2025 may go down as the year the true power of ETFs was finally felt across markets. Massive passive inflows have created powerful, long-term market swings and surprisingly, this has put individual investors in the box seat.
While institutions are constrained by size, liquidity and quarterly reporting, individual investors can move patiently, selectively, and with far greater flexibility. That’s where small caps and increasingly AI come into play.
ETFs Are Changing the Game
ETFs don’t analyse value. They buy weightings. That means capital floods into the same stocks regardless of price, distorting markets and creating opportunity elsewhere particularly in under-researched small caps.
This is just the beginning.
A Decade of Dividend Portfolio Outperformance
At Under the Radar Report, we’ve been running dividend portfolios every six months for over a decade. The results speak for themselves:
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Consistent outperformance of major indices
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Returns exceeding benchmarks by 20–30% p.a.
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A disciplined, repeatable process
This isn’t luck. It’s structure.
Why Rebalancing Matters
Over time, performance naturally tapers. The solution isn’t abandoning the strategy — it’s rebalancing. We continuously:
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Review stock fundamentals
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Sell stretched winners
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Reallocate into value
These are not “set and forget” portfolios. Active patience is how money is made.
The Individual Investor Advantage
Institutions must report quarterly. Individual investors don’t.
That difference matters.
It allows us to sit through cycles, ignore short-term noise, and capitalise when volatility creates opportunity.
Even Michael Burry — famously portrayed in The Big Short — recently exited the hedge fund world to invest independently. His reason? Freedom and patience.
Why Small Caps Are Essential
ETFs have their place. But real wealth creation requires exposure to small caps. Why?
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Greater operating leverage
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Faster earnings growth
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Mispricing due to lack of coverage
You simply don’t get that upside elsewhere.
Three AI Tips Every Investor Should Know
1. AI Won’t Replace, But Someone Using AI Will
Use AI to boost productivity and decision-making.
2. Prompts Matter
Better inputs deliver better outputs. Spend time refining prompts.
3. Always Edit the Output
AI is a starting point. Without human judgement, it’s just processed information.
Three ASX AI Small Caps on Our Radar
Appen (ASX: APX)
Appen provides human data and oversight essential for training AI models, particularly as regulation and quality control become more important. While forecasts are ambitious, the long-term positioning is compelling.
Mach7 Technologies (ASX: M7T)
A niche but growing healthcare imaging business. With a new CEO and an AI-enhanced Unity Viewer product on the horizon, interest in this stock is building.
AI Media (ASX: AIM)
AI Media is transitioning from human captioning to AI-led solutions through its Lexi platform. The opportunity is large, though earnings growth must ultimately validate the valuation.
Final Thoughts
ETFs are reshaping markets. AI is reshaping productivity. And small caps remain the engine room of real wealth creation.
Used together — patiently and selectively — they form a powerful strategy for individual investors.
Merry Christmas from the Under the Radar Report team, and we look forward to seeing you in 2026.
Please note: We are launching a new Small Cap Dividend Portfolio on 1 January 2026.
