Actively managed exchange-traded funds (ETFs) are growing in popularity. 2025 has already seen a record number of ETFs launched, with over 2,000 active ETFs now on the market. As of April 25, active ETFs had trading volume inflows of $132bn in investments, leading to explosive growth in their assets under management (AUM).
Active ETFs can offer several unique advantages for retail investors compared to their passive ETF counterparts. But there’s no one-size-fits-all answer to finding the best one out there. The best active ETF for you depends on your investment objective, risk tolerance, time horizon, and personal preferences. Are you looking for growth? Income? ESG exposure? It’s not about chasing another investor's winners, but finding a fund that fits your investment strategy.
Let's start with the basics. An ETF is an 'exchange-traded fund'. It's traded on a stock exchange, so it can be bought and sold throughout the trading day. This is just one way ETFs differ from mutual funds.
ETFs are essentially a basket of individual stocks. Because they can provide broad diversification with just one investment, they're often a popular choice among UK retail investors. Many of the most popular ETFs track an index, like the S&P 500, which is made up of the 500 largest companies on US stock markets.
There are two types of ETFs: active and passive.
Here’s a quick comparison:
Active ETFs are rising in the ranks. With more of them on offer, they're increasingly filling gaps in the market that passive ETFs struggle to cover. Other drivers behind their rise include:
Here are some of the active ETFs currently available on your Freetrade app. Please note that this is not investment advice. Rather, it’s a sample of the 34 active ETFs we offer across different geographies, industries, and strategies.
The eagle-eyed among us might notice that most of these ETFs are accumulating. That means dividends earned by the companies they’re invested in will be reinvested to help grow the fund value. This can help boost the power of compounding over the long term.
Investing in an active ETF is the same as investing in any other ETF, stock, trust, or bond.
Here’s how to get started:
While both ETFs and mutual funds pool investor money to buy diversified assets, there are some key differences to keep in mind:
This depends on your investment goals. Active ETFs charge higher fees because they have professional fund managers at the helm, conducting research and spearheading investment strategy. Their objective is to provide an investment that meets your personal objectives and risk tolerance too. Whether these fees are "worth it" mostly comes down to whether its future performance consistently outperforms the benchmark it’s tracking after you’ve paid the fees. It is worth noting that the fund may not achieve its investment goals.
You might consider using active ETFs for:
When it comes to investing, dollar cost averaging is a powerful strategy if you plan to invest over time. When you buy active ETFs in regular intervals, you’ll smooth out the price volatility. This strategy can help supplement income while reducing the risks of market timing.
General investment account
Stocks and shares ISA
Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more
FX fee of 0.59% on non-GBP trades
3% AER on up to £2k uninvested cash
General investment account
Stocks and shares ISA
Personal pension (SIPP)
Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more
FX fee of 0.39% on non-GBP trades
5% AER on up to £3k uninvested cash
General investment account
Stocks and shares ISA
Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more
FX fee of 0.59% on non-GBP trades
3% AER on up to £2k uninvested cash
General investment account
Stocks and shares ISA
Personal pension (SIPP)
Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more
FX fee of 0.39% on non-GBP trades
5% AER on up to £3k uninvested cash