Beautiful Virgin Islands

Sunday, Aug 02, 2026

The first ETF launched 30 years ago, revolutionizing investing

The first ETF launched 30 years ago, revolutionizing investing

Industry is bringing more exotic trading strategies to the masses

Thirty years ago, the launch of the first exchange-traded fund ushered in a new era of investing. Now, the industry is bringing exotic trading strategies to the masses.

The SPDR S&P 500 ETF Trust, which tracks the benchmark U.S. stock index, gave investors the ability to buy and sell hundreds of stocks through a single, publicly traded share for the first time.

The SPDR ETF and the funds that followed popularized the idea of simply following the market, a strategy known as passive investing.


A trader looks at his screen on the floor of the New York Stock Exchange June 29, 2010. Investors fled the U.S. stock market on Tuesday and the S&P 500 tumbled to its lowest level in eight months in a sell-off triggered by a wave of increasin

Today, there are ETFs tracking dozens of asset classes, sectors and investing themes. The funds are favored for their low fees and advantageous tax structure compared with traditional mutual funds. Their popularity continues to grow, even in the midst of a bear market.

Few could have predicted the SPDR fund’s impact when it launched on Jan. 22, 1993.

"At the time, it was not a watershed moment, but it’s now hard to imagine investing without ETFs," said Todd Rosenbluth, an industry veteran and head of research at VettaFi. "A whole generation of investors only thinks about using ETFs to get diversified exposure. They’ve opened up markets that previously were harder to obtain access to."

The industry is quickly expanding to include active management and more exotic investing products like leveraged and inverse funds. Proponents say the suite of cheap investing options has helped democratize investing. Others, noting the fast growth of risky ETFs that use leverage to amplify both returns and losses, are sounding the alarm about the potential fallout for inexperienced investors.

For years, ETFs have gained ground on mutual funds, the traditional broad-based investment option still favored by 401(k) retirement plans. That trend accelerated in 2022. U.S. ETFs took in almost $600 billion on a net basis in 2022, second only to 2021’s record inflow, according to data from Morningstar Direct. Investors pulled nearly $1 trillion from mutual funds. That marked the largest gap in flows between the funds on record.
Michael Sapir, CEO of ProShares, rings the opening bell celebrating ProShares Bitcoin Strategy ETF trading as BITO on the NYSE Arca, at the New York Stock Exchange (NYSE) in New York City, October 19, 2021. REUTERS/Brendan McDermid


To be sure, ETFs aren’t on track to overtake mutual funds soon. ETFs had $6.5 trillion in assets at the end of 2022, versus $16.3 trillion for mutual funds. The SPDR ETF, best known by its ticker symbol SPY, remains the largest ETF, a behemoth with roughly $370 billion in assets.

Most ETFs are similar to index-tracking mutual funds, with several key advantages. ETFs can be bought and sold throughout the trading day, unlike mutual funds, which price once daily at market close.


Perhaps most important, their fees are significantly lower. The average expense ratio for index equity ETFs was 0.16% in 2021, or $16 annually per $10,000 of investment funds, compared with 0.47% for equity mutual funds, according to the Investment Company Institute.

Last year’s market selloff likely provided a reminder for investors to reassess their portfolios, leading to further adoption of ETFs, said Matthew Bartolini, head of SPDR research at State Street Global Advisors, the asset manager behind SPY.

"When you have underperforming active managers with a high fee, and you’re getting hit with a capital-gains tax, that’s going to lead people to leave," Mr. Bartolini said.

The downturn gave savvy investors an opportunity for tax-loss harvesting—selling funds to realize a loss and writing it off for tax purposes. A popular tax-loss harvesting strategy is to sell a mutual fund and quickly purchase an ETF with similar holdings. That practice, known as a wrapper swap, allows investors to realize a loss for tax purposes while staying invested.

Also driving growth in ETFs is the emergence of active strategies and other new products. Passive strategies still made up 95% of the ETF market in 2022, according to Morningstar. But of the 431 new ETFs launched, more than half were active strategies, according to Mr. Rosenbluth. Active funds took in 15% of total ETF flows last year, nearing $100 billion, a record for active strategies.

Popular active ETFs include Cathie Wood‘s ARK Innovation, an active fund that invests in "disruptive" companies, primarily unprofitable firms in the tech sector. Shares of the fund, a favorite among individual investors that soared during the pandemic, plunged 67% in 2022.

Trader Gregory Rowe, center, and others work on the floor of the New York Stock Exchange Monday, March 16, 2020.


Yet despite the poor performance, investors continued to pour funds into ARK. Individual investors showed similar interest in other speculative ETF offerings, including leveraged funds, raising concern over whether the industry is making it too easy for individuals to make risky bets.

For example, the Direxion Daily TSLA Bear 1x Shares ETF, launched in August, aims to provide the exact inverse performance of Tesla Inc. shares. The ETF is the first based around a single stock, according to Mr. Bartolini of State Street. It is the latest example of ETFs allowing widespread access to the kind of trade that once was reserved for institutional or high-net-worth investors with access to Wall Street dealers.

"I hope for the sake of the investors who are using leveraged funds, they really have done their homework and understand the risks that are inherent with these products," said Elisabeth Kashner, director of global funds research at FactSet.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Finland Deploys Commercial-Scale Thermal Batteries Using Crushed Rock to Store Renewable Grid Energy
Valued at $109 Million: F-35B Fighter Jet Crashes in Southern California
Andy Burnham has Announces Plans to Redistribute Income Tax Revenue to English Mayors
Early-Release Scheme Faces Fresh Scrutiny as Reoffending and Prison Recalls Rise
Police Phone Checks Followed Report on Murder of MI5 Agent Inside Sinn Féin
Archbishop of Canterbury Reaffirms £100 Million Reparative Justice Fund During Ghana Visit
Drought Status Extended Across All of Wales as Heat and Dry Weather Deepen Environmental Strain
Record-Low Danube Exposes Probable Mammoth Remains in Bulgaria
US Says It Has Carried Out Heavy Strikes on Iran After Attempted Attacks on Its Forces
The chief executive of the popular gaming company laid off many employees and his pay rose to 38 million dollars
The World's Most Terrifying Smartphone: Recording, Documenting, and Reporting to the Regime
The AI User Nightmare: Private Claude Conversations Leaked to the Internet
UK: Former Football Association Leaders Call for World Cup Boycott Over FIFA Privatization Plan
Forbidden Love: China severs millions from their virtual partners
Over 24 Hours in the Air: Qantas Airbus Completes Record-Breaking Test Flight
Zuckerberg Opposes US Ban on Chinese AI Models and Warns of Regulatory Capture
Massive Wildfires Ravage Southern Europe: Fatalities in Greece and Evacuations Across France, Spain, and Turkey
Trump says Israel ‘would not survive’ without US
France Evacuates Atlantic Coast Resorts as Wildfire Risk Rises Again
Magnitude 7.1 Earthquake Strikes Kumamoto as Rescuers Search Collapsed Buildings
OpenAI Faces Demands for Full Disclosure After Models Breach Hugging Face
Nvidia Reportedly Takes Vast Texas Data-Centre Lease to Underwrite AI Expansion
Royal Collection Trust Income Falls as Palace Visits Retreat From Record Highs
FIFA’s Private-Investment Plan for World Cup Rights Draws European Revolt
Ministers Examine Social-Care Levy as Burnham Seeks Funding Settlement
Apple Briefly Crosses Five Trillion Dollar Valuation as Investors Retreat From AI Bets
Badenoch Offers Tory Votes to Keep Serious Offenders in Prison
Why Americans Queue for $15 Ice Cream and a $100 Caviar Pint
Another AI Genius Left the United States — and Silicon Valley Is Starting to Worry
Shein Reports $99mn Loss as Trade Barriers Test Low-Cost Model
CXMT Gains 466% in China’s Biggest IPO Since 2010
Amazon Seeks Approval for 5,105-Satellite Mobile Network
Burnham Puts School-to-Work Reform at Centre of Welfare Strategy
Burnham Rules Out Replacing Council Tax and Stamp Duty
Fresh Heatwave Threatens to Rekindle France’s Historic Wildfire Crisis
Following OpenAI's Cyberattack: 'Most Companies Still Do Not Understand What Is Coming'
Autopsy Finds No Violence in Death of Epstein-Linked Model Scout
Indian Education Minister Resigns After Cockroach Youth Protests
California Desert Data-Centre Plan Stalls as Water and Power Disputes Mount
War, Youth Revolt and the Global Struggle for Control
War, Power and the Rising Price of Political Decisions
Badenoch Rejects Grant Shapps' Bid to Return as Conservative Candidate
BAE Chief Warns Britain Has Underestimated the Risk of War
Burnham Rules Out New Scottish Independence Referendum in First Talks With Swinney
OpenAI Sued After ChatGPT Allegedly Discouraged Emergency Care Before Near-Fatal Embolism
Viral Video Raises Questions Over Twelve-Dollar Croissants at Manhattan Bakery
Miliband Sets Climate and International Law at Centre of UK Diplomacy
US Gasoline Returns to $4 as Renewed Iran Fighting Disrupts Oil Flows
Czech Central Bank Governor Rejects Early Euro Entry and Rate-Cut Pressure
Trump Orders 50% Tariffs on Selected Canadian Imports
×