Market uncertainty is rising as concentration risk, scorching hot valuations, and policy changes all loom over portfolios. With the near term increasingly unclear, the time may be now to make adjustments. ETFs, especially active ETFs, provide various options that can make portfolios more resilient and bolster investor finances. An active equity income approach, for example, could be just what the doctor ordered.
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While, traditionally, older investors, especially those nearing retirement, might look to current income, younger investors can benefit, too. An active equity income ETF can provide that ballast to portfolios with the active flexibility to outperform. That active flexibility can also empower managers to more closely scrutinize potential investments.
The T. Rowe Price Equity Income ETF (TEQI) could fill that active equity income ETF role. TEQI charges only 54 basis points for its approach. The fund primarily invests in U.S. large-cap firms potentially able to outperform the Russell 1000 Value Index. Specifically, TEQI invests in equity firms with low price-to-earnings ratios, above-average dividend yield, and low stock prices relative to fundamentals. The strategy provides a potential departure from the uncertainty surrounding some of the headline-grabbing mega-cap tech companies.
TEQI has delivered an average annual return of 14.3% since the ETF’s launch in 2020, per T. Rowe Price data. Leaning on fundamental research from T. Rowe Price, the strategy could provide a helpful boost to equity allocations in portfolios. Especially as the year kicks into gear and investors look to refresh, TEQI could slot in to revamp an overall allocation.
For older investors, especially those nearing retirement, that income and active adaptability could help address volatility. Younger investors who want some stability but still seek the potential for outperformance may like the active side of the fund, too. Looking ahead, a strategy like TEQI may offer a compelling case.
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