Wealth Management
Passive investment strategies such as ETFs and index-tracking mutual funds have grown rapidly over the past decade, offering low-cost and tax-efficient exposure to broad markets. However, these vehicles are not always as straightforward as they seem, with three common misperceptions shaping investor decisions according to JPMorgan.
First, passive funds may not perfectly mirror their benchmark indices due to regulatory constraints and concentration limits, which can lead to performance differences, particularly in sectors dominated by a handful of large-cap stocks. Second, while often inexpensive, specialized passive funds can carry higher expense ratios than expected, in some cases rivaling or exceeding actively managed alternatives.
Third, passive ETFs are not universally tax efficient, as separately managed accounts can provide greater flexibility through tax-loss harvesting and charitable gifting strategies.
Finsum: Understanding the nuances of passive investing is critical for aligning portfolios with long-term wealth goals and ensuring fees, exposures, and tax strategies fit the investor’s broader financial plan.
Midcap stocks are emerging as a compelling option for investors seeking balance in the current U.S. market environment, offering a middle ground between the stability of large-caps and the growth potential—but higher volatility—of small-caps.
Midcaps, by contrast, combine growth opportunities with resiliency and adaptability, making them well-suited for uncertain conditions in 2025. One core strategy gaining traction is the BNY Mellon US Mid Cap Core Equity ETF (BKMC), which tracks the Solactive GBS United States 400 Index TR.
BKMC delivers broad diversification by investing in 400 midcap companies, including REITs, with no single holding exceeding 1% of portfolio weight. As of July 31, 2025, the ETF has returned nearly 12% over the prior three months, underscoring midcaps’ potential to deliver both near-term performance and long-term stability.
Finsum: While large-caps provide scale to weather tariff and policy headwinds, they face concentration risks and reduced flexibility, whereas small-caps remain vulnerable to inflation and Federal Reserve policy shifts.
A new survey from Edward Jones and Morning Consult finds that despite the tax benefits and flexibility of 529 education savings plans, more than half of Americans (52%) don’t know what they are. Only 14% of respondents currently use or plan to use a 529 plan, suggesting that lack of awareness is a major barrier to adoption.
These plans allow tax-deferred investment growth and can be used not only for college but also for K-12 expenses, apprenticeships, and even student loan repayment, though most respondents were unaware of these options. Financial advisors at Edward Jones stressed the need for more education, noting that advisors can play a critical role in helping families align 529 strategies with broader financial goals.
The findings come as higher education continues to demonstrate strong long-term value, with college graduates earning about 80% more than those with only a high school diploma, according to the TIAA Institute and Bureau of Labor data.
Finsum: With more than half of U.S. jobs projected to require a degree by 2031, raising awareness of 529 plans could be vital in helping families prepare for future education costs.
More...
Defined outcome exchange-traded funds (ETFs), particularly buffer strategies, have grown in popularity as investors seek ways to manage volatility and reduce downside risk in uncertain markets. These ETFs cap upside potential in exchange for a defined buffer against losses, typically over a 12-month period, allowing investors to stay invested while limiting risk exposure.
While the trade-off of reduced upside may not appeal to long-term growth investors, recent innovations such as bitcoin-protected ETFs have expanded the reach of these products, offering cautious entry points into riskier assets.
The market for defined outcome ETFs has expanded rapidly, now exceeding 400 funds with more than $70 billion in assets and $8 billion in net inflows year-to-date. Innovator and First Trust dominate the space, accounting for more than 90% of assets under management, though new entrants like AllianzIM and Calamos are gaining ground with differentiated strategies.
Finsum: Defined outcome ETFs have evolved from a niche product into a mainstream risk management tool, reflecting rising investor demand and ongoing product innovation.
Infrastructure is emerging as a core allocation for advisors, and BlackRock is seizing the moment with the launch of its first active infrastructure ETF, the iShares Infrastructure Active ETF (BILT). The fund builds on BlackRock’s $10 billion passive infrastructure ETF lineup and the firm’s $183 billion infrastructure footprint, bolstered by its 2023 acquisition of Global Infrastructure Partners.
Managed by Balfe Morrison, BILT takes an active approach that aims to capture alpha in sectors such as utilities, transportation, energy, and data infrastructure, all of which are seeing heightened demand from AI adoption, digital growth, and shifting supply chains.
At inception, utilities make up the largest allocation, followed by transportation and oil and gas, with about two-thirds of exposure focused on North America and select opportunities in Europe and Asia. With yields around 3%, infrastructure provides the income and downside protection investors expect, but Morrison stresses that BILT also offers meaningful potential for capital appreciation.
Finsum: For advisors, the ETF offers diversification, inflation hedging, and exposure to long-term global trends, making infrastructure more relevant than ever in retirement and income-focused portfolios.
After bottoming in April, the stock market has staged an impressive rebound, but Stifel strategist Barry Bannister warns the rally may not last due to stretched valuations. He predicts the S&P 500 could fall as much as 15% to 5,500 but advises investors to stay in the market with a more defensive stance.
Bannister highlights high-yield dividend stocks as a classic hedge, offering steady income and stability in uncertain conditions. Ellington Financial stands out with an 11.5% yield supported by strong earnings and diversified mortgage-backed investments.
Meanwhile, Dorian LPG, a global liquefied petroleum gas carrier, offers an 8% yield with analyst support despite recent earnings volatility.
Finsum: Dividend stocks exemplify how income-focused strategies can help investors weather potential downturns while still capturing meaningful returns.