The ETF boom has hit a milestone that feels more like a plot twist in the current market environment. For the first time ever, there are now more U.S.-listed exchange-traded funds than actual U.S.-listed stocks. The latest ETF gold rush brought the number to 4,300, compared to around 4,200 companies.
In 2025 alone, issuers have launched more than 640 new ETFs—about four per day. A decade ago ETFs accounted for less than 10% of the investment universe; now they make up roughly a quarter.
What started as a low-cost alternative to mutual funds has exploded into a supermarket of niche ideas, ranging from AI-themed portfolios to cannabis plays to ETFs that sound like The Onion made them up.
“Choice is great until it becomes a burden,” Douglas Boneparth of Bone Fide Wealth said per Bloomberg.
“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,” he noted.
For investors, the explosion is both empowering and overwhelming. Sure, costs are down and access is broader than ever, but sifting through endless acronyms with nearly identical tickers is another story. It’s like walking into a supermarket with 47 brands of bottled water—you end up wondering why you came in at all.
Tail Wagging The Dog
ETFs were supposed to simplify investing: one product, diversified exposure, low fees. But popularity can distort purpose. The fact that the number of funds now exceeds the number of actual companies is, frankly, unnatural. It’s the tail wagging the dog.
The first ETFs, dating back to the 1990s, tracked broad indexes such as the S&P 500. Then came sector funds, country funds, bond funds, and eventually the flood of single-stock leveraged products that look more like casino chips than retirement tools. Investors wanted more, issuers obliged, and now we’re at the point where product proliferation is starting to create systemic risk.
More ETFs chasing the same pool of underlying assets means that, in a sharp sell-off, liquidity could vanish in ways the market hasn’t thoroughly tested. Although ETFs promise daily tradability, the illusion of liquidity depends on market makers and the healthy functioning of the underlying cash markets. If that cracks, ETFs could amplify stress rather than absorb it.
Institutions Remain Optimistic
Still, Wall Street isn’t ready to call the peak of ETFs. Morgan Stanley‘s Global Head of Capital Markets and ETF Strategy, Ally Wallace, argues that active ETFs, in particular, are built for resilience—even in downturns.
“The last five years have shown that fixed income ETFs, especially actively managed ones, thrive because of their three Ts—tax efficiency, transparency, and tradability,” Wallace said in a recent note.
She noted that the adoption of SEC Rule 6c-11 in 2019 opened the floodgates for innovation, and the appetite hasn’t slowed since. For her, the case for active ETFs is simple: investors want the liquidity and tax perks of ETFs, but also the professional oversight of an active manager.
“Even in down markets, investors recognize the efficiency of the ETF wrapper. That’s not a fad, that’s a structural shift,” she concluded.
Price Watch: The AdvisorShares Vice ETF VICE, which invests in the products and services that people find pleasure in regardless of economic conditions, is up 14.22% year-to-date.
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