How passive becomes active

Index ETFs are building blocks for tactical asset allocation. But does it work?

Paul Kaplan 10 March, 2015 | 5:00PM

Note: This article is part of Morningstar's March 2015 ETF Investing Week special report.

Most exchange-traded funds are passive investments designed to replicate market-cap-weighted indexes. But these ETFs can also serve as components of portfolios that are very much actively managed.

The most active of these approaches is tactical asset allocation. It has the same starting point as strategic asset allocation, in that both start off with a mix of asset classes. The proportions allocated to each asset class are based on the managers' views on the expected returns and risks of each asset class, and the degree to which the returns of each pair of asset classes tend to move together.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free
TAGS

About Author

Paul Kaplan

Paul Kaplan  Paul Kaplan is Director of Research for Morningstar Canada.