While passive ETFs replicate an index, such as the S&P 500, active managers aim to outperform a specific benchmark.
Some 328 active ETFs have launched in 2024 through September, compared to 352 in 2023, according to Morningstar data. Active ETFs represented just more than 2% of the U.S. ETF market at the beginning of 2019. But these funds have since grownthrough September, compared to 352 in 2023, which has been"kind of remarkable," said Stephen Welch, a senior manager research analyst for Morningstar, referring to the growth of ETFs this year.4 top reasons why exchange-traded fund growth has balloonedIn 2019, the U.S.
"Active ETFs allow managers to make tactical adjustments, which may help navigate market volatility more smoothly than a passive index," said certified financial planner Jon Ulin, managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida., which is 36% cheaper than the average mutual fund, according to a Morningstar report released in April.
However, there is the potential for underperformance, as many active managers fail to beat their benchmarks, Ulin said. Plus, some active ETFs are newer, with less performance data to review their performance.Bull markets tend to sputter in year threeWarren Buffett's S&P 500 bet paid off. Some experts say it may be time to diversify