What was the first ETF, and how many are there now?

When it comes to exchange-traded funds (ETFs), there is a lot of debate surrounding which was the very first. However, most sources agree that the first ETF was introduced in 1989 and was called the Standard & Poor’s Depositary Receipts, or SPDRs. SPDRs are still popular today and track the S&P 500 Index.

 

Since the launch of SPDRs, there have been many other ETFs created. As of 2019, over 5,000 different ETFs are available globally, with assets totaling over $4 trillion. The vast majority of these ETFs are managed by large financial institutions such as BlackRock, Vanguard, and State Street Global Advisors.

 

Different types of ETFs

 

Equity ETFs

Equity ETFs track a basket of stocks representing a specific market index, such as the S& P 500 or the Dow Jones Industrial Average. Equity ETFs are the most popular type of ETF, with over 2,000 different options available globally.

 

Bond ETFs

Bond ETFs invest in fixed-income securities, such as government bonds, corporate bonds, or municipal bonds. Bond ETFs tend to be less volatile than equity ETFs and can provide stability to a portfolio.

 

Commodity ETFs

Commodity ETFs invest in physical commodities such as gold, silver, oil, or agricultural products. You can use these ETFs to hedge against inflation or as a way to diversify a portfolio.

 

Currency ETFs

Currency ETFs track foreign currencies and can be used to hedge against currency risk or as a way to speculate on the movement of foreign exchange rates.

 

Inverse ETFs

Inverse ETFs seek to achieve the opposite performance of the underlying index or benchmark. For example, an inverse ETF tracking the S& P 500 would aim to decline by 1% when the S& P 500 rises by 1%.

 

Leveraged ETFs

Leveraged ETFs use derivatives and debt to achieve a multiple of the underlying index’s return. For example, a 2x leveraged ETF would aim to provide the underlying index’s return (or twice the loss).

 

Real estate ETFs

Real estate ETFs invest in securities, such as REITs, mortgage-backed securities, or real estate development companies.

 

Technology ETFs

Technology ETFs invest in a basket of technology stocks, such as those in the semiconductor, software, or internet sectors.

 

Alternative ETFs

Alternative ETFs invest in alternative investments such as hedge funds, private equity, or managed futures. You can use these ETFs to add diversification to a portfolio.

 

Actively managed ETFs

Actively managed ETFs are overseen by a team of professional money managers who seek to achieve a specific investment objective. These are less common than passively managed ETFs and often have higher expense ratios.

 

Exchange-traded notes (ETNs)

ETNs are debt instruments that are typically issued by banks and track the performance of a specific index or asset. ETNs have many of the same features as ETFs but some crucial differences.

 

Mutual funds

Mutual funds are investment vehicles that pool together money from many investors and invest it in a basket of securities. Unlike ETFs, mutual funds are not traded on an exchange and can only be bought or sold at the end of the day.

 

Closed-end funds

Closed-end funds are similar to mutual funds in that they pool together money from many investors and invest it in a basket of securities. However, closed-end funds trade on an exchange like a stock and can be bought or sold throughout the day.

 

Unit investment trusts (UITs)

UITs are fixed portfolios of securities held for a specific period, after which they are liquidated, and the proceeds are distributed to investors. UITs typically track a specific index or asset and can be used as a way to invest in a diversified portfolio of securities.

 

In conclusion

If you’re thinking of investing in ETFs, it’s essential to do your research and understand how they work before making any decisions. However, overall, ETFs can be a great way to get exposure to various assets without paying high fees. With so many different ETFs available, there’s sure to be one that fits your investment goals and objectives.