Passive investment strategies such as ETFs and index-tracking mutual funds have grown rapidly over the past decade, offering low-cost and tax-efficient exposure to broad markets. However, these vehicles are not always as straightforward as they seem, with three common misperceptions shaping investor decisions according to JPMorgan. 

First, passive funds may not perfectly mirror their benchmark indices due to regulatory constraints and concentration limits, which can lead to performance differences, particularly in sectors dominated by a handful of large-cap stocks. Second, while often inexpensive, specialized passive funds can carry higher expense ratios than expected, in some cases rivaling or exceeding actively managed alternatives. 

Third, passive ETFs are not universally tax efficient, as separately managed accounts can provide greater flexibility through tax-loss harvesting and charitable gifting strategies. 

Finsum: Understanding the nuances of passive investing is critical for aligning portfolios with long-term wealth goals and ensuring fees, exposures, and tax strategies fit the investor’s broader financial plan.