The “Hated” Innovation That Took Over the World

Back in January 1993, a radical financial innovation hit the market.

It was cheaper, faster, and far more efficient than the “safe” products the wire houses were peddling to their clients at the time.

I’m talking about the debut of the SPDR S&P 500 ETF (SPY) – the very first U.S.-listed exchange-traded fund.

Today, we take ETFs for granted. But back then? The Wall Street establishment absolutely hated them.

They didn’t just dismiss the idea; they actively campaigned against it.

They told you it was a “niche” product. They told you it wasn’t for serious portfolios and that you should stick with what you knew.

Why? Because this new innovation threatened their golden goose.

At the time, Wall Street was making billions in easy fees selling bloated, high-friction mutual funds. Those were the old-school way of bundling a bunch of stocks together and charging you a premium for the privilege.

I remember back in the late ’80s, when brokers bragged about getting paid 8% commissions on certain mutual funds.

On the other hand, ETFs offered lower fees (0.09% on SPY, as of this writing), greater transparency, and increased flexibility. Retail investors could buy an ETF and gain exposure to everything from commodities to international equities.

One Wall Street Journal piece even described the rise of ETFs as a “nightmare” for the industry.

I saw it differently.

In 2003, when ETFs were still in their early stages, I knew they were going to be huge.

I made a bet that there would be a massive transition away from high-cost mutual funds into low-cost ETFs.

So I started teaching people how to use them.

I even launched my own service, the ETF Master Trader program, to give everyday investors the confidence to master this new vehicle. Later, I launched Sector Hunter, the world’s first fully automated ETF trading technology for individuals.

I did this because I saw the future. I saw that ETFs offered unmatched liquidity, diversification, low cost, and flexibility that the old mutual funds simply couldn’t touch.

If You Can’t Beat Them, Co-opt Them