ETFs or Mutual Funds? How to Target Benefits of Both Worlds. | The Informed Investor 50

Episode 50: Is investing in exchange-traded funds or mutual funds an either/or choice?

Not anymore.

Thanks to the recent debut of actively managed ETF share classes—which are tacked onto mutual funds—investors will get multiple access points to an increasing number of  fund strategies.

Not many funds currently offer an active ETF share class. But that's likely to change in the months and years ahead.

The SEC greenlighted actively managed ETF share classes in 2025, and numerous fund companies have publicly stated that they may offer them.

Traditionally, the choice between an ETF or a mutual fund has largely depended on the use case. For example, assuming the underlying investment propositions and fees were similar, an investor might use mutual funds in their defined contribution retirement plan, such as a 401(k), and ETFs in their personal brokerage accounts. Alternatively, investors who value the ability to trade intraday might go for ETFs, while those who prefer the simplicity of trading at the end-of-day net asset value (NAV) might select the mutual fund.

Now, one actively managed fund can serve both applications using the same investment process—and all investors can potentially reap significant benefits.

For example, portfolio turnover arising from cash flows into either the mutual fund or ETF share class can be used for strategic rebalancing to increase expected returns across both share classes.

And all shareholders stand to benefit from lower transaction costs and greater tax efficiency through rebalancing from transactions in the ETF share class.

Plus, once the fund industry develops the necessary infrastructure, investors can look forward to nontaxable conversions between traditional share classes and ETF share classes.

In Episode 50 of The Informed Investor, Dimensional's Jake DeKinder, Head of Client Communications, David Kavanaugh, Global Head of Investment Operations, and Isabelle Williams, Deputy Head of Investment Solutions, break down this revolutionary change in the fund industry and discuss the advantageous implications for fund investors.

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Jake DeKinder on LinkedIn https://www.linkedin.com/in/jake-d-4105b98/

David Kavanaugh on LinkedIn https://www.linkedin.com/in/david-kavanaugh-59855a4/

Isabelle Williams on LinkedIn https://www.linkedin.com/in/isabellewilliams/

Learn more at https://www.dimensional.com/

For US audiences: Select videos are available as part of an opportunity for CFP® and Investments & Wealth Institute® professionals to earn continuing education (CE) credits. https://www.dimensional.com/us-en/financial-professionals/ce-credit-experience-d360