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“People hear all sorts of abbreviations—IRA, RIA, FIA, VA—and it can get confusing,” says Weschke. “But there’s one acronym that often deserves special attention: ETF.”
Traditional ETFs vs. Mutual Funds
ETFs are typically designed to track an index, such as the S&P 500, providing the diversification benefits of mutual funds but often at a fraction of the cost. Another key difference? ETFs can be bought and sold throughout the day, offering investors greater liquidity and control, whereas mutual funds can only be traded once per day.
“By providing intraday trading, ETFs allow people to move in and out of positions quickly,” adds Weschke. “That level of flexibility can be crucial when market conditions shift.”
The Rise of Actively Managed ETFs
While many ETFs have historically been “passive”—tracking a broad index without deviation—there has been a notable surge in Actively Managed ETFs. These vehicles are overseen by a portfolio manager who can adjust the fund’s holdings in response to market movements, rather than simply following a buy-and-hold strategy. According to recent reports, Actively Managed ETF assets grew to over $20 billion for the first time, a 28% increase in the past year alone.
“Actively Managed ETFs can potentially capitalize on short-term opportunities,” Weschke points out. “Managers have the freedom to use timing, sector rotation, and even short-selling strategies—tools that mirror more traditional active portfolio management.”
Tax Efficiency and Transparency
ETFs are inherently known for their tax efficiency. When an investor sells an ETF, it trades between individual investors much like a stock—generally avoiding the capital gains distributions that often come when a mutual fund manager sells underlying securities to meet redemptions. However, one challenge with Actively Managed ETFs is daily transparency: while holdings are disclosed daily, changes made during the trading day are not always reported in real-time.
“As with any investment strategy, there’s no such thing as universally ‘good’ or ‘bad,’” Weschke explains. “It’s about what’s appropriate or inappropriate for each individual investor’s goals and risk tolerance.”
About AdvancedFolio Capital Management
AdvancedFolio Capital Management, based in Setauket, NY, specializes in transparent, low-cost investment strategies tailored to each client’s unique objectives. Led by Eric Weschke, the firm focuses on financial education and strategic portfolio design that seeks to mitigate risk and enhance returns.
For more information, please visit www.AdvancedFolio.com or contact Eric Weschke directly.
**Disclaimer**: This article is for informational purposes only and does not constitute financial advice. Investors are advised to consult with a financial advisor before making any investment decisions. Investment advisory services are offered through Coppell Advisory Solutions, LLC dba Fusion Capital Management, an SEC registered investment advisor. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. See full disclosures on FusionCM.com/compliance. Insurance and annuity products are not sold through Fusion Capital Management. Fusion does not endorse any annuity or insurance product, nor does it guarantee any insurance or annuity performance. Annuity and life insurance guarantees are subject to the claims-paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain time after investing, the insurance company may assess a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. These commissions are separate and distinct from Fusion's investment advisory fees.
Eric Weschke
AdvancedFolio Capital Management
+1 631-675-1885
email us here
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