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A Brief History Of Exchange-Traded Funds
In less than 20 years, exchange-traded funds (ETFs) have become one of the most popular investment vehicles for both institutional and individual investors. Often promoted as cheaper, and better, than mutual funds, ETFs offer low-cost diversification, trading and arbitrage options for investors. Now with over $1 trillion assets under management, new ETF launches number from several dozen to hundreds, in any particular year. ETFs are so popular that many brokerages offer free trading in a limited number of ETFs to their customers. (For related reading, see Introduction To Exchange-Traded Funds.)
Beginning at the Beginning
The idea of index investing goes back quite a while; trusts or closed-end funds were occasionally created with the idea of giving investors the opportunity to invest in a particular type of asset. None of these really resembled what we now call ETFs, though.
The first real attempt at something like an ETF was the launch of Index Participation Shares for the S
