There are three main advantages of ETFs over mutual funds for retail investors — better liquidity, lower cost, and tax efficiency
At year-end 2023, US financial services companies offered 8,582 mutual funds and 3,304 exchange-traded funds accounting for total net assets of USD 25 trillion and USD 8 trillion, respectively. More than 90 percent of total net assets of long-term mutual funds (including equity, bond, and hybrid funds) are owned by retail investors, but these funds have experienced huge outflows in the last 10 years, mainly driven by outflows from equity funds. At the same time, ETFs have experienced huge inflows from retail investors.