ETFs Aren’t Always Cheaper Than Mutual Funds. Here’s What to Compare Instead

Walk into almost any conversation about fund investing and you will hear the same shorthand: ETFs are cheaper than mutual funds. It is a tidy rule of thumb, repeated so often it has hardened into received wisdom. Shelley Antoniewicz, a longtime economist who tracks fund industry data, says that shorthand quietly misleads investors who treat it as a substitute for actually reading a prospectus.

Speaking on The Rational Reminder Podcast episode “Economist: The State of Investing in 2026,” Antoniewicz argued that the structure of a fund matters far less than its scale. The headline number she keeps coming back to: on an asset-weighted basis, equity mutual fund investors paid 99 basis points for an equity mutual fund in 2000, compared to just 40 basis points today, a 60% decline. That compression is the real story of the last 25 years, and it has happened inside both wrappers.

The Myth That Will Not Die

The cliche took hold for good reason. The largest equity index ETFs are genuinely cheap. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) carries a net expense ratio of 0.000945, or 9.45 basis points, as of March 17, 2026, according to State Street’s SEC filings. At that price, a $100,000 position costs less than ten dollars a year in fund fees.

That number is possible only because SPY is enormous. The fund’s top holdings read like a roll call of the U.S. market: NVIDIA at 7.58% of net assets, Apple at 6.66%, Microsoft at 4.91%, Amazon at 3.64%, and Alphabet’s Class A shares at 2.99%. Spread fixed operating costs across hundreds of billions in assets and the per-investor bill collapses. Economies of scale, in other words, do most of the work.

What Antoniewicz Actually Said

Her sharper point is what investors should take from that math. “Even if you were to look at the same asset class, it is not a given that the ETF will always be cheaper than the mutual fund,” Antoniewicz said. “A large mutual fund can have a lower expense ratio than a smaller ETF.”

ETFs have multiplied across asset classes over the last decade, and the newer, narrower, or more exotic the strategy, the more its cost structure looks nothing like SPY. A thematic ETF with $80 million in assets has very different unit economics than a flagship index fund. Meanwhile, several large institutional mutual fund share classes now carry single-digit basis-point fees that compete directly with the cheapest ETFs.

Across asset classes the spread widens further. The iShares Core U.S. Aggregate Bond ETF (NYSEARCA:AGG) lists a net expense ratio of 0.0003, or 3 basis points, as of April 2, 2026, per its iShares summary prospectus. Comparing AGG to an equity ETF tells you nothing about whether either is cheap relative to its peers.

What To Compare Instead

The practical takeaway is straightforward. Before deciding between two funds, line them up on three things:

• Asset class and strategy. Compare a large-cap U.S. equity index fund to another large-cap U.S. equity index fund. Cross-category comparisons are noise.
• Asset-weighted expense ratio. This reflects what investors actually pay across the fund’s assets, beyond any headline fee on a marketing page.
• Fund size. Scale drives pricing power. A $400 billion fund and a $400 million fund operate in different cost universes regardless of wrapper.

The bigger lesson behind Antoniewicz’s data is that the fund industry’s fee war has already delivered most of its gains to investors who pay attention. The drop from 99 to 40 basis points on equity mutual funds is real money compounding in real portfolios. Capturing the next leg of those savings requires reading the actual expense ratio in front of you.

What to watch next: as active ETFs and mutual fund share-class conversions accelerate through 2026, the line between the two structures will keep blurring. The funds that win flows will be the ones that can defend low fees through sheer scale, whichever box they sit in.