The future is ETFs

Exchange-traded funds have transformed from the broad, boring fund your grandpa told you to invest in when you got your first summer job as a teenager to a tool for some of the most cutting-edge—and risky—trading strategies out there.

So, how did we get here? When the “ETF Rule” was passed in 2019, it suddenly became far easier to launch an ETF, which gave smaller issuers a chance to throw their hat in the ring. Fast-forward to this year: With President Trump’s overhaul of the Securities and Exchange Commission, a far less stringent regulatory environment has opened the floodgates to an array of high-risk, high-reward investment strategies.

For example, the door for digital asset funds opened in January 2024, when the SEC first approved the novel spot bitcoin ETF. Ethereum made its own ETF debut shortly after, and a whole slew of cryptocurrency ETFs are likely to be approved in the days ahead, including those that hold solana, litecoin, and even dogecoin.

Leveraged ETFs, which provide supercharged exposure to a single stock or to an index, have also grown in popularity over the past year. If investing in regular old stocks isn’t exciting enough already, now we have double-and even triple-leveraged ETFs for stocks like Nvidia and Tesla.

The ETF wild west

Just because you can bring an off-the-beaten-path ETF to life doesn’t mean you should.

“I think we're in this phase now where you have a lot of products coming to market that investors don't necessarily want,” explained Chief Investment Strategist at Innovator Capital Management Tim Urbanowicz. “People are throwing things at the wall and seeing what sticks, issuers that are launching not based on client demand are quickly getting weeded out, or will be eventually.”

Urbanowicz argued that buffer ETFs are a great choice for the current market environment. Buffer ETFs present a tradeoff: a limited upside cap on gains, but with complete downside protection.

Either way, we doubt that when John Bogle envisioned the first passive ETF, he foresaw that same investment vehicle—meant to provide steady long-term returns instead of flashy stock picking—used to give traders access to meme coins.—LB