Best Actively Managed ETFs

Actively managed funds aim to outperform popular indexes, such as the S&P 500 and the Nasdaq 100. While some of these funds exceed market returns, they tend to have higher expense ratios than average. Actively managed exchange-traded funds (ETFs) employ professionals to conduct research for the funds and adjust portfolio concentrations. You might feel more comfortable knowing someone is keeping an eye on the portfolio, but some actively managed ETFs are better than others.

7 Best Actively Managed ETFs

Actively managed ETFs can reward long-term investors if the fund managers have good management and objectives. These actively managed ETFs are some of the top picks.

1. SmartETFs Smart Transportation & Technology ETF (NYSEARCA: MOTO)

The SmartETFs Smart Transportation & Technology ETF focuses on innovative companies in transportation. Investors may benefit from the rising demand for electric vehicles (EVs) and autonomous transportation solutions. The fund holds 35 stocks, with the top three stocks being On Semiconductor (5.00%), NVIDIA (4.67%) and Quanta Services (4.42%). The fund has delivered an annualized return of 19.32% over the past three years and has a 0.68% expense ratio.

2. ARK Innovation ETF (NYSEARCA: ARKK)

The ARK Innovation ETF has been one of the leading ETFs during bullish markets. The fund focuses on high-growth stocks and has generated a 64% year-to-date return and a 0.75% expense ratio. The fund boomed during the pandemic and crashed in 2022. Despite the volatility, the fund has delivered an annualized return of 10.78% since its inception on Oct. 31, 2014. The fund’s top three holdings are Tesla (11.26%), Coinbase (8.66%) and Roku (7.49%).

3. ProShares UltraPro QQQ (NASDAQ: TQQQ)

PtoShares UltraPro QQQ is a 3x leveraged version of the Nasdaq 100 index that delivers exceptional returns during bullish markets. Shares have almost tripled year-to-date, but investors can quickly lose cash if QQQ declines. Half of the fund’s assets are in the Information Technology sector, and the expense ratio is 0.86%.

Investors should look at the concentration of the Nasdaq 100 composite before investing in TQQQ shares. The Nasdaq 100 composite’s largest positions are the Magnificent Seven: Microsoft, Apple, NVIDIA, Amazon, Tesla, Meta and Google, in that order. The upcoming Nasdaq 100 index rebalance will impact total weights, but those stocks will still hold an outsized impact on TQQQ’s performance.

4. Fidelity Blue Chip Growth ETF (BATS: FBCG)

The Fidelity Blue Chip Growth ETF prioritizes the Magnificent Seven stocks, similar to QQQ. Apple and Microsoft each make up 10% of the fund’s total assets. NVIDIA, Amazon, Alphabet, Meta and Tesla make up over 30% of the fund’s assets. Those seven stocks make up more than half of the fund’s total assets, and returns have been good so far.

The fund is up 37% over one year and has an annualized return of 12.26% over the past three years. The expense ratio is 0.59%. 

5. Clockwise Capital Innovation ETF (NYSEARCA: TIME)

The Clockwise Capital Innovation ETF gives investors exposure to long-term core growth opportunities and emerging technologies. The fund has a 0.95% expense ratio and spreads its capital across 30 holdings. The company’s top three holdings are SPDR Bloomberg 1 (9.17%), Amazon (7.81%) and Uber (7.10%). The fund has returned 32% over the past year.

6. JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF isn’t a high-flier, but the fund’s 12-month rolling dividend yield sits at a lofty 10.58%. The fund writes out-of-the-money S&P 500 index call options to distribute monthly payouts to investors. The defensive fund has an expense ratio of 0.35% and has delivered annualized returns of 12.87% over the past three years. The fund doesn’t only invest in options. The top three holdings are Adobe (1.78%), Microsoft (1.73%) and Amazon (1.68%).

7. DFA Dimensional U.S. Core Equity Market ETF (NYSEARCA: DFAU)

The DFA Dimension U.S. Core Equity Market ETF strives to deliver long-term capital growth for investors through U.S. equities. The fund has a low expense ratio of 0.12% and has delivered annualized returns of 10.04% since its inception on Nov. 17, 2020. DFAU has an outsized concentration of stocks in the information technology sector (26.39%). The top three holdings are Apple (6.97%), Microsoft (5.58%) and Amazon (2.52%).

What is an Actively Managed ETF?

An actively managed ETF is a fund with a basket of stocks. Investors who put money into an ETF get instant portfolio diversification that is centered around the fund’s theme. Unlike passive ETFs, actively managed ETFs have investing professionals who monitor the fund’s performance and make decisions about stock positions. Some actively managed ETFs conduct numerous trades, while others make occasional transactions.

Advantages of Actively Managed ETFs

Actively managed ETFs present several advantages for investors:

• Potentially outperform the market: Some actively managed ETFs outperform the market and reward long-term investors.
• You can take a passive approach: It’s easier to look away from your portfolio when you know a professional is watching it for you.
• Quick portfolio diversification: You can invest in an actively managed ETF and automatically have a diversified portfolio. Some actively managed ETFs hold onto over 100 stocks, a feat that is difficult to achieve on your own with sufficient due diligence.

Limitations of Actively Managed ETFs

Actively managed ETFs present several advantages, but they aren’t perfect. You should keep these factors in mind when looking around for actively managed ETFs.

• The expense ratio may be higher: Actively managed ETFs tend to be more expensive than passive ETFs since investors have to pay for each professional’s time.
• Not all actively managed ETFs outperform the market: It’s hard to keep pace with the market, and it’s even more difficult to outperform the market.
• Some actively managed ETFs lose money for their investors: An actively managed ETF is not guaranteed to deliver a positive return on your investment. Some funds experience notable losses and fall further than market indexes during corrections.

Where to Invest in Actively Managed ETFs

Investors can choose from several actively managed ETFs. While you compare ETFs and decide which one is right for you, it is also a good idea to compare brokers. Some brokers offer lower fees and better perks than others. If you are looking for a better broker experience, you may want to consider these top brokers.

Diversify Your Portfolio with ETFs

Actively managed ETFs give you access to more stocks and minimize your risk. You won’t have to rely on one stock dictating your portfolio’s performance. Investors can choose from actively and passively managed ETFs and decide what works best for them.

Frequently Asked Questions 

Best Actively Managed ETFs Methodology

The methodology for the best actively managed ETFs list involved looking at ETFs that have performed well over the past year. The list has a strong concentration of growth ETFs with some income ETFs.