Markets
What is an ETF?
What is an ETF?
In 1989, the idea for the exchange-traded fund (ETF) was born.
Initially marketed to investors as Index Participation Shares, this innovative new product was meant to be a proxy for the S&P 500 that also traded on an exchange like a stock. After being launched, this early ETF prototype was immediately targeted by lawyers of the Chicago Mercantile Exchange (CME) for illegally behaving like a futures contract. A lawsuit ensued, and a federal judge in Chicago ruled that they needed to be withdrawn.
A year later, the case can be made that Canada was the birthplace of the first successful ETF. This time the product was called Toronto 35 Index Participation Units (TIPs 35), and it tracked the TSE-35 Index at the time. TIPs were instantly lauded for providing low-cost exposure to Canadian equities – and shortly after, many more ETFs in Canada and the United States would follow suit, including the SPDR S&P 500 Trust ETF in 1993.
How do ETFs work?
Today’s infographic from StocksToTrade.com highlights the basics around ETFs, including how they work, what type of assets they can track, and the pros and cons associated with investing in them.
In the most basic sense, an ETF is a type of fund that owns assets – like stocks, commodities, or futures – but has its ownership divided into shares that trade on stock exchanges.
In other words, investors can buy and sell ETFs whenever they want during trading hours. Like a stock, each ETF has a ticker symbol and a price that changes in real-time. However, unlike a stock, the number of shares outstanding can change daily based on the share creation and redemption mechanisms.
Pros and Cons
There are many views out there on ETFs, but it is generally accepted that they provide an inexpensive, transparent, and convenient way to get access to many different asset classes. This makes it easy to diversify a portfolio, and it also makes ETFs simple to buy and sell.
For these reasons, the passive management investment industry has taken off, and the ETF industry now has over $4 trillion of assets under management (AUM) globally. By the year 2021, ETFs are expected to surpass the $7 trillion mark for AUM.
Despite this growth and a wide range of benefits, ETFs do have some detractors.
Critics would be quick to point out that some ETFs are very thinly traded, providing wide bid/ask spreads and lower liquidity. Furthermore, there can also be instances where technical issues can cause a performance gap between the ETF and the index it tracks, known as tracking error.
As a final point, it’s worth mentioning that there is some counterparty risk with ETFs – for example, even if you “own” physically-backed gold through the SPDR Gold Trust (GLD), there is a chance that in extreme situations that you may not actually get to see the benefit of that gold. The counterparty risk stems from the possibility of a party failing to deliver on their promises, and is actually quite common to see with other types of assets, as well.
Markets
Mapped: The State of Economic Freedom in 2023
How free are people to control their own labor, property, and finances? This map reveals the state of economic freedom globally.

Mapped: The State of Economic Freedom in 2023
The concept of economic freedom serves as a vital framework for evaluating the extent to which individuals and businesses have the freedom to make economic decisions. In countries with low economic freedom, governments exert coercion and constraints on liberties, restricting choice for individuals and businesses, which can ultimately hinder prosperity.
The map above uses the annual Index of Economic Freedom from the Heritage Foundation to showcase the level of economic freedom in every country worldwide on a scale of 0-100, looking at factors like property rights, tax burdens, labor freedom, and so on.
The ranking categorizing scores of 80+ as free economies, 70-79.9 as mostly free, 60-69.9 as moderately free, 50-59.9 as mostly unfree, and 0-49.9 as repressed.
Measuring Economic Freedom
This ranking uses four broad categories with three key indicators each, both qualitative and quantitative, to measure economic freedom.
- Rule of law: property rights, judicial effectiveness, government integrity
- Size of government: tax burdens, fiscal health, government spending
- Regulatory efficiency: labor freedom, monetary freedom, business freedom
- Open markets: financial freedom, trade freedom, investment freedom
The 12 indicators are weighted equally and scored from 0-100. The overall score is then determined from the average of the 12 indicators.
Here’s a closer look at every country’s score:
Rank | Country | 2023 Score |
---|---|---|
#1 | 🇸🇬 Singapore | 83.9 |
#2 | 🇨🇭 Switzerland | 83.8 |
#3 | 🇮🇪 Ireland | 82.0 |
#4 | 🇹🇼 Taiwan | 80.7 |
#5 | 🇳🇿 New Zealand | 78.9 |
#6 | 🇪🇪 Estonia | 78.6 |
#7 | 🇱🇺 Luxembourg | 78.4 |
#8 | 🇳🇱 Netherlands | 78.0 |
#9 | 🇩🇰 Denmark | 77.6 |
#10 | 🇸🇪 Sweden | 77.5 |
#11 | 🇫🇮 Finland | 77.1 |
#12 | 🇳🇴 Norway | 76.9 |
#13 | 🇦🇺 Australia | 74.8 |
#14 | 🇩🇪 Germany | 73.7 |
#15 | 🇰🇷 South Korea | 73.7 |
#16 | 🇨🇦 Canada | 73.7 |
#17 | 🇱🇻 Latvia | 72.8 |
#18 | 🇨🇾 Cyprus | 72.3 |
#19 | 🇮🇸 Iceland | 72.2 |
#20 | 🇱🇹 Lithuania | 72.2 |
#21 | 🇨🇿 Czechia | 71.9 |
#22 | 🇨🇱 Chile | 71.1 |
#23 | 🇦🇹 Austria | 71.1 |
#24 | 🇦🇪 United Arab Emirates | 70.9 |
#25 | 🇺🇸 United States | 70.6 |
#26 | 🇲🇺 Mauritius | 70.6 |
#27 | 🇺🇾 Uruguay | 70.2 |
#28 | 🇬🇧 United Kingdom | 69.9 |
#29 | 🇧🇧 Barbados | 69.8 |
#30 | 🇵🇹 Portugal | 69.5 |
#31 | 🇯🇵 Japan | 69.3 |
#32 | 🇧🇬 Bulgaria | 69.3 |
#33 | 🇸🇰 Slovakia | 69.0 |
#34 | 🇮🇱 Israel | 68.9 |
#35 | 🇬🇪 Georgia | 68.7 |
#36 | 🇶🇦 Qatar | 68.6 |
#37 | 🇸🇮 Slovenia | 68.5 |
#38 | 🇼🇸 Samoa | 68.3 |
#39 | 🇯🇲 Jamaica | 68.1 |
#40 | 🇵🇱 Poland | 67.7 |
#41 | 🇲🇹 Malta | 67.5 |
#42 | 🇲🇾 Malaysia | 67.3 |
#43 | 🇧🇪 Belgium | 67.1 |
#44 | 🇵🇪 Peru | 66.5 |
#45 | 🇨🇷 Costa Rica | 66.5 |
#46 | 🇭🇷 Croatia | 66.4 |
#47 | 🇨🇻 Cabo Verde | 65.8 |
#48 | 🇧🇳 Brunei Darussalam | 65.7 |
#49 | 🇦🇱 Albania | 65.3 |
#50 | 🇦🇲 Armenia | 65.1 |
#51 | 🇪🇸 Spain | 65.0 |
#52 | 🇧🇼 Botswana | 64.9 |
#53 | 🇷🇴 Romania | 64.5 |
#54 | 🇭🇺 Hungary | 64.1 |
#55 | 🇵🇦 Panama | 63.8 |
#56 | 🇲🇰 North Macedonia | 63.7 |
#57 | 🇫🇷 France | 63.6 |
#58 | 🇷🇸 Serbia | 63.5 |
#59 | 🇻🇨 Saint Vincent and the Grenadines | 63.5 |
#60 | 🇮🇩 Indonesia | 63.5 |
#61 | 🇲🇽 Mexico | 63.2 |
#62 | 🇨🇴 Colombia | 63.1 |
#63 | 🇧🇦 Bosnia and Herzegovina | 62.9 |
#64 | 🇬🇹 Guatemala | 62.7 |
#65 | 🇩🇴 Dominican Republic | 62.6 |
#66 | 🇧🇸 The Bahamas | 62.6 |
#67 | 🇫🇲 Micronesia | 62.6 |
#68 | 🇧🇭 Bahrain | 62.5 |
#69 | 🇮🇹 Italy | 62.3 |
#70 | 🇻🇺 Vanuatu | 62.1 |
#71 | 🇰🇿 Kazakhstan | 62.1 |
#72 | 🇻🇳 Vietnam | 61.8 |
#73 | 🇲🇳 Mongolia | 61.7 |
#74 | 🇸🇹 São Tomé and Príncipe | 61.5 |
#75 | 🇦🇿 Azerbaijan | 61.4 |
#76 | 🇵🇾 Paraguay | 61.0 |
#77 | 🇲🇪 Montenegro | 60.9 |
#78 | 🇽🇰 Kosovo | 60.7 |
#79 | 🇱🇨 Saint Lucia | 60.7 |
#80 | 🇹🇭 Thailand | 60.6 |
#81 | 🇨🇮 Côte d'Ivoire | 60.4 |
#82 | 🇹🇴 Tonga | 60.0 |
#83 | 🇹🇿 Tanzania | 60.0 |
#84 | 🇧🇯 Benin | 59.8 |
#85 | 🇧🇿 Belize | 59.8 |
#86 | 🇩🇲 Dominica | 59.7 |
#87 | 🇸🇨 Seychelles | 59.5 |
#88 | 🇹🇹 Trinidad and Tobago | 59.5 |
#89 | 🇵🇭 Philippines | 59.3 |
#90 | 🇧🇹 Bhutan | 59.0 |
#91 | 🇲🇬 Madagascar | 58.9 |
#92 | 🇰🇮 Kiribati | 58.8 |
#93 | 🇯🇴 Jordan | 58.8 |
#94 | 🇭🇳 Honduras | 58.7 |
#95 | 🇴🇲 Oman | 58.5 |
#96 | 🇲🇩 Moldova | 58.5 |
#97 | 🇲🇦 Morocco | 58.4 |
#98 | 🇸🇦 Saudi Arabia | 58.3 |
#99 | 🇬🇭 Ghana | 58.0 |
#100 | 🇫🇯 Fiji | 58.0 |
#101 | 🇬🇲 The Gambia | 57.9 |
#102 | 🇳🇦 Namibia | 57.7 |
#103 | 🇸🇳 Senegal | 57.7 |
#104 | 🇹🇷 Türkiye | 56.9 |
#105 | 🇬🇾 Guyana | 56.9 |
#106 | 🇬🇷 Greece | 56.9 |
#107 | 🇸🇧 Solomon Islands | 56.9 |
#108 | 🇰🇼 Kuwait | 56.7 |
#109 | 🇺🇿 Uzbekistan | 56.5 |
#110 | 🇰🇭 Cambodia | 56.5 |
#111 | 🇧🇫 Burkina Faso | 56.2 |
#112 | 🇬🇦 Gabon | 56.1 |
#113 | 🇩🇯 Djibouti | 56.1 |
#114 | 🇸🇻 El Salvador | 56.0 |
#115 | 🇰🇬 Kyrgyzstan | 55.8 |
#116 | 🇿🇦 South Africa | 55.7 |
#117 | 🇲🇷 Mauritania | 55.3 |
#118 | 🇹🇬 Togo | 55.3 |
#119 | 🇪🇨 Ecuador | 55.0 |
#120 | 🇸🇿 Eswatini | 54.9 |
#121 | 🇳🇮 Nicaragua | 54.9 |
#122 | 🇲🇱 Mali | 54.5 |
#123 | 🇧🇩 Bangladesh | 54.4 |
#124 | 🇳🇬 Nigeria | 53.9 |
#125 | 🇷🇺 Russia | 53.8 |
#126 | 🇳🇪 Niger | 53.7 |
#127 | 🇧🇷 Brazil | 53.5 |
#128 | 🇰🇲 Comoros | 53.5 |
#129 | 🇬🇳 Guinea | 53.2 |
#130 | 🇦🇴 Angola | 53.0 |
#131 | 🇮🇳 India | 52.9 |
#132 | 🇹🇳 Tunisia | 52.9 |
#133 | 🇲🇼 Malawi | 52.8 |
#134 | 🇲🇿 Mozambique | 52.5 |
#135 | 🇰🇪 Kenya | 52.5 |
#136 | 🇱🇰 Sri Lanka | 52.2 |
#137 | 🇷🇼 Rwanda | 52.2 |
#138 | 🇹🇩 Chad | 52.0 |
#139 | 🇨🇲 Cameroon | 51.9 |
#140 | 🇵🇬 Papua New Guinea | 51.7 |
#141 | 🇱🇸 Lesotho | 51.6 |
#142 | 🇳🇵 Nepal | 51.4 |
#143 | 🇺🇬 Uganda | 51.4 |
#144 | 🇦🇷 Argentina | 51.0 |
#145 | 🇧🇾 Belarus | 51.0 |
#146 | 🇹🇯 Tajikistan | 50.6 |
#147 | 🇱🇦 Laos | 50.3 |
#148 | 🇸🇱 Sierra Leone | 50.2 |
#149 | 🇭🇹 Haiti | 49.9 |
#150 | 🇱🇷 Liberia | 49.6 |
#151 | 🇪🇬 Egypt | 49.6 |
#152 | 🇵🇰 Pakistan | 49.4 |
#153 | 🇬🇶 Equatorial Guinea | 48.3 |
#154 | 🇨🇳 China | 48.3 |
#155 | 🇪🇹 Ethiopia | 48.3 |
#156 | 🇨🇬 Congo | 48.1 |
#157 | 🇨🇩 Democratic Republic of the Congo | 47.9 |
#158 | 🇿🇲 Zambia | 47.8 |
#159 | 🇹🇱 Timor-Leste | 47.2 |
#160 | 🇲🇻 Maldives | 46.6 |
#161 | 🇹🇲 Turkmenistan | 46.5 |
#162 | 🇲🇲 Myanmar | 46.5 |
#163 | 🇸🇷 Suriname | 46.1 |
#164 | 🇱🇧 Lebanon | 45.6 |
#165 | 🇬🇼 Guinea-Bissau | 44.6 |
#166 | 🇨🇫 Central African Republic | 43.8 |
#167 | 🇧🇴 Bolivia | 43.4 |
#168 | 🇩🇿 Algeria | 43.2 |
#169 | 🇮🇷 Iran | 42.2 |
#170 | 🇧🇮 Burundi | 41.9 |
#171 | 🇪🇷 Eritrea | 39.5 |
#172 | 🇿🇼 Zimbabwe | 39.0 |
#173 | 🇸🇩 Sudan | 32.8 |
#174 | 🇻🇪 Venezuela | 25.8 |
#175 | 🇨🇺 Cuba | 24.3 |
#176 | 🇰🇵 North Korea | 2.9 |
- | 🇮🇶 Iraq | N/A |
- | 🇱🇾 Libya | N/A |
- | 🇱🇮 Liechtenstein | N/A |
- | Afghanistan | N/A |
Only four countries in the world have a score of 80 or above, Ireland, Singapore, Switzerland, and Taiwan, categorizing them as completely free economically.
Let’s now look at things from a more regional perspective.
Europe
From a regional perspective, Europe ranks the strongest in economic freedom.
Despite being a powerhouse within Europe, Germany ranks 10th in the continent, with a score of 73.7. One of the categories Germany scored the weakest in was government spending (28.3/100). Over the last three years, government spending has averaged 49% of GDP.
Ireland ranks third globally, scoring particularly high in categories like property rights and judicial effectiveness. The country also has no minimum capital requirement—which is typically a banking regulation and corporate law issue determining how many assets an organization must hold—making it attractive for businesses to set up shop on the Emerald Isle.
Africa
Currently, Africa is the continent with the least economic freedom in the world, however, it is also the region with the highest potential for economic growth. A booming population, and thus, labor force, are promising for future innovation. In fact, it’s anticipated that Africa will see an increase of 2.5 billion people by the end of the century.
The lowest scoring country in Africa is Sudan, a country under further strain thanks to rife civil conflict. Historically, economic development has been constrained by rampant corruption and a lack of institutional capacity.
Conversely, Botswana registered the highest score on continental Africa (64.9), ranking higher than countries like France and Italy.
The Americas
In the Americas, the United States ranks 3rd regionally—25th overall—with a score of 70.6. The report attributes the categorization of U.S. as only “mostly free” to issues like inflation, increasing government debt, and unchecked deficit spending. Public debt currently sits at a figure equivalent to more than 128% of GDP.
In South America, Chile comes out on top, ranking above many other economic powerhouses like the U.S., the UK, and Japan. However, the 2021 election of a new Constitutional Assembly could risk the current economic state, as it favors a much more socialist approach to the economy.
East Asia and Oceania
China’s score is among the lowest in East Asia & Oceania, ranking 154th in the world categorizing it as a repressed economy. The ruling Chinese Communist Party routinely exercises direct control over economic activity. China’s protectionist stance towards foreign investment and a plethora of trade tariffs imposed by other nations also factor in here.
In India, where public debt is equivalent to about 84% of GDP, fiscal health is the worst-scoring category. Additionally, much of the economy remains quite informal; a large share of people work in jobs without tax slips, recorded income, or formal contracts protecting them, which challenges labor freedoms.
The Middle East and Central Asia
It may come as no surprise that the United Arab Emirates has the highest score in the Middle East. The UAE has implemented various measures and initiatives, such as tax exemptions, duty-free zones, streamlined business registration processes, and flexible regulatory frameworks to encourage entrepreneurship and foreign direct investment. As well, the top individual and corporate tax rates in the country are 0%.
Türkiye’s lowest scoring category relates to judiciary effectiveness and the rule of law. President Recep Tayyip Erdoğan, who has already been in power for two decades, recently won the country’s election, again cementing his authority over Turkish politics. This makes it unlikely that Türkiye’s economic freedom score will recover in the short to medium term.
Where Does This Data Come From?
Source: The Index of Economic Freedom from the Heritage Foundation
Data notes: A number of countries were not ranked due to unavailable data or other factors, like ongoing war, that made it difficult to properly assess the economy. These countries include: Ukraine, Afghanistan, Iraq, Libya, Liechtenstein, Somalia, Syria, and Yemen.
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