Core Viewpoint - The Fidelity Enhanced Small Cap ETF (FESM) is highlighted as a strong investment option for small-cap exposure, particularly as investor sentiment shifts positively towards small-cap stocks in 2025 [1][2]. Fund Performance - FESM experienced significant inflows of $2 billion in 2025, contrasting with outflows from other small-cap ETFs like the Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap 600 ETF (IJR) [1]. - The fund has a history of outperforming its peers and benchmark, beating its benchmark by approximately 500 basis points in 2025 and outperforming the Morningstar category by nearly 1,000 basis points [2]. Management Style - FESM employs a "strategic active" management approach, utilizing computer-generated analysis for stock selection based on historical valuation, growth, and profitability, rather than traditional stock-picking methods [1]. - The fund maintains a diversified portfolio of around 600 stocks, with sector exposure aligned with its benchmark, focusing on profitable small-cap companies [1]. Cost Efficiency - The expense ratio for FESM is 28 basis points, which is competitive for an actively managed fund, making it an attractive option for investors seeking low-cost active management [2]. - The fund's performance justifies its fees, as investors have been rewarded for the active management style despite the low cost [2]. Portfolio Role - FESM is suggested as a core holding for investors looking to enhance their small-cap exposure, especially for those currently invested in index funds or higher-cost active funds [2]. - The fund is positioned as a strategic addition for investors who may want to increase their allocation to small-caps without incurring significant tax liabilities from selling existing holdings [2].

Group 1: AI's Impact on Investment Opportunities - Artificial intelligence is transforming energy markets, infrastructure spending, and portfolio construction, with a focus beyond just chips and software [1] - Companies like Bloom Energy have seen significant stock price increases, with shares rising over 500% since last year, reaching a market cap above $30 billion [1] Group 2: Small- and Mid-Cap Companies - Small- and mid-cap companies are gaining attention as they operate in niche markets with limited competition, allowing for faster improvement in fundamentals [2] Group 3: Energy Reliability and AI - Energy reliability is crucial, as data centers require a constant power supply to avoid downtime, shifting the focus from renewable energy intermittency to consistent energy sources [3] Group 4: Nuclear Energy Investment - There is a notable shift towards nuclear energy, with renewed investments in existing plants and the development of small modular reactors, creating new suppliers and growth opportunities [4] Group 5: Data Center Efficiency - Efficiency in data centers is critical, with cooling and power management becoming bottlenecks as AI workloads expand, leading investors to favor leading companies in these fields [5] Group 6: Market Structure and Investment Strategies - Market structures show concentration with few providers, leading to operating leverage but also potential risks, prompting interest in actively managed ETFs to identify growth opportunities earlier [6] Group 7: Risks in AI Ecosystem - The AI ecosystem includes financially weak companies that are sensitive to electricity demand, leading to volatility, suggesting that no single AI theme should dominate an investment portfolio [7] Group 8: Nuclear ETFs and Market Entry Points - Nuclear ETFs have experienced significant price fluctuations, with some trading at high levels before stabilizing, indicating a more reasonable entry point for new investors [8] Group 9: Nuclear ETFs List - Notable nuclear ETFs include First Trust Bloomberg Nuclear Power ETF, VanEck Uranium and Nuclear ETF, Themes Uranium & Nuclear ETF, Range Nuclear Renaissance Index ETF, and Global X Uranium ETF [9]

Core Insights - The S&P 500 has risen more than 14% year-to-date, leading to significant gains for many investors, prompting a need for tax reduction strategies [1] - TAXF, the American Century Diversified Municipal Bond ETF, offers a tax-exempt investment option with a 27 basis point fee, focusing on both high yield municipal and investment-grade bonds [1] - The fund has returned 4.1% year-to-date and has a yield to maturity of 4.2% as of October 31, outperforming its category average [1] Tax Benefits - TAXF provides two main advantages: reducing tax exposure for portfolios and offering an upgrade over passive municipal bond funds [2] - The active management of TAXF allows for quick adaptation to market changes, unlike passive funds that may struggle with early bond calls or defaults [1] Performance and Strategy - The fund allocates up to 35% of its portfolio to riskier securities, depending on market conditions, enhancing its performance potential [1] - Active ETFs like TAXF leverage fundamental research to identify promising issuers, which can lead to better outcomes in riskier areas [1]