When Did ETFs Begin and How They Changed the Game

The birth of exchange-traded funds (ETFs) dates back to 1990, when the first ETF, the Standard & Poor's 500 Stock Index Fund, was launched by the American Stock Exchange.

The first ETF was created by Nathan Most, who is often referred to as the "father of ETFs." Most's innovative idea was to allow investors to buy and sell a basket of stocks that tracked the performance of a specific market index.

The introduction of ETFs revolutionized the investment landscape by offering a more flexible and cost-effective alternative to traditional mutual funds. This change was made possible by the creation of the first ETF, which paved the way for a wide range of index funds and actively managed ETFs.

The 1990 launch of the first ETF marked the beginning of a new era in investing, one that would continue to evolve and grow in the years to come.

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ETFs are funds that securitize their holdings for investors to purchase and trade.

They can be traded throughout a trading day, unlike mutual funds, which can only be traded after markets close. This allows investors to take advantage of price movements throughout the day rather than being limited to a closing price at the end of the day.

ETFs combine features of both mutual funds and stocks, offering investors an interest in a professionally managed, diversified portfolio of investments.

Unlike mutual funds, ETF shares trade like stocks on exchanges, with prices fluctuating throughout the day based on market demand.

There is no guarantee that ETFs will exactly replicate the returns on indexes they track, as each fund has a slight tracking error or difference between how the index would perform and how the ETF does.

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The first American ETF, the S&P 500 Trust ETF, was launched in 1993 by State Street Global Investors. This marked the beginning of a new era in investing.

ETFs were initially met with skepticism, but they eventually gained traction. By 2000, ETFs had assets that were barely 1% of those of mutual funds. Trading remained relatively low throughout the 1990s despite the massive growth of the dot-com era.

The ETF industry experienced rapid growth in the 2000s, with the number of ETFs growing exponentially and assets under management (AUM) surging toward the $1 trillion mark by the end of the decade. The decade also saw the introduction of new asset classes and strategies, transforming ETFs from a niche product into a fundamental tool for both retail and institutional investors.

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ETFs are funds that securitize their holdings for investors to purchase and trade.

They can be traded throughout a trading day, unlike mutual funds, which can only be traded after markets close.

This allows investors to take advantage of price movements throughout the day rather than being limited to a closing price at the end of the day.

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ETF shares trade like stocks on exchanges, with prices fluctuating throughout the day based on market demand.

Investors can buy and sell ETFs on public exchanges, just like individual stocks.

The first ETF in the U.S. was the SPDR S&P 500 ETF Trust (SPY), which began trading in 1993.

It tracks the performance of the S&P 500 by buying the same 500 stocks and weighting them proportional to the index.

Index ETFs, like SPY, track the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average.

The world's first ETF was called the Toronto 35 Index Participation Units, launched in 1990 by the Toronto Stock Exchange (TSX).

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The first ETF was born in 1990 on the Toronto Stock Exchange (TSX) as the Toronto 35 Index Participation Units.

The ETF market grew slowly in the early 1990s, but it wasn't until the launch of the SPDR S&P 500 ETF Trust (SPY) in 1993 that it started to gain momentum. SPY remains the largest fund in the world, with over $500 billion in assets.

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The first American ETF was launched in 1993, and it took 15 more years for the first actively managed ETF to reach the market. Barclays entered the ETF business in 1996, and Vanguard began offering ETFs in 2001.

The ETF industry experienced rapid growth in the 2000s, with the number of ETFs increasing from 102 in 2002 to over 12,000 by 2024. The assets under management (AUM) for U.S. ETFs surged toward the $1 trillion mark by the end of the decade.

The first US-listed exchange traded fund (ETF) was launched in January 1993, and it was a basket of securities tracking the performance of the S&P 500 Index. The ticker SPY flashed on screen for the first time, marking a significant milestone in the history of ETFs.

ETFs have come a long way since their launch in 1993, but how do they stack up against other investments?

ETFs are traded on U.S. exchanges like any stock, making them more accessible to investors than mutual funds.

In the 2000s, ETFs expanded into new asset classes and strategies, transforming them into a fundamental tool for both retail and institutional investors.

By 2000, ETFs had assets that were barely 1% of those of mutual funds, but this would soon change.

The flexibility and range of ETFs continued to attract a broad base of investors, despite regulatory concerns in 2008.

The number of ETFs grew exponentially by the end of the decade, and the assets under management (AUM) for U.S. ETFs surged toward the $1 trillion mark.

ETFs offered investors new ways to diversify their portfolios, such as the iShares MSCI EAFE ETF (EFA), which provided exposure to international stocks in 2001.

Bond ETFs also gained popularity, with the introduction of the iShares Barclays Aggregate Bond ETF in 2002, making them the second-most traded type of ETFs after equities.

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Index investing with ETFs has a rich history that dates back to the 1970s.

Academic studies and influential works like Burton Malkiel's "A Random Walk Down Wall Street" argued that most investors would be better off investing in a low-cost, diversified portfolio that tracked a broad market index rather than trying to beat the market.

The first index mutual fund was launched by Wells Fargo and American National Bank in 1973 for institutional customers.

This was followed by Vanguard's First Index Investment Trust in 1976, which tracked the S&P 500 and was open to the public.

Index funds gained traction and reached $1.5 trillion in assets by 1993.

This was a pivotal year in investment funds history, marking the beginning of a new era in index investing.

The introduction of ETFs in 1993 revolutionized the way people invest in the market.

The first ETF, the SPDR S&P 500 ETF Trust (SPY), was launched by State Street Global Investors and remains the largest fund in the world, with over $500 billion in assets.

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Today, there are over 12,000 ETFs available worldwide, with about 600 different fund management companies providing them.

ETFs offer investors broad exposure to various asset classes, including international stocks, bonds, and commodities.

The iShares MSCI EAFE ETF (EFA) was one of the first ETFs to provide exposure to international stocks, making it easier for investors to diversify across the globe.

Bond ETFs also gained popularity with the introduction of the iShares Barclays Aggregate Bond ETF in 2002.

The flexibility and range of ETFs have continued to attract a broad base of investors, with assets under management (AUM) for U.S. ETFs surging toward the $1 trillion mark by the end of the 2000s.

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In 2019, the SEC adopted the ETF Rule, which streamlined the process of bringing new ETFs to the market.

This openness was put to the test immediately as the SEC had many applications for ETFs related to various cryptocurrencies. The SEC approved bitcoin futures ETFs in 2021, allowing investors exposure to the currency without buying them directly.

The SEC continued to bat down proposals for ETFs that held crypto directly, citing concerns over market manipulation, liquidity, and security for the crypto these funds held. SEC Chair Gary Gensler was a well-known crypto skeptic, saying its markets were "rife with abuses and fraud."

The SEC doubled the size of its crypto and digital-asset-related staff in response to a series of bankruptcies involving major cryptocurrency platforms like FTX, BlockFi, and Voyager Digital.

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The ETF landscape has come a long way since its inception in 1993. One of the first notable ETFs was the iShares MSCI EAFE ETF (EFA), which began trading in 2001 and provided exposure to international stocks.

This ETF made it easier for investors to diversify their portfolios with a single purchase of shares. The iShares Barclays Aggregate Bond ETF was introduced in 2002, becoming a popular choice for bond investors.

The SPDR Gold Shares (GLD) ETF gave exchange-traded access to commodities for the first time in 2004. This marked a significant milestone in the ETF industry. The Euro Currency Trust (FXE) debuted a year later, offering investors the ability to hedge or speculate on changes in foreign exchange (forex) rates.

ProShares launched its first leveraged and inverse ETFs in 2006, offering two times or negative-two times the daily returns of market indexes. These tools were particularly appealing during the volatile market conditions leading up to and following the 2008 financial crisis.

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