The opposite of index funds that follow a passive investment strategy, actively managed exchange-traded funds (ETFs) frequently trade or pick stocks they believe will bring returns for investors. Only about 2 percent of ETFs are actively managed.
The advantage of an actively managed ETF is that they can allow you to outperform the market and capitalize on "trendy" stocks without having to hold and manage those shares yourself. Here are some of the best actively managed ETFs to invest in now.
ARK Innovation ETF (ARKK)
The ARK Innovation ETF is a $22.28 billion fund that focuses on innovation-based companies such as e-commerce, cloud computing, and digital media. This fund’s 56 holdings include some big names such as Tesla, Square, Roku, Zillow Group, and Zoom. This actively managed ETF has an expense ratio of 0.75 percent. It aims to capture long-term growth.
First Trust Long/Short Equity ETF (FTLS)
The goal of the First Trust Long/Short Equity ETF is to provide investors with long-term returns by establishing long and short positions in a portfolio of Equity Securities. That means it’s not only betting on those stocks it sees as gaining (long) but also those that will fall (short). This active ETF has over $332 million in total net assets. It focuses on healthcare, IT, and communication services sectors. Top holdings include Apple, Microsoft, CVS Health Corporation, and Thermo Fisher Scientific. The fund’s annual expense ratio of 1.55 percent is higher than other standard index funds, but 0.6 percent of that is margin interest expense and fees for its short sale strategy
WisdomTree Emerging Markets Local Debt Fund (ELD)
The WisdomTree Emerging Markets Local Debt Fund is an actively managed fund that seeks high returns through the investment in local debt in currencies of emerging countries such as Brazil, Chile, Mexico, Russia, and South Africa. Since its inception in August 2010, the fund has had a rate of 3.73 percent on market price returns. The fund has an expense ratio of 0.55 percent.
BlackRock U.S. Equity Factor Rotation ETF (DYNF)
The BlackRock U.S. Equity Factor Rotation ETF focuses on stocks in smaller, financially healthy companies with inexpensive and low volatility stocks. It has over $84 million in assets with 618 holdings. The holdings in this active fund lean heavily in the IT sector including Intel, Microsoft, Apple, Cisco Systems, and Adobe. The expense ratio is 0.30 percent.
FormulaFolios Tactical Income ETF (FFTI)
The FormulaFolios Tactical Income ETF focuses on fixed-income asset classes that have the greatest potential to provide stable, long-term returns at minimal risk. Those fixed asset classes could be in treasuries, investment-grade bonds, high-yield bonds, aggregate bonds and international government bonds. The fund invests in the top three with the lowest bond yields and highest price momentum. The expense ratio is 1.00 percent.
American Century Focused Dynamic Growth ETF (FDG)
The American Century Focused Dynamic Growth ETF is a growth fund that focused on large and mid-capitalization U.S. growth stocks. The primary sectors it invests in are IT and consumer discretionary. Top holdings include Tesla, Amazon, Alphabet (Google), and Facebook. It has had a year-to-date return of 6.63 percent for market price returns. The expense ratio on this fund is 0.45 percent.
SPDR SSGA Global Allocation ETF (GAL)
The SPDR SSGA Global Allocation ETF is an internationally diverse fund that invests in exchange-traded funds, commodity trusts, and notes. At least 30 percent of its assets are tied to countries outside of the U.S. Its primary benchmark is the MSCI ACWI IMI Index which measures the performance of developed and emerging markets. The expense ratio is 0.35 percent.