Eye Active Investing as Market Leaders Diverge | ETF Trends

Remember the Magnificent Seven? Per the Wall Street Journal, they’re really now just a “Fab Four.” Like the Beatles shedding original members, the likes of Nvidia (NVDA) and Meta (META) have taken leading roles as Tesla (TSLA) and Apple (AAPL) have drifted away. That changing of the guard should remind investors of the merits of active investing.

See more: 3 Active ETFs Sending Buy Signals

With active investing, investors can lean on strategies that and nimbly shift as markets do.  Indexed strategies lack the same speed in adapting their holdings. Perhaps more crucially, however, while the S&P 500 (SPX) adapts over time to the changing fortunes of its holdings, strategies that track it passively lack the freedom to weight or overweight holdings.

So, while a passive ETF tracking an index reflects a market’s changing leadership, its managers can’t act on trends. Active investing can combine fundamental research to assess individual firms. At the same time, it can look at lessons from news like the above change to the Magnificent Seven and adapt.

Active Investing Strategies

For example, as investors responding to the WSJ piece suggest in the above piece, markets doing well without relying on the Magnificent Seven, as they did last year, is a bullish signal. Active investing can consider the implications and applicability of that claim, along with many other trends, and adjust.

Active ETFs had a strong year in 2023, bringing in significant flows relative to their AUM. Many investors and advisors are looking to add more active strategies to their portfolios. With so much “wait and see” around potential rate cuts this year, active ETFs and active investing can help sift through the changing narrative while waiting.

T. Rowe Price offers a variety of active ETFs. For example, investors can consider strategies like the T. Rowe Price Capital Appreciation Equity ETF (TCAF) to get active investing exposure.

For more news, information, and strategy, visit the Active ETF Channel.