Financial advisors predict a shift in investment preferences, with exchange-traded funds (ETFs) overtaking mutual funds as the most popular investment vehicle by 2026.
Financial advisors expect to hold more client assets in exchange-traded funds (ETFs) than mutual funds by 2026, for the first time, according to Cerulli Associates. ETFs generally have certain advantages over mutual funds relative to taxes, fees, transparency, and liquidity, experts said. According to Cerulli, advisors estimate that a larger share of client assets (25.4%) will be invested in ETFs in 2026 relative to the share of client assets in mutual funds (24%).
If that happens, ETFs would be the 'most heavily allocated product vehicle for wealth managers,' beating out individual stocks and bonds, cash accounts, annuities, and other types of investments, according to Cerulli. Financial advisors remain reluctant to recommend crypto investments, even as prices soar ETFs and mutual funds are similar. They're essentially a legal structure that allows investors to diversify their assets across many different securities like stocks and bonds. While that's about half the roughly $20 trillion in mutual funds, ETFs have steadily eroded mutual funds' market share since debuting in the early 1990s. 'ETFs have been attractive for investors for a long time,' said Jared Woodard, an investment and ETF strategist at Bank of America Securities. 'There are tax advantages, the expenses are a bit lower and people like the liquidity and transparency.' Specifically, mutual fund managers generate capital gains within the fund when they buy and sell securities. That tax obligation then gets passed along each year to all the fund shareholders. However, the ETF structure lets most managers trade stocks and bonds without creating a taxable event
Etfs Mutual Funds Investments Financial Advisors Market Share
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