20 Dec 2022
Investors are reaping the benefits of a boom in active exchange traded funds (ETFs)—low-cost, diversified, flexible funds with a hands-on approach that can outperform the market and generate higher returns for investors.
Investors are reaping the benefits of a boom in active ETFs (1), or actively traded Exchange Traded Funds . Active ETFs combine ETF benefits—low-cost, diversified (2), flexible—with the hands-on approach of a fund manager buying and selling stocks and/or bonds to try to outperform the market and generate higher returns for investors.
In today’s market, investors have their pick of actively managed ETFs, each with a particular focus on various stocks, bonds, currencies, commodities, industries, and different regions, or a mix of all of the above, to name just a few. On Magnifi, investors can search “invest in active ETFs,” look for active ETFs to match their passions from robotics to Iceland, and even quickly research the proportion of actively managed shares that an active ETF holds.
An Exchange Traded Fund (ETF) is like a grocery basket of various stocks and bonds, with shares sold on the stock exchange. Active or passive, ETFs are traded on an exchange like a stock. Yet these funds are comprised of shares of many stocks and bonds, like a mutual fund. As such, an ETF is a low-cost and tax-efficient option to invest in a variety of asset classes and investment strategies. ETFs tend to have lower annual expenses than mutual funds, but due to the fact that they are traded like stocks, they come with higher transaction costs such as commissions, bid-ask spreads, and other fees.
Most Exchange Traded Funds are passive, meaning they track an index such as the S&P 500 or the Nasdaq. Active ETFs are only a small part of the $7 trillion ETF industry in the U.S., about 10.5 percent of sales and 4 percent of total assets. However, 2021 saw for the first time the launch of more active ETFs than passive ETFs—about 60 percent of the 500 EFTs that year.
This phenomenal growth is driven by enthusiasm among institutional investors: 78 percent of institutional investors prefer ETFs to other index vehicles, up from 68 percent in 2021.
No minimum costs
Rapid risk management
Investors invest in active ETFs to take advantage of a fund manager or management team's expertise, diversify their investments, and manage risk.
There are several key ways that investors take advantage of active ETFs. If you have a financial advisor, you can ask them how to use active ETFs to help you meet your financial goals. If you are investing on Magnifi, you can ask your virtual assistant how to invest in active ETFs.
Active ETFs can help you invest for the long-term in 6 ways:
Investors can invest in actively managed ETFs for any investment strategy that they have, with different allocations of stocks, bonds, currencies, commodities, industries, and different regions. On Magnifi, investors can search for active ETFs that match their strategies, their passions, or or their financial goals.
This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. Investors should carefully consider the investment objectives and risks as well as charges and expenses of all innovation-related securities before investing. Read the prospectus carefully before investing. ETFs and mutual funds are actively managed and there is no guarantee that the manager’s investment decisions will produce the desired results. All investments involve risks, including possible loss of principal. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and fund expenses will reduce returns. You should carefully consider a fund’s investment goals, risks, charges and expenses before investing. Download a summary prospectus and/or prospectus, which contains this and other information and read it before you invest or send money.