More investors are using passive, index-linked ETFs in active portfolio strategies. Rather than buying individual stocks, they are often using sector ETFs to trade entire industries and market segments.

“Although the products themselves are passively managed, they are being used tactically in an active manner by investors seeking to execute certain objectives–whether it be income, capital preservation, or even to outperform the market. Passive investments have dominated recent fund flows in North America,” analyst John Gabriel wrote in a recent Morningstar article. [ETFs Vs. Active Managers]

Investors are not outsourcing management–they are taking it into their own hands. ETFs are useful tools that can help underweight or overweight a sector or asset class, for the goal of outperformance, reports Gabriel. [Schwab Files to Introduce Actively Managed ETFs]

ETFs are actually helping the trend in active management. They are supporting investors to make active, tactical trades and use sector rotation strategies. In other words, investors are actively managing passive ETFs. [PIMCO ETF Puts Focus on Active ETFs]

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.