Invest in the S&P 500 with confidence through active management


For once since November 2020, the S&P 500 had its best week after a string of first quarter and early second quarter selloffs. For investors still unconvinced to dive back into the market, active management could help ease that fear.

“We’re taking a break here and making some adjustments to the market to allow for that,” said Tom Martin, senior portfolio manager at Globalt Investments, told CNBC. “We’ve come a long way pretty quickly and if we can stabilize here, the declines we’ve seen might be all we need, or something close.”

The recent rally has been helped by signs that inflation may be slowing, with the price index for core personal consumption expenditures down 0.3% in April from the previous month. Additionally, retail data shows that investors are adjusting how they spend their money amid rising prices.

“The consumer seems to have a ‘dumbbell’ approach to spending: basic necessities and high-end experiences/luxuries are doing well, while spending on general merchandise is lagging, i.e. saying they’re getting one more year of these worn patio furniture is okay,” Wells Fargo’s Christopher Harvey said Friday.

If the recent rally isn’t enough to convince investors to dive back into the S&P 500, they might consider an actively managed exchange-traded fund (ETF) like the T. Rowe Price US Equity Research ETF (TSPA). The fund’s portfolio managers use an active research-driven process to provide exposure to large caps with a similar risk and sector profile that closely mirrors the S&P 500.

Focus on the fundamentals

TSPA aims to seek long-term performance above the S&P 500 Index over a full market cycle. The ETF matches this benchmark in terms of sector and industry allocation, then uses the current S&P structure to guide weighting, position size and exposure to off-benchmark securities.

One of the main drivers of TSPA is the focus on fundamentals. TSPA analyzes the overall financial condition of a company using data from financial metrics such as return on capital and earnings per share.

In addition to the basic figures, the focus is also on the company’s basic business model and its position in the market. This can help analyze the market in which the business operates and how well positioned it is to thrive among other competitors.

TSPA offers investors an ideal alternative to maximize gains beyond the S&P 500, but with an index-like risk profile, through exposure to diversified core stocks guided by fundamental analyst research dedicated sectors, rather than through annual index committee selections. Additionally, the flexibility of this actively managed ETF is available at 34 basis points, which is lower than its category average.

For more news, insights and strategy, visit the Active ETF channel.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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