If you look at the graph, the trend is very clear: while the number of companies that are quoted in the stock market has been stable for more than a decade, the ETFS offer grows explosively.
ETFs emitters are living a historic year. In 2025, 640 new ETFs were already created, of which 469 were born alone in the first semester. That is an interannual growth of +50%. To take dimension: 4 new funds are being launched per day.
For any investor the variety of options is so wide that it became impossible to ignore them. But be careful: there are more ETFs what actions it does not mean that everyone is good.
What is an ETF?
An ETF (Exchange Traded Fund) is a background that lies in the stock market just like an action. Its main function is to replicate the performance of an index, a sector, a country or even a complete strategy.
They allow you to buy, with a single ticket, a diversified portfolio without having to choose action per action. For example, with the SPY you buy the 500 companies of the S&P 500 and with the QQQ exposes you to the main technological ones of Nasdaq.
They are efficient, transparent and, in most cases, cheaper than traditional funds. That is why its global adoption explodes year after year.
What types of ETFs are there?
Passive management ETFs are the most recommended for most investors. Its objective is to replicate the performance of a specific index or sector, which makes them simple and efficient. In addition, they have very low costs and offer a direct way of diversifying. Classic examples are the Spy, IWM, vti.
On the other hand, there are active management ETFs, which seek to win the market actively selecting the assets that make up the fund. They can be interesting in certain contexts or themes, but they usually involve higher commissions. For example, Cathie Wood’s funds, such as Arkk, focused on innovation.
There are also sectoral, thematic and geographical ETFs, which allow you to directly expose sectors such as energy, health, technology, or specific trends such as artificial intelligence, renewable energy or blockchain. In addition, with a single ticket you can invest in full countries; For example, EWZ (Brazil), FXI (China) or EWJ (Japan).
Finally, there are leverage ETFs, which are not recommended for most investors. These multiply potential daily gains, but also losses. The main problem is the effect of daily compound interest: if you do not actively operate them, they can erode capital over time.
What to look at the ETFs?
The Boom of the ETFs brings with it a great opportunity, but also a challenge: not all are the same. In many cases, ETFs are highly concentrated and only 5 or 6 actions explain most of the performance. Therefore, understanding what is inside is key.
The first point to review are the holdings. Before investing, enter the ETF (an interesting page is www.etf.com) and look what assets make up the background and how much each one weighs. This avoids you surprises and lets you know what you are investing.
The second point is the commissions: passive management ETFs are usually very cheap, but there are thematic, active or niche funds that charge much more.
A good example is the Lit (Global X Lithium & Battery Tech ETF). In theory, this background invests in “the entire lithium industry.” Is that so? Let’s see:
The ETF Lit looks like a pure lithium play, but it is not. If you look at the holdings, 47% are concentrated in 10 companies and many do not depend only on the price of lithium. For example, Tesla or Samsung SDI have much broader businesses, while even producers such as Albembarle or SQM also diversify. In short, investing in Lit is not to bet only on lithium, but to the entire battery chain and electric vehicles.
To conclude, the historical record that today there are more ETFs than actions marks a huge change in the way of investing.
Therefore, the key is to look inside: understand the holdings, evaluate the commissions, confirm that the ETF replicates what it promises and ensure that it brings real diversification to your portfolio. ETFs are an incredible tool, but like everything in the market, you have to understand where you put your money.
If you are interested
Note: The material contained in this note should not be interpreted under any point of view as an investment council or recommendation for the purchase or sale of a particular asset. This content has only educational ends and represents only an opinion of the author. In all cases it is advisable to advise with a professional before investing.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
