London Daily

Focus on the big picture.
Tuesday, Nov 11, 2025

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

0:00
0:00
Close
UK Unemployment Hits 5% as Wage Growth Slows, Paving Way for Bank of England Rate Cut
Starmer Warns of Resurgent Racism in UK Politics as He Vows Child-Poverty Reforms
UK Grocery Inflation Slows to 4.7% as Supermarkets Launch Pre-Christmas Promotions
UK Government Backs the BBC amid Editing Scandal and Trump Threat of Legal Action
UK Assessment Mis-Estimated Fallout From Palestine Action Ban, Records Reveal
UK Halts Intelligence Sharing with US Amid Lethal Boat-Strike Concerns
King Charles III Leads Britain in Remembrance Sunday Tribute to War Dead
UK Retail Sales Growth Slows as Households Hold Back Ahead of Black Friday and Budget
Shell Pulls Out of Two UK Floating Wind Projects Amid Renewables Retreat
Viagogo Hit With £15 Million Tax Bill After HMRC Transfer-Pricing Inquiry
Jaguar Land Rover Cyberattack Pinches UK GDP, Bank of England Says
UK and Germany Sound Alarm on Russian-Satellite Threat to Critical Infrastructure
Former Prince Andrew Faces U.S. Congressional Request for Testimony Amid Brexit of Royal Title
BBC Director-General Tim Davie and News CEO Deborah Turness Resign Amid Editing Controversy
Tom Cruise Arrives by Helicopter at UK Scientology Fundraiser Amid Local Protests
Prince Andrew and Sarah Ferguson Face Fresh UK Probes Amid Royal Fallout
Mothers Link Teen Suicides to AI Chatbots in Growing Legal Battle
UK Government to Mirror Denmark’s Tough Immigration Framework in Major Policy Shift
UK Government Turns to Denmark-Style Immigration Reforms to Overhaul Border Rules
UK Chancellor Warned Against Cutting Insulation Funding as Budget Looms
UK Tenant Complaints Hit Record Levels as Rental Sector Faces Mounting Pressure
Apple to Pay Google About One Billion Dollars Annually for Gemini AI to Power Next-Generation Siri
UK Signals Major Shift as Nuclear Arms Race Looms
BBC’s « Celebrity Traitors UK » Finale Breaks Records with 11.1 Million Viewers
UK Spy Case Collapse Highlights Implications for UK-Taiwan Strategic Alignment
On the Road to the Oscars? Meghan Markle to Star in a New Film
A Vote Worth a Trillion Dollars: Elon Musk’s Defining Day
AI Researchers Claim Human-Level General Intelligence Is Already Here
President Donald Trump Challenges Nigeria with Military Options Over Alleged Christian Killings
Nancy Pelosi Finally Announces She Will Not Seek Re-Election, Signalling End of Long Congressional Career
UK Pre-Budget Blues and Rate-Cut Concerns Pile Pressure on Pound
ITV Warns of Nine-Per-Cent Drop in Q4 Advertising Revenue Amid Budget Uncertainty
National Grid Posts Slightly Stronger-Than-Expected Half-Year Profit as Regulatory Investments Drive Growth
UK Business Lobby Urges Reeves to Break Tax Pledges and Build Fiscal Headroom
UK to Launch Consultation on Stablecoin Regulation on November 10
UK Savers Rush to Withdraw Pension Cash Ahead of Budget Amid Tax-Change Fears
Massive Spoilers Emerge from MAFS UK 2025: Couple Swaps, Dating App Leaks and Reunion Bombshells
Kurdish-led Crime Network Operates UK Mini-Marts to Exploit Migrants and Sell Illicit Goods
UK Income Tax Hike Could Trigger £1 Billion Cut to Scotland’s Budget, Warns Finance Secretary
Tommy Robinson Acquitted of Terror-related Charge After Phone PIN Dispute
Boris Johnson Condemns Western Support for Hamas at Jewish Community Conference
HII Welcomes UK’s Westley Group to Strengthen AUKUS Submarine Supply Chain
Tragedy in Serbia: Coach Mladen Žižović Collapses During Match and Dies at 44
Diplo Says He Dated Katy Perry — and Justin Trudeau
Dick Cheney, Former U.S. Vice President, Dies at 84
Trump Calls Title Removal of Andrew ‘Tragic Situation’ Amid Royal Fallout
UK Bonds Rally as Chancellor Reeves Briefs Markets Ahead of November Budget
UK Report Backs Generational Smoking Ban Ahead of Tobacco & Vapes Bill Review
UK’s Domino’s Pizza Group Reports Modest Like-for-Like Sales Growth in Q3
UK Supplies Additional Storm Shadow Missiles to Ukraine as Trump Alleges Russian Underground Nuclear Tests
×