Invest in the S&P 500 With Confidence Using Active Management

For once since November 2020, the S&P 500 had its best week after a spate of sell-offs through Q1 and the beginning of Q2. Investors who still aren’t confident to dive back into the market, active management could help quell that fear.

“We’re taking a breather here and making some adjustments in the market to allow for that,” Tom Martin, senior portfolio manager at Globalt Investments, told CNBC. “We have come a long way down pretty fast and if we can stabilize here then the declines we’ve seen might be all that’s needed, or something close to that.”

The recent rally was helped by signs inflation could be slowing as the core personal consumption expenditures price index was down 0.3% in April compared to the previous month. Also, retail data is showing that investors are tailoring the way they spend their money amid rising prices.

“The consumer appears to have a ‘barbell’ approach to spending: low-end necessities and higher-end experiences/luxury items are doing fine, while general merchandise spending is being delayed, i.e., getting one more year out of that worn-down patio furniture is okay,” Wells Fargo’s Christopher Harvey said Friday.

If the recent rally is not enough to convince investors to dive back into the S&P 500, they might want to consider an actively managed exchange-traded fund (ETF) like the T. Rowe Price US Equity Research ETF (TSPA). The fund’s portfolio managers use an active, research-driven process to deliver large-cap exposure with a similar risk and sector profile that closely mirrors the S&P 500.

Focusing on Fundamentals

TSPA aims to seek long-term performance greater than the S&P 500 Index over a full market cycle. The ETF matches this benchmark index in sector and industry allocation, then utilizes the S&P’s current structure to guide the weighting, position sizes, and exposure to non-benchmark securities.

One of the key drivers of TSPA is a prime focus on fundamentals. TSPA analyzes a company’s overall financial position using data stemming from finance metrics such as return on capital and earnings per share.

Aside from the core numbers, there’s also a focus on the company’s core business model and market position. This can help analyze the marketplace in which the company operates and how well-positioned it is to thrive amongst other competitors.

TSPA presents investors with an ideal alternative to maximize gains beyond the S&P 500, but with a similar risk profile to the index, through exposure to diversified core equity guided by fundamental research from dedicated industry analysts, rather than annual index committee selections. Furthermore, the flexibility of this actively managed ETF is available at 34 basis points, which falls below its category average.

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