Entrusting your money to a star portfolio manager in the hopes of outperforming an index can be appealing. But active management has historically faced two major headwinds.
The first is cost. Active funds generally charge high expense ratios, which are annual fees deducted from fund assets to cover management, research, administration, marketing and operational expenses.
Passive index funds, by contrast, are usually much cheaper because their job is primarily to replicate an existing benchmark rather than actively research and select investments.
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The second challenge is tax efficiency. Actively managed funds typically have higher turnover, meaning securities are bought and sold more frequently. In a traditional mutual fund structure, this can create sizable taxable capital gains distributions at year-end.
Importantly, investors may owe taxes on these gains even if they never sold their fund shares themselves. If the manager realizes gains inside the portfolio, whether from profit-taking or meeting investor redemptions, those gains can be passed along to shareholders.
The exchange-traded fund, or ETF, structure helps mitigate many of these issues. On average, ETFs tend to charge lower expense ratios than mutual funds and generally avoid additional costs such as sales loads or 12b-1 fees.
More importantly, ETFs use an in-kind creation and redemption process. This structure allows ETF managers to accommodate inflows and outflows without needing to sell securities as frequently, reducing the likelihood of taxable capital gains distributions.
That said, active ETFs are not all trying to beat the market through discretionary stock picking. Some follow systematic strategies designed around factors that academic research associates with long-term outperformance, such as smaller company size, lower valuations or higher profitability. Others prioritize income generation or hedging risk instead of maximizing raw returns.
Active management exists on a spectrum, and the distinction between “active” and “passive” is not always as clear as index versus non-index. Many indexes today are sophisticated enough to behave like active strategies, while some active managers run low-turnover portfolios that hug benchmarks.
One way to measure how truly active a fund is called active share. This measures the percentage of holdings in a portfolio that differ from its benchmark index. A fund with a 0% active share perfectly mirrors its benchmark, while a 100% active share has no overlap at all.
Some fund providers disclose this figure directly, though investors may also need to rely on third-party data platforms such as Morningstar. In general, investors seeking a genuinely active strategy may want to look for an active share metric above 60%.
Here are seven of the best active ETFs to buy in 2026:
| ETF | Expense Ratio |
| Avantis All Equity Markets Value ETF (ticker: AVGV) | 0.26% |
| Dimensional World Equity ETF (DFAW) | 0.24% |
| State Street Bridgewater All Weather ETF (ALLW) | 0.85% |
| Distillate U.S. Fundamental Stability & Value ETF (DSTL) | 0.39% |
| JPMorgan Hedged Equity Laddered Overlay ETF (HELO) | 0.50% |
| Roundhill Generative AI & Technology ETF (CHAT) | 0.75% |
| Fidelity Blue Chip Growth ETF (FBCG) | 0.57% |
Avantis All Equity Markets Value ETF (AVGV)
“AVGV provides investors broadly diversified exposure to large-, mid- and small-cap companies across U.S., non-U.S. developed and emerging markets, targeting names with attractive prices relative to the strength of their balance sheet and cash flows,” said Matthew Dubin, senior portfolio manager at Avantis Investors. This active ETF features tilts toward the size, value and profitability factors.
AVGV is structured as a “fund-of-funds,” holding six underlying Avantis ETFs. Performance has been strong recently, with AVGV delivering a 42% net asset value total return over the trailing year, ahead of the MSCI ACWI IMI Value Index, at 29.1%. It is also relatively affordable for active management, charging a 0.26% net expense ratio, and currently has just under $330 million in assets under management.
Dimensional World Equity ETF (DFAW)
One risk with active management is style drift, where a fund gradually moves away from its original mandate over time. Investors can reduce this risk by allocating across competing managers. Investors who like AVGV’s global factor investing approach may also want to consider DFAW, which charges a 0.24% net expense ratio and has outperformed the MSCI All Country World IMI Index since its inception.
“DFAW targets equity premiums in the U.S., developed international and emerging markets and can serve as a one-ticker solution for investors looking for diversified global equity exposure,” says Ashish Bhagwanjee, senior portfolio manager and vice president at Dimensional Fund Advisors. “DFAW provides exposure to 48 different countries and more than 13,000 stocks around the world.”
State Street Bridgewater All Weather ETF (ALLW)
Some of the most influential active strategies have historically only been available through hedge funds. ETFs have helped broaden access to some of these approaches, with ALLW being a notable example. The fund provides exposure to Ray Dalio and Bridgewater Associates’ famous “All Weather” strategy at a 0.85% expense ratio. ALLW is up 8.4% year to date, ahead of the MSCI ACWI IMI Index, at 7.1%.
“ALLW is designed to help investors diversify portfolios across different economic environments — rising growth, falling growth, rising inflation and falling inflation,” says Matthew Bartolini, managing director and global head of research strategists at State Street Investment Management. “ALLW allocates across global equities, government bonds, inflation-linked bonds, commodities and gold, balancing risk.”
Distillate U.S. Fundamental Stability & Value ETF (DSTL)
One criticism of active management is that some strategies operate like a black box, offering little transparency into how investments are selected. DSTL takes the opposite approach, screening 500 profitable U.S. large-cap stocks and prioritizing companies with low debt. The 100 most attractively valued names are then weighted by free cash flow generation and rebalanced quarterly.
DSTL may appeal to investors worried about an artificial intelligence bubble. “We stay well clear of thinking valuation is a good predictor of short-term returns, but the parallels with 1999 are pretty unmistakable,” says Thomas Cole, co-founder at Distillate Capital Partners. Since inception, DSTL has returned 13.7% after a 0.39% expense ratio, outperforming the Russell 1000 Value Index, at 11.6%.
JPMorgan Hedged Equity Laddered Overlay ETF (HELO)
HELO is the ETF version of the JPMorgan Hedged Equity Fund (JHEQX), but with far greater accessibility. Investors can gain exposure for roughly $67 per share, whereas JHEQX requires a $1 million minimum investment. The ETF also lowers the cost slightly, charging a 0.5% expense ratio versus 0.57% for the mutual fund. The strategy is still managed by Hamilton Reiner, who has spent 17 years at J.P. Morgan.
HELO is a large-cap U.S. equity fund with an options-based hedge. HELO buys put options 5% out of the money and sells puts 20% out of the money, creating downside protection within that range over rolling three-month periods. To help finance this hedge, the ETF also writes covered calls. As the name suggests, these option positions are laddered rather than reset all at once, providing evergreen protection.
Roundhill Generative AI & Technology ETF (CHAT)
The Invesco QQQ Trust (QQQ) has become a popular way to gain exposure to the mega-cap technology companies driving AI innovation. However, some active ETFs have managed to outperform it, with CHAT being a notable example. From May 18, 2023, through May 8, 2026, CHAT delivered a 242.1% cumulative return versus 114.6% for QQQ. Its concentrated portfolio of 44 AI companies has generated alpha.
“High-quality operators are differentiating themselves as laggards fail to monetize investments into various AI initiatives,” says Thomas DiFazio, ETF strategist at Roundhill Investments. “We believe investors need a nimble, adaptive strategy not bound by country borders to stay ahead of the generative AI revolution.” CHAT charges a 0.75% expense ratio and currently has $1.6 billion in assets.
Fidelity Blue Chip Growth ETF (FBCG)
The Fidelity Blue Chip Growth Fund (FBGRX) is a mainstay in many 401(k) plans. Over the past 10 years, it has delivered a 21% annualized return, outperforming the Russell 1000 Growth Index and the Morningstar large-growth category averages of 18.3% and 15.9%, respectively. Investors can access an ETF version through FBCG, which charges a lower 0.57% expense ratio versus 0.61% for the mutual fund.
FBCG is structured as a semi-transparent ETF. Unlike traditional ETFs, it does not disclose its full holdings daily, helping preserve the confidentiality of the manager’s strategy. The trade-off is slightly weaker liquidity, reflected in a wider 0.1% 30-day median bid-ask spread. However, as an ETF, FBCG is generally less likely than an active mutual fund like FBGRX to distribute large taxable capital gains at year-end.
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7 Best Actively Managed ETFs to Buy Today originally appeared on usnews.com
Update 05/11/26: This story was previously published at an earlier date and has been updated with new information.