Our what is an ETF page gives an overview of the financial products that are making investing more accessible, cheaper and more convenient to novice investors. In this note, we will look back through time and assess who, what, where, why and when for ETFs!
When was the first ETF created?
The first ETF was created not too many decades ago. In 1990, the world’s first ETF was introduced in Canada. In the early days of ETFs, they were used by institutional investors to exploit trading strategies. ETFs were used primarily by institutional investors to execute sophisticated trading strategies, now they are used by novice investors for low-cost investing.
They gained popularity later in the ’90s, in the US, the first ETF was introduced three years later in 1993 when the SPDR, or “spider” for short was introduced. This was an ETF that tracked the S&P 500.
Who invests in ETFs?
From 1 ETF in 1990, there are now thousands of ETFs traded across the globe. They are one of the most commonly traded assets and are used by retail investors all the way to global banks. There are approximately 160 different issuers of ETFs and approximately 8000 different ETFs that investors can buy.
What is the point of ETFs?
Investing in a fund like the S&P 500 would normally require you to buy a small portion of individual assets. If you wanted to invest a small amount, like £500, this would mean buying £1 from each company. As you can imagine, this is time-consuming, practically impossible and would cost a lot of money in transaction costs. In an ETF you can get the diversification benefits of ETFs by purchasing only one asset.
Where can I buy ETFs?
There are many different brokers that sell ETFs, these are generally bought online. On our How to trade ETFs page, we take you through slowly the different ETFs open to you and which ones you can purchase online.
Why are ETFs so popular?
ETFs are popular because they are generally an easier and less hassle way of investing. You can also gain a considerable amount of diversification benefits compared to investing in a single stock. As above, one of the most popular ETFs is the SPDR and the fund has approximately $350 billion in assets under management!
Stay informed and make smart investment decisions by reading our previous post to find out if stocks are fairly priced. Simply visit the link to access it now.