In 2012, exchange-traded products are ubiquitous in the world of investing. The more than 1,400 products have accumulated billions of dollars, and are widely used by all types of investors, from individuals with relatively small accounts and simple strategies to sophisticated hedge funds managing billions. So it may be hard to believe that the ETF industry is still relatively young; most ETFs have been around for only a handful of years, and it wasn't that long ago that assets were less than $500 billion. Below is a whirlwind history of the ETF industry, starting with the launch of the first exchange-traded product :

January 1993: S&P 500 SPDR (SPY) Debuts

When the first ETF began trading, Bill Clinton was in the Oval Office, gas cost about a dollar a gallon, and the Red Sox were still a decade away from ending their World Series drought. SPY launched with relatively little fanfare, but in the nearly 20 years since has accumulated more than $100 billion in assets.

April 1995: Second ETF Debuts

Just the second man to walk on the moon (Buzz Aldrin) is not nearly as well known as Neil Armstrong, the second ETF launched doesn't stick in the mind of many investors. In the spring of 2004, State Street rolled out its MidCap SPDR (MDY), which seeks to replicate the performance of the S&P MidCap 400 Index. MDY remains quite popular; this fund has about $10 billion in assets, and an average daily volume of about two million shares.

March 1996: iShares Debuts International ETFs

The first iShares ETFs to debut included a suite of international equity ETFs targeting Australia (EWA), Canada (EWC), Sweden (EWD), Hong Kong (EWH), Germany (EWG), Italy (EWI), Japan (EWJ), Belgium (EWK), Switzerland (EWL), Malaysia (EWM), the Netherlands (EWN), Austria (EWO), Spain (EWP), France (EWQ), Singapore (EWS), the United Kingdom (EWU), and Mexico (EWW).

December 1998: Sector SPDRs Debut

Today there are ETFs that deliver access to extremely narrow sub-sectors of the U.S. economy, including smartphones, platinum miners, and social media (SOCL). The first step on the road to this level of sector granularity was taken in late 1998, when a lineup of products targeting the major sectors of the U.S. economy debuted. The Sector SPDRs are pretty straightforward; they split up the S&P 500 by sector.

July 2002: Bond ETFs Debut

Bond ETFs have become tremendously popular in recent years, so it may be hard to believe that these products were born only a decade ago. iShares launched its first four bond ETFs IEF, LQD, SHY, and TLT in the summer of 2002.

LQD remains the largest bond ETF to this day, with about $24 billion in assets. TIP, which launched in December 2003, comes in second with about $23 billion.

November 2004: Gold SPDR (GLD) Launches

The first commodity ETF to debut was GLD, which offers exposure to physical gold bullion. Now the second largest ETF by assets, GLD didn't begin trading for more than a decade after the first ETF hit the market.

The second gold ETF, iShares IAU, debuted only a few months later in January 2005. In this case, the first mover advantage was significant. GLD currently has more than $70 billion in assets, while IAU has only $10 billion.

June 2006: ETNs Enter The Fray

In the middle of 2006 Barclays launched the first two exchange-traded notes: two products offering exposure to commodity futures contracts. The Dow Jones-UBS Commodity Index ETN (DJP) and S&P GSCI Total Return Index ETN (GSP) both offer access to diversified baskets of commodity futures contracts, though the mix between the two varies quite a bit.

During the past several years, ETNs have seen their ups and downs. But they are undoubtedly quite popular; as of June 2012 there were more than 200 ETNs with aggregate assets of more than $16 billion.

November 2009: Schwab Debuts Commission Free ETFs

Charles Schwab was a latecomer to the ETF game, but made a splash with the debut of four funds that could be traded commission free within Schwab accounts. In the months that followed, other brokerages quickly followed suit: Fidelity, TD Ameritrade, Vanguard, and E*TRADE all now offer commission free ETF trading.

December 2010: ETF Assets Hit $1 Trillion Mark

In late 2010 the ETF industry hit an inevitable milestone of $1 trillion. Thanks in large part to a stock market rally since bottoming out in early 2009, the the ETF total surpassed $1 trillion and never looked back. Assets have since climbed further, approaching $1.2 trillion and showing no signs of slowing down.

Disclosure: No positions at time of writing.

Related Articles
  1. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  2. Professionals

    5 Top-Rated Funds for Your Retirement Portfolio

    Mutual funds are a good choice for emotional investors. Here are five popular funds to consider.
  3. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  4. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  5. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  6. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  7. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  8. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  9. Chart Advisor

    Bumpy Roads Ahead In Transportation

    Investors are keeping an eye on the transportation industry. We'll take a look at the trend direction and how to trade it.
  10. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!