The first ETF is 30 years old this week. It launched a revolution in low-cost investing

(An excerpt from the book, "Shut Up and Keep Talking: Lessons connected Life and Investing from the Floor of the New York Stock Exchange," by Bob Pisani.)

Thirty years agone this week, State Street Global Advisors launched the Standard & Poor's Depositary Receipt (SPY), the archetypal U.S.-based Exchange Traded Fund (ETF), which tracked the S&P 500. 

Today, it's known arsenic the SPDR S&P 500 ETF Trust, oregon conscionable "SPDR" (pronounced "Spider").  It is the largest ETF successful the satellite with implicit $370 cardinal successful assets nether management, and is besides the astir actively traded,  routinely trading implicit 80 cardinal shares regular with a dollar measurement northbound of $32 cardinal each day. 

 Holding an concern successful an ETF operation has galore advantages implicit a communal fund.

 An ETF:

• Can beryllium traded intraday, conscionable similar a stock.
• Has nary minimum acquisition requirement.
• Has yearly fees that are little than astir comparable communal funds.
• Are much taxation businesslike than a communal fund.

For a merchandise that would extremity up changing the concern world, ETFs started disconnected poorly.

Vanguard laminitis Jack Bogle had launched the archetypal scale fund, the Vanguard 500 Index Fund, 17 years before, successful 1976.

The SPDR encountered a akin problem. Wall Street was not successful emotion with a low-cost scale fund. 

"There was tremendous absorption to change," Bob Tull, who was processing caller products for Morgan Stanley astatine the clip and was a cardinal fig successful the improvement of ETFs, told me.

The crushed was communal funds and broker-dealers rapidly realized determination was small wealth successful the product.

"There was a tiny plus absorption fee, but the Street hated it due to the fact that determination was nary yearly shareholder servicing fee," Tull told me.   "The lone happening they could complaint was a commission. There was besides nary minimum amount, truthful they could person got a $5,000 summons oregon a $50 ticket."

It was retail investors, who began buying done discount brokers, that helped the merchandise interruption out.

But occurrence took a agelong time.  By 1996, arsenic the Dotcom epoch started, ETFs arsenic a full had lone $2.4 cardinal successful assets nether management.  In 1997, determination were a measly 19 ETFs successful existence.  By 2000, determination were inactive lone 80.

So what happened?

 While it started disconnected slowly, the ETF concern came on astatine the close moment.

Its maturation was aided by a confluence of 2 events: 1) the increasing consciousness that indexing was a superior mode of owning the marketplace implicit banal picking; and 2) the detonation of the net and Dotcom phenomenon, which helped the S&P 500 rocket up an mean of 28% a twelvemonth betwixt 1995 and 1999.

By 2000, ETFs had $65 cardinal successful assets, by 2005 $300 billion, and by 2010 $991 billion.

The Dotcom bust slowed down the full fiscal industry, but wrong a fewer years the fig of funds began to summation again.

The ETF business soon expanded beyond equities, into bonds and past commodities.

On November 18, 2004, the StreetTracks Gold Shares (now called SPDR Gold Shares, awesome GLD) went public.  It represented a quantum leap successful making golden much wide available. The golden was held successful vaults by a custodian. It tracked golden prices well, though arsenic with each ETFs determination was a interest (currently 0.4%). It could beryllium bought and sold successful a brokerage account, and adjacent traded intraday.

After pausing during the Great Financial Crisis, ETF assets nether absorption took disconnected and person been much than doubling roughly every 5 years.

The Covid pandemic pushed adjacent much wealth into ETFs, the immense bulk into index-based products similar those tied to the S&P 500.

From a measly 80 ETFs successful 2000, determination are astir 2,700 ETFs operating successful the U.S., worthy astir $7 trillion.

The communal money manufacture inactive has importantly much assets (about $23 trillion), but that spread is closing fast.

 "ETFs are inactive the largest increasing plus wrapper successful the world," said Tull, who has built ETFs successful 18 countries. "It is the 1 merchandise regulators spot due to the fact that of its transparency. People cognize what they are getting the time they bargain it."

 Note: Rory Tobin, Global Head of SPDR ETF Business astatine State Street Global Advisors, volition beryllium connected Halftime Report Monday astatine 12:35 PM and again astatine 3 PM Monday connected ETFedge.cnbc.com.