With rising geopolitical tension in Ukraine and the Middle East, the stock market will surely continue to struggle in the coming days. Chinese slowdown and concerns over the health of the European economy will also weigh on the broad U.S. equities.
Given the grumpy economic climate, it is difficult for investors to maintain a healthy portfolio. Here actively managed ETFs offer a far better option. This is because these funds are actively managed by a manager who uses various skills and attributes (like top-down approach, bottom-up approach, value investing, growth investing or absolute returns strategy) so that the fund outperforms the benchmark index even if the odds are against it.
These products are gaining immense popularity in recent years and generally perform well in a world torn by strife and uncertainties. Though these funds attempt to beat the market, they might underperform their passive counterparts as most fund managers fail to match the return of the indexes with that of the funds (read: Protect Your Portfolio with These Multi-Asset Income ETFs).
Additionally, investors often overlook these ETFs as they are expensive due to research expenses associated with the manager's due diligence, and may not be popular or liquid too, which further inflates costs in the form of wide bid/ask spreads beyond the expense ratio. These funds also require daily portfolio disclosures, which could hamper their competitive portfolio composition.
While this is true in most cases, several active funds have managed to hold up quite nicely. There have been quite a few ...
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