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Exchange-traded funds (ETFs)
SPY, Jan 1993· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
An exchange-traded fund is a fund that trades on a stock exchange like a single share, usually tracking an index at low cost.
See it on the Money & Finance map →How it works
The first US ETF, the SPDR S&P 500 (ticker SPY), launched in January 1993. A mutual fund is priced once a day; an ETF trades all day at market prices. Big dealers called authorized participants can swap baskets of stocks for new ETF shares, or the reverse, which keeps the price close to the holdings' value and lets most ETFs avoid paying out capital gains: a tax edge in taxable accounts. US ETF assets passed $10 trillion in 2024.
Why it matters
ETFs put diversified, low-cost portfolios in any brokerage account with one trade, and are now the main channel for new index money.
Facts, rules and data
Fund filings, exchange data and Investment Company Institute statistics; the SEC's 2019 ETF rule (Rule 6c-11) standardized how they operate.
Debates and risks
Whether intraday trading tempts investors to overtrade, how well leveraged and niche ETFs serve buyers, and whether bond ETFs hold up in panics are debated.
Connections (4)
▸Bond funds and bond ETFs make up a fast-growing share of Exchange-traded funds (ETFs)Fact, law or data
The connection
Individual bonds trade rarely and over the counter, so buying many is costly. A bond ETF bundles hundreds or thousands into one share that trades all day on an exchange, at fees as low as a few hundredths of a percent. Many investors now get their bond exposure this way.
When and why
iShares launched the first US bond ETFs in July 2002; the category grew rapidly after 2008 and again after 2020.
How we know
Fund filings and industry flow data show the growth; in 2020 the Fed itself bought corporate bond ETFs to calm credit markets.
Debates and risks
In March 2020 some bond ETFs traded well below their holdings' stated value; whether that showed fragility or simply more honest prices is debated.
▸Exchange-traded funds (ETFs) are an exchange-traded form of Index funds and passive investingFact, law or data
The connection
Most ETFs are index funds in a different wrapper: the same basket of holdings, but traded on an exchange during the day instead of bought from the fund once a day. The in-kind swap of shares for stocks also makes them more tax-efficient than most index mutual funds.
When and why
SPY, designed by Nathan Most at the American Stock Exchange with State Street, launched in January 1993.
How we know
Prospectuses and Investment Company Institute data show most ETF assets sit in index-tracking funds.
Debates and risks
Active ETFs have multiplied since the SEC's 2019 ETF rule; whether 'ETF' will keep meaning 'index fund' is uncertain.
▸Spot bitcoin ETFs (2024) use the structure of Exchange-traded funds (ETFs)Fact, law or data
The connection
Like other ETFs, spot bitcoin funds trade on stock exchanges all day, and large dealers called authorized participants create or redeem shares in blocks, keeping the share price close to the value of bitcoin held. Legally they are trusts registered under the 1933 Act, not 1940 Act funds, so mutual-fund protections such as diversification rules do not apply.
When and why
Approved January 10, 2024; trading began the next day on NYSE Arca, Nasdaq and Cboe. In-kind creation, swapping bitcoin directly for shares, was allowed in July 2025.
How we know
The SEC's approval order and each fund's prospectus describe the structure; funds publish holdings and net asset value daily.
Debates and risks
Whether the arbitrage holds up in a crash, since bitcoin trades 24/7 but ETF shares only during market hours, leaving weekend gaps.
▸World stock markets: about $158 trillion, 44% of it in the US are open to US investors through country Exchange-traded funds (ETFs)Fact, law or data
The connection
US-listed ETFs package foreign markets into one ticker traded in dollars during US hours: total-world funds, developed-markets funds, emerging-markets funds and single-country funds such as Japan, India or South Korea. Investors bear currency swings unless the fund hedges. Fees run from a few hundredths of a percent for broad funds to around 0.5% for some country funds.
When and why
The first single-country funds, Morgan Stanley's WEBS (later part of iShares), began trading on the American Stock Exchange in 1996.
How we know
Fund prospectuses and Investment Company Institute data on international equity ETF assets.
Debates and risks
Index providers decide what counts as 'emerging' (MSCI still classes Korea that way), which steers billions; their criteria are debated.