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Steady as She Goes for Markets? Don’t Ignore High-Conviction Investments

BY | ETF Database
01/27/2025 | 967 VIEWS
When it comes to markets and portfolios, what will 2025 bring? A new administration’s policies are taking shape, and while those impacts will take quite some time to be felt, the next big trend or news item to watch has yet to appear. Indeed, despite continued concentration risk, last year’s megacap standouts look set to continue playing a key role. Where, then, might investors look? The moment may actually invite investors to consider looking more toward high-conviction active ETFs rather than simple index-tracking funds.See more: Stocks Too Expensive? Focus on Fundamentals in Active Value ETF TVAL While passive funds may be straightforward, they bring some degree of complacency with that simplicity. 2025’s uncertainty also implies a significant amount of risk regarding “unknown unknowns.” Concentration risk looms, of course, with stubborn inflation and government risk issues. The risks investors aren’t thinking about may be the culprits should portfolios take a hit. Together, those factors paint a blurry picture at best. In that scenario, investors may want to lean into those high-conviction active strategies that can adapt to changes and uncertainty. As an example, active ETFs often lean heavily on fundamental research, engaging in bottom-up stock selection. When those funds and their managers invest in stocks, they do so with confidence and belief backed by research. However, they also retain the ability to pivot when circumstances change. The T. Rowe Price Capital Appreciation Equity ETF (TCAF A-) may stand out among other funds making high-conviction investments. Managed by award-winning PM David Giroux, TCAF charges only 31 basis point fee for its approach. The fund leans on fundamental analysis, seeking U.S. large-cap firms perceived to offer high growth. Specifically, the ETF looks for those firms with a strong market position, capable management, and a track record of attractive valuations. Using a “growth at a reasonable price” (GARP) approach, TCAF’s use of T. Rowe Price’s research capabilities can help it make some high-conviction moves. TCAF has already returned 3.5% in the starting weeks of an uncertain 2025, and that could help separate that fund from rivals and boost client portfolios. For more news, information, and analysis, visit our Active ETF Channel.

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