SPY Celebrates 20: A Look Back And Forward For ETFs

Includes: SPY
by: Roger Nusbaum

The S&P 500 SPDR (NYSEARCA:SPY) will be 20 years old later this this month. SPY is of course the first US ETF and it is also the largest. I remember very clearly when SPY launched and it was quite obvious it would be a big deal. My recollection is that the S&P 400 Mid Cap SPDR (NYSEARCA:MDY) came next followed by the WEBS country funds and then the Sector Select SPDRs before the funds available started to really proliferate. I looked it up and my recollection was correct.

While I knew they would be a big deal back in the 1990s I believe it is fair to say I was early in writing about the significance of the wrapper when I started writing in 2004. For a short time in 2004 I wrote for Motley Fool and they had little to no interest in my writing about ETFs for them. This contributed to the blog coming into existence (a story I've told many times before that I downloaded Firefox, blogger was already bookmarked, I wrote about non market things, ran out of stuff to say and started writing about the market after a couple of posts, you can look for yourself).

I then got hired on as the ETF guy for theStreet.com in September 2005 thanks in large part to the blog. Now of course ETFs are mainstream in every sense of the word.

We have been using narrow based ETFs in the portfolio from the start and I believe it is fair to say I was very early to cover narrow based ETFs in terms of using them and writing about them. All of this has opened a lot of doors professionally and provided many opportunities to do very fun things I wouldn't have had the chance to do and meet a lot of interesting people I would have never had the chance to meet.

The reason to mention these things in the face of the 20th is that I actually think the investment product has had a very positive effect on my life for the reasons stated above. More importantly the product can of course have a very positive effect for investors who take the proper amount of time to construct their portfolios. They also can help people who simply allocate their savings to one very broad equity fund and one very broad bond fund without really engaging in the market.

The whole time I've been writing about ETFs I have been saying that the industry would continue to offer ever increasingly specialized access thus evening the playing field in terms of allowing anyone willing to spend the necessary time to create very sophisticated portfolios. In all fairness these were obvious conclusions to draw but also in fairness we started talking about that here in 2004.

Hopefully the industry will continue to evolve and I will continue to write about it.

One other amusing ETF story that I sort of mentioned one other time before. At an IndexUniverse event in Florida a few years ago I was in the audience for a roundtable with several serious ETF industry executives including a guy named Jim Ross from StateStreet who was part of the team that launched SPY and he had become a very senior executive in the ETF division. So I'm sitting there and they have a screen with all of the panel participants' pictures and I look at it and get distracted because I think I know Ross but I don't know where from. Then it clicks, I played baseball with him at the equivalent of the Babe Ruth level (the term Babe Ruth did not exist where we grew up) and his older brother was the coach. So I went up to him afterwards and it was him. We've exchanged a couple of emails since but not had a lot of contact but this was probably the funniest worlds colliding in my life.