One major difference between exchange-traded funds (ETFs) and mutual funds is that ETFs tend to be passively managed. This means they follow the components of a specific industry group, sector, index, etc. Compared to mutual funds that are actively managed, ETFs cost a lot less. Yet sometimes in order to gain an edge on the market, active management is a must even if the costs are a bit higher. Fortunately, the ETF industry understands and created actively managed ETFs.
Such actively managed ETFs are not merely re-indexed according to a formula on a quarterly or annual basis, but actively trade and sell the relevant underlying securities on a daily basis. Three of the firms currently featuring actively managed funds are AdvisorShares, Columbia Management and PIMCO. AdvisorShares has almost 30 ETFs in its portfolio; Columbia has five, while nine of PIMCO???s 21 ETFs are actively managed.
One of the asset classes used by all three firms in their actively managed ETF efforts is, interestingly enough, bonds. Bonds are typically considered fixed-income securities. But when bundled together and actively traded via an ETF, they are subject to some of the same trading pressures and changing valuation as stocks.
Read more about how these three actively managed exchange-traded funds could lead to profits at Eagle Daily Investor.