaller subsectors. 2025 could see further opportunities to use active therein.
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