A tectonic shift is underway in the asset-management industry, as investor disinterest in traditional mutual funds shows no signs of slowing.
Instead, capital is pouring into exchange-traded funds (ETFs), favored for their flexibility, lower fees and tax advantages, forcing legacy players like Vanguard and BlackRock Inc. BLK to adapt.
The $11 trillion U.S. ETF market has now grown to more than half the size of the $19.8 trillion mutual fund industry. And momentum favors ETFs.
According to data shared by ETF.com, ETFs have earned nearly $2.5 trillion in assets since 2022, while mutual funds have lost over $2 trillion. This stark divergence reflects shifting investor preferences.
From January to April, mutual funds have suffered $255.9 billion in outflows, while ETFs have added $348.4 billion.
The difference in market activity is even more striking: 350 ETFs were launched through April 2025—ten times more than the 34 mutual funds launched during the same period.
The Vanguard Group, the world’s largest mutual fund company, has slowed its mutual fund launches. It introduced only one stand-alone mutual fund since 2023, but rolled out 11 ETFs in that same period, according to Morningstar. Its $657.3 billion Vanguard S&P 500 ETF VOO is now the world’s largest ETF.
Disclosure: 82% of retail CFD accounts lose money
Why Are ETFs Winning Against Mutual Funds?
According to ETF.com, ETFs are quickly becoming the go-to option for investors seeking low-cost access to broad indexes like the S&P 500, specific sectors such as retail, banking, or semiconductors, and a wide range of bond markets.
Unlike mutual funds, which price only once at the end of the day, ETFs trade throughout market hours.
One of their biggest advantages is tax efficiency—thanks to how fund shares are created and redeemed, they typically don’t trigger capital gains taxes when sold in taxable accounts.
“Mutual funds are clearly giving up market share to ETFs,” said Daniel Sotiroff, CFA, Morningstar Direct senior manager research analyst.
Top ETFs By Inflows Over The Last Year
The investor pivot from mutual funds to ETFs is reflected not just in the scale of flows, but in where and why the money is going.
The seven most popular ETFs by inflows over the past 12 months reveal clear preferences: broad-based U.S. equity exposure, low-cost Bitcoin strategies, and short-term U.S. bonds amid inflation and interest-rate uncertainties.
Notably, the Vanguard S&P 500 ETF led all funds with nearly $140 billion in inflows, driven by its rock-bottom 0.03% expense ratio. Similarly, the iShares Core S&P 500 ETF IVV attracted more than $60 billion, due to its competitive costs.
In contrast, the SPDR S&P 500 ETF Trust SPY, the world’s largest fund, has drawn just $9.46 billion amid a 0.09% expense ratio.
In third place, the iShares Bitcoin Trust IBIT attracted over $31 billion, outpacing crypto peers largely due to its industry-low 0.12% annual fee.
| ETF Name | Inflows (1Y) | Expense Ratio |
|---|---|---|
| Vanguard S&P 500 ETF | $139.95B | 0.03% |
| iShares Core S&P 500 ETF | $62.53B | 0.03% |
| iShares Bitcoin Trust | $31.7B | 0.12% |
| Vanguard Total Stock Market ETF VTI | $31.22B | 0.03% |
| Invesco QQQ Trust QQQ | $26.57B | 0.20% |
| iShares 0–3 Month Treasury Bond ETF (ARCA: | $26.22B | 0.09% |
| SPDR Portfolio S&P 500 ETF (ARCA: SPLG) | $25.34B | 0.02% |
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