Exchange-traded funds can help you cut your tax bill. All funds must distribute capital gains from the stocks and bonds that they sell throughout the year. The gains can leave you stuck with unwanted taxes. ETFs and mutual funds differ when it comes to tax efficiency. It starts with how the investments are traded and how the transactions are treated. The differences can result in ETF investors owing less than mutual fund investors or nothing at all because ETFs can minimize their capital gain distributions. Bryan Armour, Morningstar’s director of ETF and passive strategies research for North America, explains how ETFs beat mutual funds at the tax game.

ETFs vs. Mutual Funds: The Benefits That Really Matter

On this episode:

00:00:00 Welcome

00:01:01 ETFs are more tax-friendly than their mutual fund rivals. Why is that?

00:02:17 How does the way ETFs are traded limit the tax drag that affects mutual funds?

00:03:23 ETF investors will eventually pay a tax bill. Why is it important to control when that happens?

00:04:04We talked about tax drag. What about cash drag? How are ETFs winning here?

00:04:51An ETF’s underlying strategy can sharpen or dull the edge it has over a mutual fund when it comes to capital gains. Which ETF strategies have held the biggest advantage over the past few years?

00:05:40Can you talk about the tax issues involving international stocks when managing gains in an ETF?

00:06:55And what about taxable-bond ETFs versus mutual funds?

00:07:37 Some ETFs do not benefit from tax efficiency. Which investments are those, and why don’t they?

00:08:24High-turnover strategies, where there’s a lot of buying and selling, can result in a big tax bill for investors. What have you found when you compared two momentum strategies?

00:08:58How can outflows leave loyal investors with a big tax bill?

00:09:49Active ETFs’ popularity is soaring. How tax-friendly are these investments versus their passive peers and mutual funds?

00:10:52 Which ETFs belong in taxable accounts and tax-advantaged accounts like an IRA or 401(k) to maximize tax efficiency?

00:11:55What if someone listening or watching just realized they should work on their asset location? What should they do?

00:12:54What’s the takeaway for using ETFs to cut tax bills?

Watch more from Morningstar:
Tax-Loss Harvesting Isn’t Just for Downturns. Here’s Why 

Bond ETFs Are Surging in Popularity in 2025. Here Are 5 of the Best

Investors Still Need to Mind the Gap in Their Funds’ Returns

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Your portfolio might be due for an end-of-the-year cleanup. The Morningstar US Market Index is up about 15% through mid-November 2025, and overall performance has been strong for years (even after 2022’s down market). That said, some stock sectors have performed significantly better than others, and performance can vary widely even within a sector. That could mean you’relikely holding some winners and some losers. Tax-loss harvesting could help trim your tax bill to save some money. While you’re tuning up your portfolio, it could also be a good opportunity to bring your asset allocation back into balance. Morningstar portfolio strategist Amy Arnott is here to explain how to pull off both strategies.

How to Rebalance Your Portfolio in a Lofty Market https://www.morningstar.com/portfolios/how-rebalance-your-portfolio-lofty-market

On this episode:

00:11 Welcome

01:03 What is tax-loss harvesting, and how does it work?

01:41 Is a brokerage or retirement account better suited for tax-loss selling? Why?

02:12 The US stock market has experienced solid growth so far in 2025. Do up markets make it harder to spot losses?

02:52 Why is tax-loss harvesting still a good strategy even when times are good?

03:32 Where can investors find losses to offset gains in their portfolio this year? Let’s start with stocks.

04:33 And what about mutual funds and ETFs?

05:17 Can you explain what wash-sale rules are, and how to play by the IRS’ rules?

06:39 What are some other strategic ways to take advantage of the losses?

07:55 In the spirit of tuning up our portfolio, this might be a good time to rebalance. How does that work, and why can it be an emotional challenge sometimes?

09:14 The 60/40 portfolio might need rebalancing. What’s happened over the past decade?

09:43 And what about growth versus value and US versus international stocks?

10:44 What are a few tips on how to restore balance to a portfolio?

12: 48 What is the takeaway for taking this time of year to do tax-loss harvesting and rebalancing?

Watch more from Morningstar:
Bond ETFs Are Surging in Popularity in 2025. Here Are 5 of the Best

Investors Still Need to Mind the Gap in Their Funds’ Returns

The US Dollar Is Weak. Is Your Portfolio at Risk?

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Investors are betting big on bond exchange-traded funds. Hundreds of billions of dollars have poured into bond ETFs in the first nine months of 2025. And more of these strategies have hit the market over the past several years. It’s important to remember that some bond ETFs are riskier than others. What should investors consider before tweaking their portfolio? Dan Sotiroff, a senior manager research analyst at Morningstar Research Services and the editor of the Morningstar ETFInvestor newsletter, discusses that and shares five top ideas for income investors.

Subscribe to Morningstar ETFInvestor for the full list of highly-rated bond ETFs. 

00:00:00 Introduction

00:00:54 Bond ETFs are having a banner year. Why are investors turning to these investments? 

00:02:31 Which is getting the bigger slice: passively or actively managed bond ETFs?

00:03:15 What are the four major types of bond ETFs, and how do they differ?

00:04:35 This month’s edition of Morningstar ETFInvestor analyzed more than a dozen bond ETFs. What makes a core bond ETF a solid portfolio building block?

00:05:47 What’s the top idea that’s received high marks from Morningstar?

00:06:27 We’re shifting from the least risky to the next level up, core-plus. What do these bond ETFs typically offer that an index-tracking ETF does not?

00:07:11 Can you tell us one intermediate core-plus bond ETF that’s earned a Gold rating from Morningstar?

00:07:44 Multisector bond ETFs take on a bit more risk than the previous two categories, and that comes with an expectation of more income. Should income investors skip the others and start here?

00:08:59 It’s time for the third top idea. What multisector bond ETF should folks consider?

00:09:25 High-yield bond ETFs are the riskiest among the categories we’re discussing today. What additional risks are investors taking on for the juicy yields?

00:10:30 Morningstar does not currently rate any actively managed high-yield bond ETFs. Is there one that income investors should watch?

00:11:28 What’s the takeaway for folks figuring out if these types of bond ETFs fit in their portfolios?

Watch more from Morningstar:
Investors Still Need to Mind the Gap in Their Funds’ Returns

The US Dollar Is Weak. Is Your Portfolio at Risk?

2025’s Winners and Losers, from Gold to Small Cap Stocks to the 60/40 Portfolio

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Are you getting the most out of your fund’s performance? Over the past 10 years, the average dollar invested in US mutual funds and exchange-traded funds earned 1.2% less per year than what those funds returned during the same period. That’s the top-line finding in this year’s Mind the Gap study, which aims to address the question of where investors succeeded in capturing most of their funds’ returns, and where they fell short. Jeff Ptak, a managing director for Morningstar Research Services, breaks down the takeaways from the report and what investors can do if they want to avoid leaving money on the table.

Mind the Gap US 2025

On this episode:

00:52 How does the report measure the difference between investor returns and total returns?

02:16 How does the latest research compare with previous years? Is the “gap” going away?

02:58 This difference in investor returns and total returns doesn’t just come from people failing to time the market. What else might cause the gap?

04:29 Where have investors been able to capture most of their funds’ total returns, and where have they fallen short? Are there certain categories that stand out?

06:18 Exchange-traded funds continue to gain popularity and market share. Did the investment type, mutual fund or ETF, make a difference in investor outcomes?

07:57 Morningstar research has found that active funds have largely struggled to beat their benchmarks, but certain categories are better suited for active management than others. Is there a difference in the investor return gap in active versus passive funds?

09:02 The study found that the more investors traded, the less they made. Why is that?

10:40 Morningstar has found that fees tend to be a predictor of performance. Does that finding hold when looking at investor returns?

12:12 The report also looked at the effects of return volatility. How did that translate to investor outcomes?

13:18 You’ve written that where a fund is utilized can be just as important as the type of fund and how it’s used. Can you explain that?

15:05 What is one takeaway from your research?

Watch more from Morningstar:
The US Dollar Is Weak. Is Your Portfolio at Risk?

2025’s Winners and Losers, from Gold to Small Cap Stocks to the 60/40 Portfolio

The Stock Market Is Ultra-Concentrated. Here’s How to Manage the Risks.

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How is the weakening dollar affecting your portfolio? The world’s reserve currency fell sharply in the first half of 2025, making it a bruising year. It has recovered some but still sits below where it started the year. Other currencies like the euro, Japanese yen, and Mexican peso look stronger against the greenback. Several factors could influence whether the dollar roars back or recedes. Why should the dollar’s performance matter for everyday investors like you? Morningstar Indexes strategist Dan Lefkovitz explains why and what you can do to protect your portfolio from currency fluctuations.

The bifurcation of the stock market is appearing to divide investors into two camps. There’s a lot of optimism baked into share prices of firms seen as leaders in artificial intelligence, according to Dan Kemp, chief research and investment officer at Morningstar Investment Management Europe. The Market Brief author points to Tesla TSLA as a great example, since investors are ascribing significant value to the company’s unproven, future products. Meanwhile, there’s a lot of pessimism in parts of the market that are not involved in AI. Kemp reminds investors to look for undervalued opportunities in the unloved areas of the market.

The US Dollar’s Value Is Down—and These 3 Investments Are Way, Way Up

On this episode:

What has been going on with the dollar? 

A lot of worried investors are likely asking the same question: How is the stock market going up in this macroeconomic environment? 

And why are bonds doing well?

You have written about the implications for a declining dollar. The dollar and gold typically compete as safe haven assets. It looks like gold is winning this year. Why is that? 

International stocks are outperforming US stocks this year. How does currency play into this? 

Our colleague Morningstar Inc portfolio strategist Amy Arnott joined me on Investing Insights for the Oct. 24 episode. She said investors might be underweight in international stocks despite recent performance. What case would you make to convince folks to consider increasing their overseas exposure? 

Emerging-markets debt is another asset class winning thanks in part to the dollar. Why does Morningstar find this fixed-income segment attractive? 

What risks could threaten the dollar’s dominance in the future?

Why should everyday investors who are saving for retirement or other goals care about whether the dollar falls or rises? And how can they hedge their bets?

Earnings season is underway. You’ve written about how it can be tempting to tweak a portfolio when companies share their forecasts. What should investors keep in mind?

In this week’s Markets Brief, you wrote about how optimism about Tesla’s unproven future growth opportunities highlights what’s going on in the broader market? Can you explain?

What are you keeping an eye on for next week’s column?

Watch more from Morningstar:
2025’s Winners and Losers, from Gold to Small Cap Stocks to the 60/40 Portfolio

The Stock Market Is Ultra-Concentrated. Here’s How to Manage the Risks.

New Crypto ETFs Are Coming. Here's How Investors Can Prepare

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This year’s uncertainty is producing a somewhat surprising group of winning and losing asset classes. And there are still two months to go in 2025. Many investors are rerouting their investments into different asset classes because of geopolitical risks like the US trade war, elevated inflation, and high interest rates. A more recent development is the budget battle in Washington, D.C. While the macro environment is pressure-testing portfolios, it’s also serving as a reminder about the benefits of diversification. So, which asset classes are leading and lagging as 2025 prepares to wrap up? And how’s the classic 60/40 portfolio holding up? Morningstar portfolio strategist Amy Arnott has examined the data.

The hunt for cockroaches may produce opportunities for patient investors. JPMorgan Chase CEO Jamie Dimon reacted to First Brands’ and Tricolor’s bankruptcies saying, “When you see one cockroach there are probably more.” Dan Kemp, chief investment research officer at Morningstar Investment Management Europe, says people are looking for more cockroaches to emerge due to weak lending standards via private credit. Despite the bankruptcies primarily involving the US markets, European banks took the hit. Kemp says there are bargains and more could surface if there are additional bankruptcies.

Can the Gold Rush Continue? Warning Signs for Investors

On this episode:

Market volatility has recently increased. Can you talk about what’s fueling it? 

We’re going to talk about asset classes that are winning and losing so far this year. Let’s start with the leaders. Gold hit record highs this year, but a sharp selloff this week has stopped the rally. Who’s been buying gold?

Cryptocurrencies have been on a tear despite a recent big selloff due to the US trade war. The volatile sector has rebounded. What’s driving its performance?

We’ve talked on the podcast in the spring about the outperformance of international stocks. Is the streak still going, and do overseas opportunities still exist? 

We’re now focusing on the three losing asset classes. The real estate sector is having a tough year. Can you give us the details? 

Why are US small-cap stocks and some bond segments lagging? 

How is the government shutdown affecting the demand for US Treasuries? Could this affect their safe-haven status?

The US dollar isn’t having a great year either. Could the world’s reserve currency weaken even more? 

How has the popular 60/40 portfolio—made up of 60% stocks and 40% bonds—performed? 

What about other popular portfolios, such as the three-fund portfolio or the more diversified portfolio your team looked at in the Diversification Landscape? 

What’s the takeaway for investors as they brace for more market volatility?

The stock market tumbled earlier this month, and cryptocurrencies like bitcoin and Ethereum fell with it. There’s the argument that crypto can serve as an effective diversifier for stocks. What’s your take, and what has filled the safe haven role this year?

In this week’s Markets Brief, you wrote about weaknesses in the financial services sector and a so-called cockroach hunt. Can you explain what’s going on, and how patient investors can find opportunities?

What do you plan to highlight in next week’s Markets Brief?

What to watch from Morningstar. 
The Stock Market Is Ultra-Concentrated. Here’s How to Manage the Risks.

New Crypto ETFs Are Coming. Here's How Investors Can Prepare

How Inflation, AI, and Budget Battles Will Shape the Stock Market in Q4

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Over the past few years, just a few large-cap technology stocks have powered the stock market’s returns. That trend shows no signs of abating anytime soon, as demand for artificial intelligence continues to send the tech sector higher. 

A highly concentrated market can—and has—turbocharged returns, but it also comes with downsides. As tech stocks soar, fund investors may find themselves with portfolios that are significantly less diverse than expected thanks to the outsize influence of a handful of firms like Nvidia NVDA and Microsoft MSFT. Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth, discusses how today’s narrow market compares with history and how investors can mitigate concentration risk in their portfolios. Morningstar Wealth is part of a registered investment advisor, Morningstar Investment Management.

https://www.morningstar.com/markets/whatever-happened-broadening-stock-market-rally

On this episode:

What do strategists mean when they talk about concentration risk? 

How did today’s narrow market develop? What forces and trends brought us here? 

How unusual is today’s narrow stock market compared with history? 

When the market has been concentrated in the past, what has caused that concentration to dissipate? 

Are the risks associated with high concentration greater for passive index investors? Why? 

Wall Street has been warning about concentration risk for the better part of two years. But stocks are still hitting record highs, and the weightiest stocks are still performing the best. Why do some strategists say they aren’t as concerned about concentration risk? Do investors really need to be worried? 

What are some strategies investors can use to mitigate the risk of a highly concentrated market without leaving too much upside on the table? 

What’s the most important thing investors should remember right now?

What to watch from Morningstar. 
New Crypto ETFs Are Coming. Here's How Investors Can Prepare 

How Inflation, AI, and Budget Battles Will Shape the Stock Market in Q4

Is Your Dividend Income at Risk? Here’s How to Spot Dividend Traps

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ETF Share Classes Are a Go for Dimensional: Here’s What Investors Need to Know

On this episode:

What was your reaction to the SEC removing these regulatory hurdles? 

Let’s first start with the rule change regarding crypto ETFs. Can you explain what new investment choices could be available, and what would they track? 

How soon could firms release new crypto ETFs? 

They’re already spot crypto ETFs trading. Could new competition push down fees overall? 

How have crypto ETFs performed so far in 2025? 

What crypto ETFs do Morningstar consider solid choices for investors? 

Morningstar considers crypto a speculative or high-risk asset. Will you remind investors why that is? 

Let’s switch to the SEC’s other recent rule change. It has approved Dimensional Fund Advisors to add an ETF share class to its mutual funds. Can you explain what an ETF share class is and provide a brief history lesson on it? 

More than 70 asset managers have banded together to get permission to offer dual share class funds. How often does that happen, and why in this case? 

What do individual investors stand to gain from new ETF share classes? 

Let’s flip it. What could they lose? 

What is the takeaway for investors as a new wave of crypto ETFs and ETF share classes arrive?

We talked on last week’s Investing Insights about how a US government shutdown would stop the release of economic data, like the monthly jobs report. How could a shortage of data affect the Federal Reserve and others who depend on this information?

Let’s discuss this week’s Markets Brief column. You wrote that the stock market could be on the verge of a so-called “melt up.” Can you explain what that is, and why cycles like this can be dangerous for investors? 

What are you tracking for next week’s Markets Brief column?

What to watch from Morningstar. 
How Inflation, AI, and Budget Battles Will Shape the Stock Market in Q4 

Is Your Dividend Income at Risk? Here’s How to Spot Dividend Traps

Should You Hold Cash Investments After the Fed Cuts Interest Rates?

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Investors’ exuberance is fueling this year’s stock rally, but will key economic risks dampen the market’s mood? The current bull run has lifted stocks from their springtime lows to higher levels in autumn. The artificial intelligence boom is one of the big factors driving it. Meanwhile, the Federal Reserve is dealing with the challenging situation of balancing the weakening job market and stubborn inflation. The Fed cut interest rates for the first time in 2025 in the third quarter, but the path forward from here is less certain. Morningstar Inc Senior Markets Reporter Sarah Hansen discusses seven key market factors you should watch in Q4 2025.

Nvidia’s investment of up to $100 billion in ChatGPT creator OpenAI could shatter records. The big bet is helping feed two simple narratives about the AI era, according to Dan Kemp, chief research and investment officer at Morningstar Investment Management Europe. First, there’s too much investment in the technology, and booms tend to lead to busts. Second, AI has changed the rules of investing and returns. Kemp cautions investors to remember that there are a wide range of possible outcomes than these easy stories. 

On this episode:

You examine the highs and lows during each quarter and write about it. What do you think are the biggest takeaways from Q3? 

Stocks are climbing higher despite a lot of risks. What signals is the market ignoring, and could it be at its own peril? 

The AI boom is driving what’s going on in the market. Mega-cap tech companies are making huge investments. Where’s the money going, and how long is this level of spending expected to continue? 

The hot IPO market has benefited from AI. Some of the most successful IPOs this year involved the industry. Can you describe this revival? 

The first interest rate cut of 2025 is in the books. The Federal Reserve pointed to the softening job market as one reason for the move. What are strategists telling you as the markets await the Fed’s next move? 

Inflation is still not tamed and hovering above the Fed’s 2% target. There are expectations that tariffs could raise prices for a while. What are the outlooks from Morningstar and other strategists? 

As the Fed cuts rates, short-term yields will come down. What about the rest of the bond market? Where do people see the risks? 

The federal funding fight is continuing in Washington, D.C. Let’s timestamp this moment. It’s Tuesday, Sept. 30. The US government would shut down on Oct. 1 if there’s not an agreement. How does uncertainty like this affect the markets, and what should investors think? 

Earnings season is coming up in a couple weeks. What is your team watching for? 

What’s the takeaway for investors as we enter Q4?

We talked on last week’s Investing Insights about inflation. The Federal Reserve’s preferred tracker showed inflation slightly ticked up in August as forecasters expected. It also revealed consumer spending rose. What do you think that’s signaling about the US economy? 

In this week’s Markets Brief column, you highlighted Nvidia’s potentially record-breaking investment. The chipmaker announced it would invest up to $100 billion in OpenAI. How should investors think about this deal?

New economic data is due out this week. What are you tracking for next week’s Markets Brief?

Read about topics from this episode.  

13 Charts on Q3’s Tech-Driven Stock Rally 

Will the AI Boom in Semiconductor Stocks Continue? 

What Investors Need to Know About the Steepening Yield Curve 

The Fed’s ‘Difficult Situation’: Reading Between the Lines of the September Dot Plot 

Forecasts for August PCE Report Shows Some Cooling, but Tariff Impacts Persist 

What Investors Need to Know About a US Government Shutdown 

Markets Brief: Nvidia’s AI Spending Spree Raises Boom and Bust Fears 

What to watch from Morningstar. 
Is Your Dividend Income at Risk? Here’s How to Spot Dividend Traps 

Should You Hold Cash Investments After the Fed Cuts Interest Rates?

What You Need to Know Before Choosing a Stock ETF

Investing in AI? Here Are 6 Undervalued Stocks for Buy-and-Hold Investors

Read what our team is writing.

Sarah Hansen

Dan Kemp

Ivanna Hampton

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It might be tempting to buy dividend stocks with the highest yields, but not all dividend payers are safe. Those big payouts could be signaling that a company’s fundamentals are cracking. Looming financial risks could wreak havoc on income-focused investors’ portfolios. But there are ways to spot dividend traps. Morningstar Indexes strategist and columnist Dan Lefkovitz explains how to avoid the risks.

Both healthcare and consumer defensive sectors are lagging the broader stock market this year, but for different reasons.

Dan Kemp, chief research and investment officer at Morningstar Investment Management Europe, explored what’s behind it in this week’s Markets Brief column. He says consumer defensive stocks are falling from high valuations, while healthcare stocks are facing significant headwinds like politics and earnings growth. He reminds investors that’s why it’s important to understand not only what you own in your portfolio, but why you own it as well.

On this episode:

What is a dividend trap, and under what conditions do they tend to develop? 

You and your team published research on dividend traps just before Dow Chemical DOW cut its dividend in half over the summer. How does your research explain what happened with Dow? 

Other well-known brands have also slashed their dividend payouts since 2020. The list includes Shell, Walgreens, and Intel. What warning signs were these companies flashing before their cuts? 

You have written about how income-focused investors can avoid dividend traps. Let’s start with step number one on how to spot them. What is the payout ratio, and what does it tell us about a company’s health?

The second step focuses on a company’s durable competitive advantage or economic moat. Can you describe what that reveals?

Your team weeds out dividend payers using a third step that relies on Distance to Default. How does that work, and what did you all find out? 

How can investors protect their dividend income from risks? Would portfolio diversification help? 

What’s the key takeaway to spot dividend traps?

We discussed on last week’s Investing Insights that you would focus on the market moves following the Fed’s quarter-point cut. How have the US dollar and bond prices reacted?  

In this week’s Markets Brief column, you zoomed in on the lagging performance of healthcare and consumer defensive stocks. What’s important for investors to know?  

New data on inflation from the Fed’s preferred tracker is set to come out Friday, September 26th. Inflation is hovering above the Fed’s 2% target. What are the markets’ expectations, and what would a surprise in the data mean for the near future?

Read about topics from this episode.  

Not All Dividend Stocks Are Safe. Here’s How to Avoid Dividend Traps 

What Investors Can Learn from Dow’s 50% Dividend Cut 

7 Things You May Not Know About Dividends 

The 10 Best Dividend Stocks 

Does Dividend Investing Still Work? 

Construction Rules for the Morningstar Indexes Distance to Default 

Markets Brief: AI Investment is Massive in a Cyclical Industry. Will This Time Be Different?

What to watch from Morningstar. 
Should You Hold Cash Investments After the Fed Cuts Interest Rates? 

What You Need to Know Before Choosing a Stock ETF

Investing in AI? Here Are 6 Undervalued Stocks for Buy-and-Hold Investors

Do Dividend Stocks Benefit From Non-US Revenue?

Read what our team is writing.

Dan Lefkovitz 

Dan Kemp

Ivanna Hampton

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