1993 was the year of Dazed and Confused, Doc Martens, and a Blue Jays World Series win. It was also the year that Nathan Most and Steven Bloom brought investors the Exchange Traded Fund (ETF).
In January '93 Most and Bloom introduced the Standard & Poor's Depositary Receipts known as SPDRs. The fund quickly became the largest ETF in the world.
Now, 23 years later, there are over 1,400 funds and nearly $2 trillion in assets under management.
Quick refresher here. An exchange traded fund holds a basket of securities much like a mutual fund. However, unlike a mutual fund, ETFs trade on an exchange which means they can be bought and sold throughout the day like stocks. Because ETFs are usually passively managed and track an index this generally results in significantly lower expense ratios compared to mutual funds. The advent of ETFs has allowed retail investors the opportunity to invest in markets and asset classes that were almost impossible to achieve in the past.
Sounds great right?
Believe it or not, it actually took Nathan Most several years to get buy-in for the ETF. First it took him 3 years to convince the American Stock Exchange (Amex) to invest in the creation of the ETF. It then took another 3 years to make it past the almighty SEC's approval process.
Luckily their perseverance paid off and we have access to many ETFs today.
Full disclosure: Wela Strategies uses ETFs so we gave them a much better birthday present than Mutual Funds. Sorry Mutual Funds. (But not really)