Exchange-traded funds are generally known for passive strategies. But there has been a surge in actively managed ETFs as investors seek lower costs and more precision, experts say.

Active ETFs represented just more than 2% of the U.S. ETF market at the beginning of 2019. But these funds have since grown more than 20% each year, rising to a market share of more than 7% in 2024, according to Morningstar.

Some 328 active ETFs have launched in 2024 through September, compared to 352 in 2023, which has been “kind of remarkable,” said Stephen Welch, a senior manager research analyst for Morningstar, referring to the growth of ETFs this year.

There are a few reasons for the active ETF growth, experts say.

In 2019, the U.S. Securities and Exchange Commission issued the “ETF rule,” which “streamlined the approval process” and made it easier for portfolio managers to create new ETFs, Welch said.

Meanwhile, investors and advisors have increasingly shifted toward lower-cost funds. Plus, there has been a trend of mutual fund providers converting funds to ETFs.

Still, only a fraction of issuers have been successful in the active ETF market. The top 10 issuers controlled 74% of assets, as of March 31, according to Morningstar. As of October, only 40% of active stock ETFs had more than $100 million in assets.

The “biggest thing” to focus on is the health of an active ETF, explained Welch, warning investors to “stay away from ones that don’t have a lot of assets.”

While passive ETFs replicate an index, such as the S&P 500, active managers aim to outperform a specific benchmark. Like passive ETFs, the active version is typically more tax-friendly that similar mutual funds.

“Active ETFs allow managers to make tactical adjustments, which may help navigate market volatility more smoothly than a passive index,” said certified financial planner Jon Ulin, managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida.

These funds can also provide “more unique strategies” compared to the traditional index space, he said.  

The average active ETF fee is 0.65%, which is 36% cheaper than the average mutual fund, according to a Morningstar report released in April. But the asset-weighted average expense ratio for passive funds was 0.11% in 2023.

However, there is the potential for underperformance, as many active managers fail to beat their benchmarks, Ulin said. Plus, some active ETFs are newer, with less performance data to review their performance.

Many investors worry about how the outcome of the presidential election will impact their investments.

But there’s another risk financial advisors are focused on — public debt, according to a new survey from Natixis Investment Managers.

Most U.S. advisors — 68% — rank public debt as the top economic risk, while 64% of advisors worldwide said the same, according to the survey of 2,700 respondents in 20 countries, including 300 in the U.S.

“No matter who wins the election, they’re convinced public debt is going to continue to go up,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight.

The term public debt is used interchangeably by the U.S. Treasury with national debt and federal debt.

The government has borrowed to pay expenses over time, comparable to how an individual might use a credit card and not pay off the full balance each month. The U.S. national debt is now more than $35 trillion and growing.

The next U.S. president and Congress will inherit that government spending dilemma, as well as looming trust fund depletion dates for Social Security and Medicare.

More individuals now believe they are on their own when it comes to funding their retirements, the Natixis survey have shown, according to Goodsell.

Experts say there are certain moves individual investors can make to limit the financial exposure they have to those broader risks.

“You cannot control what Congress is doing, but you can control how you plan, how you save, invest and react to the news,” said Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. Cheng is also a member of the CNBC FA Council.

To diversify, investors may consider both U.S. and international bonds, said Barry Glassman, a certified financial planner and the founder and president of Glassman Wealth Services. Bonds that have longer duration tend to come with more risks. Glassman is also a member of the CNBC FA Council.

For investors who worry the country’s debt may lead to slow growth, it can help to add international exposure to a portfolio, Cheng said.

At the nation’s top schools, including many in the Ivy League, acceptance rates hover near all-time lows.

“College admissions only ever gets more competitive and there’s a lot of stress from families about the stakes and how to get in,” said Thomas Howell, the founder of Forum Education, a New-York based tutoring company.

For some families, getting their child into a top school is an investment, and to that end there is almost no limit to what they will spend on tutors, college counselors and test prep.

Meanwhile, as the sticker price at some private colleges nears six figures a year, some students have opted for less expensive public schools or alternatives to a degree altogether. For those willing to pay for a four-year, private college, it should be worthwhile, the sentiment often goes.

“The value proposition of higher education is splitting,” Howell said, “it’s either a top school or a real value.”

For this crop of college applicants, it’s “top 20% or bust,” he added.

As a result, universities in the so-called “Ivy Plus” are experiencing a record-breaking increase in applications, according to a report by the Common Application.

The “Ivy Plus” is a group that generally includes the eight private colleges that comprise the Ivy League — Brown, Columbia, Cornell, Dartmouth, Harvard, University of Pennsylvania, Princeton and Yale — plus the University of Chicago, Duke, Massachusetts Institute of Technology and Stanford.

To get into this elite group of schools, many families look for outside help to get a leg up.

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“The consensus is it’s only worth going to college if it’s a life changing college,” said Hafeez Lakhani, founder and president of Lakhani Coaching in New York. 

“What hasn’t changed is people with enormous resources willing to invest over $100,000, which is about 20% of our clients,” Lakhani said. “This might be the single largest thing they’ve spent on other than a car.”

Lakhani Coaching’s clients spend an average of $58,000 on counseling, but some have spent as much as $800,000 over the course of several years, according to Lakhani.

At that price point, students receive “essentially a ‘SEAL-team’ level tutor through almost every class,” he said. Lakhani was equating the academic support with the highest level of organization and execution that epitomizes the training of a Navy Seal, the special operation force that stands for sea, air and land teams.

Lakhani charges $1,600 an hour for his services, the top rate at his company, and still, families often choose to work with him over the less senior coaches there, some of whom charge about $290 an hour, he said.

Even if he charged more, that dynamic likely would not change, he added.

Parents often say, “it’s worth the investment,” he added. “That word investment comes up over and over again.”

At Command Education in New York, counselors meet with students weekly starting in eight or ninth grade. Families are charged $120,000 per year, not including the Standards Admission Test (SAT) or American College Test (ACT) test prep. By graduation, they’ve spent roughly half a million dollars.

Command caps the clientele at 200 students worldwide, mostly on a first-come, first-served basis, although they will turn students away if they don’t think they can deliver the desired outcome, according to Christopher Rim, the founder and CEO.

“At the end of the day, results are most important,” he said.

To be sure, the business of college counseling is growing year after year, driven in part by increased concerns about college’s return on investment, which is making these specialists a worthwhile expense, according to IBISWorld, a market research firm. In 2024, total revenue reached $3 billion.

Plus, the number of counselors available to students has been steadily dwindling for years. Currently, the national student-to-counselor ratio is 405 to 1, according to the National Association for College Admission Counseling.

Those that can afford outside help do have an advantage.

Children from families in the top 1% are more than twice as likely to attend an “Ivy Plus” college as those from middle-class families with comparable SAT or ACT scores, according to the National Bureau of Economic Research. 

“Higher education is an imperfect meritocracy,” Lakhani said.

However, the wealthiest students hailing form the country’s top private schools are primarily competing amongst themselves as schools look to build a diversified class.

“When you are applying from an affluent family, the people you are competing against are people in a similar bucket,” Lakhani said.

The irony is most don’t want to admit that they’ve received private help, even if they are fortunate enough to get it.

“Every parent wants to say their child does it on their own,” Rim said.

A study by Harvard University-based non-partisan, non-profit research group Opportunity Insights compared the estimated future income of waitlisted students who ultimately attended Ivy League schools with those who went to public universities instead.

In the end, the group of Harvard University- and Brown University-based economists found that attending an Ivy League college has a “statistically insignificant impact” on earnings.

However, there are other advantages beyond income.

For instance, attending a college in the “Ivy-plus” category rather than a highly selective public institution nearly doubles the chances of attending an elite graduate school and triples the chances of working at a prestigious firm, according to Opportunity Insights.

Leadership positions are disproportionately held by graduates of a few highly selective private colleges, the Opportunity Insights report found. 

Further, it increases students’ chances of ultimately reaching the top 1% of the earnings distribution by 60%.

“Highly selective private colleges serve as gateways to the upper echelons of society,” the researchers said.

“Because these colleges currently admit students from high-income families at substantially higher rates than students from lower-income families with comparable academic credentials, they perpetuate privilege,” they added.

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