'VOO and chill:' Why this popular investment strategy may be losing its appeal — even with stocks at all-time highs

Passive investing done exchange-traded funds whitethorn beryllium losing its appeal.

Tidal Financial Group Chief Revenue Officer Gavin Filmore finds galore of his clients are nary longer satisfied with buying fashionable ETFs tied to marketplace indexes.

 "I deliberation investors are looking beyond conscionable the let's telephone it the 'VOO and chill approach' wherever you conscionable bargain the scale successful an ETF, which is simply a large attack but they're looking for diversification," Filmore told CNBC's "ETF Edge" this week." "And they're not uncovering it wrong the merchandise oregon wrong the index, truthful they person to look beyond that." 

Filmore refers to the Vanguard S&P 500 ETF (VOO), which tracks the S&P 500's performance. Both are up astir 16% truthful acold this year.

Meanwhile, Strategas Securities' Todd Sohn contends investors are losing diversification by utilizing the S&P 500 arsenic a benchmark.

"Imbalance is the cleanable word," said the firm's elder ETF & method strategist successful the aforesaid interview. He added technology present accounts for much than 35% of the index, a grounds high.

Meanwhile, antiaircraft sectors including consumer staples, health care, energy and utilities are astatine an all-time debased value of 19% successful the S&P 500, according to FactSet.

So, wherever are traders turning? Sohn is seeing renewed involvement successful small-cap stocks.

The Russell 2000, which tracks the group, deed an all-time precocious connected Wednesday and conscionable saw its champion week since August. It's present up much than 28% implicit the past six months — outperforming the S&P 500. Earlier this month, the Russell 2000 topped 2,500 for the archetypal clip ever.

"I wonderment if you're seeing this broadening hap extracurricular the ample headdress abstraction wherever investors are comfy with their tech and AI vulnerability and seeking different routes," Sohn said.

While determination is simply a increasing chorus of voices throwing enactment down the tiny caps, the dense hitters volition instrumentality halfway signifier connected Wall Street adjacent week. That's erstwhile 5 of the 7 alleged "Magnificent 7" — Meta Platforms, Alphabet, Microsoft, Apple and Amazon — are owed to study their latest earnings.