US ETFs now exceed the pool of listed stocks, with active ETFs doubling in five years

The US securities market has hit a milestone where the number of exchange-traded funds (ETFs) now exceed the pool of individual listed stocks for the first time, latest data from Morningstar has shown, triggering a debate over whether growth in investment options have reached a level of excessive choice.

The ETFs have surpassed listed US stocks for the first time, with over 4,300 ETFs as against nearly 4,200 listed companies, potentially increasing choices for investors, along with lower costs. However, too many options may make the space more competitive for the players, and confusing for the investors.

“There’s an ETF for everything now - AI, pets, cannabis, woke and anti-woke portfolios. It’s hard to tell whether you’re investing in something meaningful for the long term or you’re filling out an online quiz for Buzzfeed,” Bloomberg News quoted Douglas Boneparth, President at Bone Fide Wealth in a news report. Soaring demand has meant that active ETFs now manage about 10% of the total $11.6 trillion US ETF market, as compared to less than 5% a decade ago, according to Bloomberg Intelligence data.

The ETF count in US has doubled in the last eight years, partly helped by the expansion of spot Bitcoin ETFs, which the US SEC allowed from January 2024, expanding ETF's role as a channel for crypto exposure. This year alone, as many as 640 new launches have happened.