The exchange traded fund (ETF) has evolved quite a bit since 1993. The first ETF launched on the American Stock Exchange was the S&P Depository Receipt, aka Spiders, SPDR (SPY). Selena Maranjian of The Motley Fool explains that the SPDR offered investor’s a way to get into the S&P 500 funds without having to buy each individual stock.  SPY was new at the time, a stock-like instrument that could be bought and sold throughout the day in increments as small as a single share…with a brokerage commission for every trade. It was an exciting way to be involved with the growth of the U.S. stock market and 500 of America’s largest companies.

Today, ETFs have grown into broad indexes plus specialties and niches. Sophisticated investor’s can take advantage of these however, for some not so experienced it can spell danger.  Researching what’s inside the ETF is a MUST, as well as having an exit strategy.

Tags: S&P 500