ETFs surpassed mutual funds in assets under management around 2024

Exchange-traded funds (ETFs) crossed the $10 trillion mark in assets under management in 2024, surpassing the roughly $8 trillion held in mutual funds for the first time. This shift represents a fundamental change in how Americans invest, though the exact timing depends on which assets you count and which data source you use. The crossover happened gradually over several years, not overnight.

The milestone matters because it signals which investment vehicle has become the default choice for both individual investors and financial advisors. For decades, mutual funds dominated — they were the only simple way to own a diversified basket of stocks or bonds without picking individual securities. ETFs changed that by offering the same diversification with lower fees, tax efficiency, and the ability to trade during market hours like individual stocks.

Key Takeaways

  • ETFs reached approximately $10 trillion in assets under management by 2024, exceeding mutual fund assets for the first time.
  • The crossover happened gradually between 2020 and 2024 as investors shifted toward lower-cost, tax-efficient investment vehicles.
  • ETFs now dominate new investment flows, meaning more money goes into ETFs than mutual funds each year, even though mutual funds still hold substantial assets.
  • The shift reflects lower expense ratios on ETFs, better tax treatment, and easier trading, not superior investment returns.
  • Mutual funds remain common in retirement accounts and advisor-managed portfolios, so the crossover does not mean mutual funds are disappearing.

Why the crossover took so long

Mutual funds had a 40-year head start. The first index mutual fund launched in 1976, and for decades they were the only practical way for ordinary investors to own diversified portfolios without paying a financial advisor to pick stocks. By the early 2000s, mutual funds held trillions of dollars.

ETFs launched in 1993 but remained small and niche for years. They required a brokerage account and cost money to trade, which made them unattractive to small investors. The real acceleration began around 2010, when commission-free trading became standard and ETF expense ratios fell sharply. By 2015, ETFs were growing faster than mutual funds, but mutual funds still held more total assets because of their installed base.

The crossover took until 2024 because mutual fund assets did not shrink — they simply grew more slowly. Existing mutual fund holders often stayed put, especially in retirement accounts where switching costs little but feels like work. Meanwhile, all new money increasingly flowed into ETFs.

How the numbers changed year by year

In 2015, mutual funds held roughly $15 trillion globally and ETFs held about $2 trillion. By 2020, mutual funds had grown to around $27 trillion and ETFs to $7 trillion. The gap was still wide, but ETF growth was outpacing mutual fund growth by a factor of three or four.

Between 2020 and 2024, ETF assets grew by roughly $3 trillion while mutual fund assets grew by about $1 trillion. Market gains and new contributions both drove the numbers, but the direction was clear: ETFs were winning the race for new money. By late 2023 or early 2024, depending on market conditions and which data source you consulted, ETFs pulled ahead.

The exact crossover date varies slightly because different firms count assets differently — some include only U.S. assets, others include global funds, and some count assets on different reporting dates. But the trend is unmistakable and not in dispute.

What drove investors to switch

The primary reason is cost. The average ETF expense ratio is roughly 0.20 percent per year, while the average mutual fund expense ratio is roughly 0.50 percent per year. Over decades, that difference compounds significantly. A $100,000 investment growing at 7 percent annually costs an investor roughly $20,000 more in fees over 30 years if held in a mutual fund instead of an ETF.

Tax efficiency is the second reason. Mutual funds distribute capital gains to shareholders, which triggers a tax bill even if you did not sell. ETFs rarely distribute capital gains because of how they are structured. For taxable accounts, this difference can add up to several percentage points of return over time.

Convenience is the third reason. ETFs trade like stocks — you can buy or sell during market hours at a price that changes by the minute. Mutual funds settle once per day after the market closes. For most investors this does not matter, but the flexibility appeals to active traders and people who want to move money quickly.

Where mutual funds still dominate

Mutual funds remain the default in employer retirement plans and target-date funds. Many 401(k) plans offer only mutual funds, and most target-date funds (the "set it and forget it" option in retirement accounts) are structured as mutual funds. This is partly inertia and partly because mutual fund companies have long-standing relationships with plan administrators.

Mutual funds also remain common in advisor-managed accounts, especially for older investors or those with complex financial situations. Some advisors prefer mutual funds because they can negotiate lower expense ratios for large accounts, and because the daily settlement process fits their rebalancing schedules.

Actively managed funds — where a human manager tries to beat the market — are still predominantly mutual funds. ETFs have grown in the active space, but mutual funds still hold more actively managed assets. This is because active management was the original mutual fund business model, and switching to ETFs requires rebuilding relationships and systems.

What the crossover means for investors

The shift from mutual funds to ETFs is not a signal that mutual funds are bad or that you should sell them. It is a signal that the market has moved toward lower-cost, more tax-efficient vehicles, and that new investors have more choices than previous generations did. If you own mutual funds in a retirement account, there is usually no reason to switch — the tax advantages of ETFs do not apply inside a 401(k) or IRA.

If you own mutual funds in a taxable account and you are paying more than 0.30 percent per year in expenses, it may be worth exploring an ETF alternative. But switching triggers capital gains taxes if the fund has appreciated, so the math depends on your specific situation.

The crossover also reflects a broader trend toward passive investing — owning the entire market through index funds rather than trying to pick winners. Both mutual funds and ETFs offer index options, but ETFs have captured most of the growth in this category because of their cost advantage.

Frequently Asked Questions

Does the crossover mean mutual funds are going away?

No. Mutual funds still hold roughly $8 trillion in assets and remain common in retirement accounts and advisor-managed portfolios. The crossover means ETFs are now the default for new investors and new money, but mutual funds will likely remain a significant part of the investment landscape for decades.

Should I move my mutual funds to ETFs?

It depends on the account type and the fund's performance. In retirement accounts, there is usually no tax advantage to switching, so stay put unless the fund's expense ratio is unusually high. In taxable accounts, switching may make sense if you are paying more than 0.30 percent annually, but calculate the capital gains tax first — it may offset the savings.

Are ETFs better investments than mutual funds?

Not necessarily. ETFs and mutual funds can hold the same underlying investments and produce the same returns. The advantage of ETFs is lower costs and tax efficiency, not superior performance. A low-cost mutual fund index fund can outperform a high-cost ETF.

Why did it take so long for ETFs to catch up?

Mutual funds had a 40-year head start and benefited from inertia — most investors do not switch investments unless they have a specific reason. ETFs only became cost-competitive around 2010, and the crossover required years of new money flowing into ETFs while mutual fund assets grew more slowly.

What percentage of assets are now in ETFs versus mutual funds?

As of 2024, ETFs hold roughly 55 percent of combined assets and mutual funds hold roughly 45 percent. The split varies by region and account type — ETFs dominate in taxable accounts and new retirement accounts, while mutual funds remain more common in older 401(k) plans.