The History of ETFs: From SPY to Today
From a single fund in 1993 to a $10 trillion industry. Here is how ETFs went from a niche product to the default investment vehicle.
Don't have time? Here's what you need to know:
- 1SPY launched in 1993 as the first U.S. ETF — the industry now exceeds $10 trillion
- 2The fee war has driven core index ETF costs from 0.20%+ to 0.03% over two decades
- 3Key milestones: VTI (2001), GLD (2004), the zero-fee revolution (2018), Bitcoin ETFs (2024)
- 4ETFs will continue to take market share from mutual funds — the trend benefits all index investors
1993: SPY Launches and Nobody Cares
State Street Global Advisors launched SPY — the SPDR S&P 500 ETF Trust — on January 22, 1993. It was the first U.S.-listed ETF (Canada had one a few years earlier). SPY attracted about $6.5 million on its first day. Financial advisors were skeptical — mutual funds dominated, and most investors had never heard of an exchange-traded fund.
SPY's innovation was packaging the S&P 500 index into a fund that traded like a stock. No more end-of-day NAV pricing. No more minimum investments. No more waiting for the mutual fund to process your order. You could buy the market in real-time, and sell it whenever you wanted.
Milestones That Built the ETF Industry
| Year | Event | Impact |
|---|---|---|
| 1993 | SPY launches (S&P 500) | First U.S.-listed ETF — proved the concept works |
| 1996 | iShares launches international ETFs | Global investing in a single purchase |
| 2001 | VTI launched by Vanguard | Total market indexing enters the ETF format |
| 2004 | GLD launches (physical gold) | Commodities accessible through ETF wrapper |
| 2010 | VOO launched at 0.05% (later cut to 0.03%) | Price war begins — fees race toward zero |
| 2015 | ETF assets pass $2 trillion | Institutional adoption accelerates |
| 2018 | Fidelity launches zero-fee index funds | Fee war reaches its logical conclusion |
| 2024 | Spot Bitcoin ETFs approved by SEC | Crypto enters the regulated ETF wrapper |
| 2024 | ETF assets exceed $10 trillion globally | ETFs surpass hedge fund AUM |
The Future: What Comes After $10 Trillion
ETFs continue to take market share from mutual funds. The conversion trend (mutual funds converting to ETF wrappers) is accelerating. Active ETFs are the fastest-growing segment — fund managers who formerly offered only mutual funds are now launching ETF versions of their strategies.
For individual investors, the trajectory is clear: fees will continue to fall (already approaching zero), selection will keep expanding, and ETFs will remain the most cost-effective way to build a diversified portfolio. The ETFs you buy today — VTI, VOO, BND — will likely exist and function identically in 30 years.
Tip: The ETF industry's growth is a tailwind for investors. More competition means lower fees, tighter spreads, and better products. The trend benefits anyone who owns index ETFs.
Frequently Asked Questions
Is SPY still the best S&P 500 ETF?
SPY is the most liquid and most traded — critical for options traders and institutional investors. For buy-and-hold investors, VOO (0.03%) and IVV (0.03%) are better because they charge one-third the fee of SPY (0.0945%). SPY was first to market; VOO is the better long-term hold.
Will ETF fees keep dropping?
Likely. Vanguard, Fidelity, and Schwab compete aggressively on cost. Fidelity already offers 0.00% index funds. ETF fees cannot go below zero, so the floor is near — but pressure to reduce remaining fees on niche and active ETFs will continue.
Could ETFs be replaced by something better?
Unlikely in the near term. ETFs combine low cost, tax efficiency, trading flexibility, and transparency in a way that no other investment structure matches. Direct indexing (owning individual stocks to replicate an index) is a potential challenger for taxable accounts, but it requires more complexity than most investors want.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.