It feels like you can’t turn on the news or read a headline without running into the acronym “ETF.” Exchange-traded funds have become one of the most talked-about investment tools in the industry, and for good reason. Their use has exploded in recent years, and they’ve quietly changed the way many portfolios are built.
According to Barron’s, more than 700 new ETFs launched in 2024 alone, bringing the total number of U.S.-listed ETFs to over 4,000. That’s nearly double the number of U.S.-listed stocks. Some headlines have gone so far as to say “ETFs Are Eating the World.” While that may be a touch dramatic, it does reflect a growing reality: ETFs are here in force, and they are not going away anytime soon.
So, what’s driving the popularity?
Two key factors continue to stand out.
- Tax Efficiency
One of the interesting features of ETFs is how they handle taxes. Unlike traditional mutual funds, many ETFs can avoid triggering taxable gains inside the fund thanks to a mechanism called the “in-kind” redemption process. This structure often defers capital gains until the investor sells their shares, giving more control over when taxes are realized.
- Lower Costs
ETFs are also known for their low fees. Many of the largest firms, including Vanguard, State Street, and American Funds, have helped push costs down by operating at scale and competing on price. Over time, that cost efficiency can make a meaningful difference to shareholders.
Why We Utilize Active ETFs
While many ETFs are designed simply to track a market index, active ETFs are managed by real people, not algorithms. That gives them the ability to respond to changing market conditions in real time. In our view, that flexibility matters.
Markets don’t move in straight lines. Active managers can make decisions based on current risks and opportunities, rather than blindly following a benchmark. This doesn’t guarantee better results, but it does provide an added layer of intentionality that we believe aligns better with long-term financial planning.
How We Use Them
We generally use active ETFs in non-retirement accounts, where the tax efficiency of the structure can offer long-term benefits to the portfolio. They can serve as a powerful tool when used with care and purpose.
As with any investment, context matters. Our approach remains centered on building portfolios that reflect each client’s long-term goals, respect their risk tolerance, and support a steady, disciplined view of their financial life.
- Allen Minassian
There are risks involved with investing in ETFs, including possible loss of money. The funds are subject to other risks. Past performance does not guarantee future results. Diversification does not guarantee a profit or eliminate the risk of loss. Please consult your tax advisor for information regarding your own tax situation. Please see the prospectus for information regarding the risk associated with each fund before investing.