Happy holidays and welcome to Investing Insights. I'm your host, Ivya Hampton. This week, we're looking back at three discussions we held earlier this year about exchange traded funds that income investors might find attractive.You'll hear from two Morning Star ETF specialists. They're talking about dividend, bond, and cover call ETFs in 2025. Let's start with dividend ETFs.This style of investing can focus on income or growth. The strategies can have different riskreward profiles. I sat down with Brian Arm ...

Core Insights - The discussion emphasizes the advantages of small cap ETFs over individual small cap stocks, highlighting diversification as a key benefit [2][3] - Investors are advised to consider costs, including fees and trading expenses, when selecting small cap ETFs [4][5] - The podcast notes that passive index funds generally have higher success rates compared to active funds in the small cap space [7][8] Small Cap ETFs vs Individual Stocks - Diversification is crucial as most small cap stocks may not outperform in the long term, making ETFs a more effective way to capture winning stocks [2][3] - Holding a broad portfolio through ETFs allows investors to access a wider range of small cap stocks [3] Key Considerations for Small Cap ETFs - Cost is a significant factor, with attention to both management fees and trading costs, especially for micro cap stocks [4][5] - Investors should understand the index that the ETF tracks and examine the portfolio for sector exposures and style box variations [13] Active vs Passive Strategies - Passive small cap index funds tend to perform better than active funds, but active ETFs are gaining popularity in the small cap space [6][8] - Concentrated strategies in active ETFs can pose risks due to the inability to limit new investors [8][9] Index Selection - Different indexes like S&P 600 and Russell 2000 offer various approaches to small cap investing, with specific requirements for profitability impacting index composition [11][13] - Understanding the differences in index methodologies is essential for investors [12][13] Market Trends and Investor Sentiment - Recent outflows from small cap ETFs may indicate a contrarian investment opportunity, suggesting that it could be a favorable time to invest in small caps [14][15] - The principle of "no pain, no premium" in factor investing suggests that underperformance can lead to future outperformance [15] Recommended Small Cap ETFs - Vanguard Small Cap ETF (VB) and iShares Core S&P Small Cap ETF are highlighted as top choices for market beta exposure, both offering low fees [17][18] - For active small cap ETFs, Dimensional US Small Cap ETF (DFAS) and Avantis US Small Cap Equity ETF (AVSC) are recommended for their focus on value and profitability [20][21]