Mutual Funds vs ETFs vs SMAs: Which is the Best For You? (EP.219)

Aug 27, 2025

Discover the key differences between mutual funds, ETFs, and SMAs, including their impacts on taxes, costs, and control. Learn how ETFs and SMAs can offer solutions to the pitfalls of mutual funds. Delve into the concepts of tax-loss harvesting and how it creates tax alpha. Explore the future of investing as ETFs rise in popularity, SMAs gain traction, and mutual funds retain their role in retirement plans. This discussion is essential for anyone looking to refine their investment strategy.

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ANECDOTE

Group-Dinner Check Analogy

Peter Lazaroff compares mutual funds to a group dinner where the bill gets split evenly among diners.
He explains that you can end up subsidizing others' decisions when pooled investors redeem and force taxable trades.

INSIGHT

Redemptions Create Shared Tax Bills

Mutual fund redemptions force managers to sell securities which can create taxable distributions to all shareholders.
Those distributions mean one investor's sale can produce tax consequences for others who didn't sell.

INSIGHT

ETF Plumbing Reduces Tax Hits

ETFs use an in-kind creation/redemption process via authorized participants to avoid selling portfolio securities.
That plumbing makes ETFs far more tax-efficient for investor flows than mutual funds.

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Mutual funds, ETFs, and SMAs all give you access to the market — but the way they handle taxes, costs, and control can lead to very different outcomes. In this episode, I break down how each vehicle works, where it shines, and when it falls short. If you’ve ever wondered which is best for your portfolio, this is the episode you’ll want to hear.

Listen now and learn:

► Why mutual funds can leave you paying for other investors’ decisions — and how ETFs and SMAs solve that problem.

► The key differences between mutual funds, ETFs, and SMAs in terms of tax efficiency, cost, and customization.

► When an SMA makes sense (and when it doesn’t) — including how tax-loss harvesting at the stock level creates “tax alpha.”

► The future of investing vehicles: why ETFs dominate flows, how SMAs are growing, and why mutual funds still matter in retirement plans.

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com).

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