The ascent of exchange-traded funds has many investors wondering whether to abandon mutual funds and join the stampede into ETFs.
It's not hard to understand why. ETFs didn't gain popularity until the turn of the millennium, but they have been on a tear in recent years. There are now more than 1,600 U.S.-listed ETFs with some $2 trillion in assets under management, although that's still a fraction of the $13 trillion in open-end mutual funds, according to Morningstar.
Last year ETFs had their strongest yearly inflows ever, more than $241 billion, and asset managers rolled about 200 new funds.
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Most ETFs are passively managed, meaning they track a stock or bond index, and that helps to keep their costs low compared to actively managed mutual funds. For many advisors, ETFs are an easy, low-cost way to provide clients with exposure to certain market segments when putting together a diversified investment portfolio.