With investors now able to invest in ETF strategies in both active and passive flavours, getting the most out of that wide menu of options is one of the most important tasks for investors. Especially with a new year ahead, getting the best out of active and passive matters. One area that may be worth revisiting amid active’s rise to prominence may be an active equity core approach.
When it comes to the core side of the core and satellite investing model, many investors simply pick a passive ETF, invest, and wait. That has its merits, with simplicity and low cost often the standouts. Of course, it also has its drawbacks. As active ETFs have matured, they can increasingly compete with passive funds for that equity core role.
What kind of investor might want an active equity core approach for their portfolio, then? For one thing, those at or near retirement may want to add a more flexible core fund that can address volatility. Those investors may seek greater stability in their portfolios before retiring, and a significant market drop-off in their passive funds can hurt. Active flexibility could offer a solution.
Younger, more risk-oriented investors, meanwhile, may consider an active equity core approach for the potential upside. An active manager can frequently go further than a passive fund’s rules allow, leaning on fundamental research to over or underweight certain firms or sectors.
Over the long term, that fundamental research and adaptability could make an active core allocation a compelling opportunity. The Capital Group Global Equity Select ETFTM (Canada) (CAPG), for example, could serve in that role. The ETF, per Capital Group Canada information, aims to provide long-term growth of capital via investing in firms around the globe. Focusing on high conviction investments, it leans on Capital Group’s proprietary, collaborative research to drive its investing ideas.