Exchange-traded funds (ETFs) have become all the rage on Wall Street in recent years. But have you ever had your own themed investment idea and wondered what it would take to start your very own ETF?
In the past, it would typically cost between $700,000 and $1.25 million for an individual or small business to launch an ETF from scratch. But, the rise of white-labeling ETF companies has now cut that cost down to around $100,000.
White-Labeling
White-labeling is the process through which one company creates a product and allows another company to place its name on the product.
White-labeling ETF companies already have critical (and expensive) infrastructure in place, such as SEC exemptive relief. For a small player to create a new ETF, it must violate a handful of rules contained in the Investment Company Act of 1940. Obtaining permission to do so from the SEC can take more than two years, but white-labeling ETF companies have pre-obtained exemptive relief.
Another Option
Of course, for many retail investors, $100,000 is still too high of a price tag for creating and selling a new ETF. Instead, online broker Motif Investing allows customers to build their own unique ETF-like motifs of up to 30 stocks for a minimum investment of just $250. If other users like the investment, they can buy…
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