Actively Managed ETFs: Strategies & Potential Benefits

The actively managed ETF is a unique type of investment vehicle. Here are the basics of the actively managed ETF and information about how it could benefit you.

Actively Managed ETF

An actively managed ETF utilizes investment strategies that try to outperform those of passive ETFs. While many ETFs will try to match a particular benchmark or index, an actively managed ETF will try to exceed those returns. An actively managed ETF can be used to mimic the returns of a particular mutual fund or a fund manager's stock picks.

Benefit to Investors

With this method of management, investors can take advantage of the ETF structure. For example, you might want to get involved with a particular mutual fund. However, if you find an ETF that mimics the returns of that mutual fund, it might be more beneficial to go with the ETF. Since ETFs are actively traded on the stock market, you will be able to buy and sell shares of the ETF more easily. If you are watching the market closely and decide to liquidate your shares in the security, you will be able to instantly do it with an ETF. If you invest in a mutual fund, you will have to wait until the end of the trading day to do so.