economy
Active ETFs Have 'Arrived in Full Force,' Researcher Says—But Consider the Costs Before Buying
Investors and fund companies alike are increasingly betting on active exchange-traded funds.
TL;DR
- The Vanguard S&P 500 ETF (VOO) was the first ETF to surpass $1 trillion in assets, highlighting the dominance of passive index tracking.
- Despite the rise of passive strategies, approximately 8 in 10 new ETF launches in recent years have been active funds.
- Active ETFs are attracting a substantial portion of investor cash flowing into U.S. ETFs.
- Many new active ETFs employ strategies involving options or derivatives for specific investor outcomes, rather than traditional stock picking.
- Active ETFs generally have higher expense ratios than passive ETFs, which can significantly impact long-term returns.
- Investors should weigh the potential benefits of active ETFs, such as risk management or access to unique strategies, against their higher costs.