While individual stocks like Nvidia, Palantir, and Tesla dominated headlines in 2024, the titanic investment vehicles beneath the surface of the market — exchange-traded funds — quietly had a blockbuster year too. The Wall Street Journal reported that investors poured over $1 trillion into US ETFs last year through November, pushing their total assets to a record $10.6 trillion. That’s a 30% increase from the previous year and a more than fivefold surge over the past decade, data from research firm ETFGI showed.
Active versus passive
Obviously, it didn’t hurt that the stock market boomed. In 2024, the S&P 500 shattered 57 record highs, gaining 25%, while the tech-heavy Nasdaq soared 30%.
But the fast rise of ETFs is much more than a story about stock markets going up. It’s reflective of a decades-long transition from active to passive investing as traders eschew the traditional “hire someone smart and expensive to actively make my investing decisions for me” in favor of lower-cost passive options. And ETFs, which you can buy a slice of on an exchange, typically invest based on simple rules (track an index, buy assets that fit only X, Y, or Z criteria) and often have tax benefits, and have boomed as a result.
These days, there are lots of whacky ETFs — and active ETFs are also growing rapidly — but the biggest ones in the US are still by far the simplest: they track America’s flagship S&P 500 Index. ETFs have been particularly successful in the States. In November alone, 97% of equity ETF inflows went to US stocks, as non-US markets continue to lag behind, according to State Street. Leading the pack were large-cap ETFs tied to the S&P 500, followed by a bitcoin-focused fund and Invesco’s QQQ, which tracks the tech-heavy Nasdaq 100.
