Sick of being told not to put all your eggs in one basket?

The recently-launched Fitz-Gerald Must Have Portfolio (FITZ) from XFUNDS is an actively-managed ETF, which currently consists of 30 companies that market researcher and strategist Keith Fitz-Gerald said are must-have stocks. Fitz-Gerald, who has more than four decades of experience on Wall Street and is a frequent collaborator of Main Street favorite Suze Orman, argues that long-term returns are concentrated in a shrinking group of dominant businesses. He selected stocks such as Apple, JPMorgan Chase, Chevron and Eli Lilly..

It may be a hard sell given that a cardinal rule of investing is to diversify, and it comes with a relatively high expense ratio of 0.75%. But Fitz-Gerald said the fund can benefit young professionals who want to invest in companies that are going to be around for decades, as well as pre-retirees and retirees who want the potential for high returns.

“If you own hundreds or thousands of stocks spread across a bunch of different ETFs and funds, you’re never going to have enough of the right stocks to really move the needle,” Fitz-Gerald told ETF Upside. “If we do our job properly, then the difference between owning the right amount of Nvidia and just the S&P 500 index fund is going to be significant.”

Funds with Faces

As more investors gravitate to ETFs, there has been a rise in funds that promise investors the ability to capitalize on one expert’s recommendation, such as the Dan IVES Wedbush AI Revolution ETF (IVES) and Cathie Wood’s suite of ARK ETFs.

But Brendan McCann, senior associate analyst for Morningstar, said to be cautious about funds like these trying to beat the market:

• “They can be exciting to invest in, and it’s different enough from the market that it has the potential to outperform,” McCann said. “The other side of that coin is it can also wildly underperform … these funds are taking on more risk.” Plus, it’s hard to time the market. Just 38% of active mutual funds and ETFs performed better than their passive peers last year, according to Morningstar.
• It’s especially hard to do so with a fee of 75 basis points when index funds are charging just two or three. “That’s around a 70-basis-point gap every year that it’s fighting against,” McCann added.

Wait and Hold: Fitz-Gerald may be pointing investors away from diversification, but he is recommending the other investing “D” word: dollar-cost averaging. “Longer term, I expect this to perform exactly the way we intended it to,” he said. “But the shorter term — with this volatility and everything else going on — as much as I’d like to say buy it all right now, don’t do that.”

No pain, no gain, apparently.

Crypto’s recent price swings have been hard to ignore. Bitcoin has fallen more than 40% over the past year, and since mid-May, spot bitcoin ETFs have lost more than $4.3 billion in assets. Volatility isn’t a flaw, though. It’s the entire appeal, according to industry experts at the ETP Forum in New York City last week. When allocated in small amounts, typically 1% to 5% of a portfolio, crypto can offer diversification benefits without exposing clients to outsized risk, panelists said. And if it underperforms, the damage is contained.

“Volatility is a feature; it’s not a bug,” one expert said. “If volatility is low, you sort of have to back the truck up to the asset in order to get an allocation that moves the needle.”

Adoption Plan

Over roughly the past decade, crypto has gone from a “what the heck is this” asset class to a, well, still kind of “what the heck is this” asset class, but one that many more people want to actually own. The global crypto market now exceeds $2 trillion, the White House and SEC have championed digital assets and major issuers have rolled out crypto ETFs. Plenty of advisors are onboard, too:

• Roughly one-third of advisors invested in crypto for client accounts last year, up from 22% in 2024, according to a Bitwise survey.
• More than half report owning crypto personally, marking the highest level of ownership since the survey began in 2018.

Still, hesitation remains, with complexity as a major barrier. When bitcoin dominated the market narrative, allocation decisions were relatively straightforward. Now, with assets like Ether, Solana and others competing for attention, crypto is increasingly viewed less as a single trade and more as a multi-asset ecosystem. Plus, crypto markets run 24/7, adding another layer of operational and behavioral complexity for wealth managers. “Advisors have moved beyond bitcoin and a couple of names,” the expert said. “Now they’re going to need help figuring out how to put together a portfolio.”

One audience member at the forum simply asked why advisors should allocate to crypto if the price of bitcoin has fallen so far. “Do you know what the single best-returning asset across multiple time frames is over the last 15 years?” another executive responded. “Bitcoin.” There’s some nuance to that, though. While bitcoin has the potential to continue outperforming, its impressive returns are partly a result of its launching less than 20 years ago at effectively $0.

Token Talk: Beyond portfolio construction, panelists pointed to tokenization, the representation of real-world assets and securities on blockchain networks, as one of crypto’s most important innovations. Token transfers can happen almost instantly and cost a fraction of a cent, compared with traditional cross-border money transfers that can take days and cost up to $50, an expert said. Over the next three to five years, many investors will likely hold tokenized assets even if they don’t realize it. “These are turning out to be the first killer apps for crypto,” the expert said.

The bond market is far from fixed.

More ETF providers are diving headfirst into the world of fixed-income funds, with Vanguard launching a bond index ETF (VCHY) last week that provides index‑based exposure to high‑yield corporate bonds. The passively managed index fund is unique in that it offers a lower-cost way for investors to access high-yield fixed-income products, which typically have higher expense ratios. (The average fund fee in this category is 0.44%, while VCHY’s fee is .05%.) The move is the latest by a major fund manager to bring fixed-income to the retail space, and it’s emblematic of the industry-wide growth into new areas like collateralized loan obligations, said Greg Stumm, CEO of American Beacon Partners.

“You don’t really see a lot of CLO mutual funds,” Stumm said. “But with the growth of the CLO market and the way the ETFs trade, they’re able to take active strategies into the CLO space, which is kind of a whole new area for the wealth market.”

Where No Manager Has Gone Before

Fixed-income ETFs have been around since the early 2000s, but now managers are more willing to launch funds that wouldn’t have been advisable (or possible) five years ago, Stumm said. Vanguard’s new fund tracks a market‑value‑weighted index that provides exposure to corporate bonds with the goal of limiting issuer concentration, which can happen when a fund’s portfolio is weighted unevenly toward a small number of underlying companies. “Our goal has been to take the expertise we’ve built over decades in active fixed-income mutual funds and extend that … into the ETF wrapper,” said Brad Collins, a fixed income specialist at Vanguard. “And while corporate bonds are one component, it’s not just about a single sector.”

Vanguard isn’t alone. JPMorgan launched a fund last month that invests in fixed-income and floating-rate debt securities. And last year, Simplify Asset Management launched four government money market ETFs, which before then was a strategy only available as a mutual fund, said Jason England, a portfolio manager and fixed income strategist at Simplify Asset Management.

Wrap It Up: The widening accessibility of once-restricted asset classes is another trend helping increase the popularity of active fixed income funds, said England. There are also more wrapper options, as well as growing use of derivatives. “The wrapper options have changed,” England said. “Getting institutional grade-caliber strategies inside the ETF wrapper, the retail adviser can access it, where before only high-net-worth and institutional investors could access some of these strategies.”