At the beginning of 2026, Germany's DAX index broke through 25,000 points for the first time, while the US Dow Jones nearly hit 50,000. Behind these record numbers is not only economic growth but a fundamental change in how people engage with stock markets.
ETFs (exchange-traded funds) have played a significant role in this transformation, evolving from an experiment into a portfolio staple for millions of investors worldwide over three decades. ETFs have made markets more accessible and inclusive to ordinary people.
ETFs operate simply: investors put money into a fund that buys a basket of assets based on a certain index or strategy. ETF shares are traded on exchanges like ordinary company stocks. By buying one ETF share, an investor gains exposure to hundreds or thousands of companies at once.
The first ETF appeared in 1990 in Canada, but the industry's true takeoff came in the US in 1993 with the launch of the SPDR S&P 500 ETF. The goal was to give regular investors access to the entire US market through one low-cost tool. The fund attracted about $500 million in its first year and now manages over $500 billion. Globally, ETF assets under management have grown to more than $19 trillion.
ETF advantages include low fees (about 0.1-0.2% annually vs. 1-2% for active funds), instant diversification (one purchase, hundreds of companies), and liquidity (buy or sell at market price any time during the day). Among the drawbacks: ETFs do not protect against large market declines—they simply follow the index. Simplicity can also be deceptive, as there are important differences in strategies and risks among index funds. There is also concentration in a few tech giants, such as MSCI World, which has about 70% US stocks.
The market offers different ETFs: global, regional, thematic (e.g., iShares MSCI World ETF or Vanguard FTSE All World ETF), and equal-weight funds (such as Invesco MSCI World Equal Weight ETF).
Statistics show index investing is often more effective than trying to beat the market, due to lower costs and long-term growth trends. Still, ETFs do not guarantee profits and do not protect from losses.
The main achievement of ETFs is democratizing and broadening access to investing. Now, anyone with a brokerage account can get exposure to thousands of companies with just a few clicks.
ETFs have changed how millions approach saving and investing, making markets global and open for most people.
