Fifteen years ago, just as the Fool was beginning its mission to demystify investing and personal finance, the money management industry set off on a mission of its own: transforming plain-vanilla mutual funds into exchange-traded funds (ETFs), baskets of securities that trade throughout the day like individual stocks.

The most popular ETF, the S&P-tracking SPDRs (AMEX:SPY),  rolled off the assembly line in 1993, in fact, and through the close of last month had cranked out a cumulative return of roughly 197%.

31 flavors and then some
That's not too shabby, of course, but these days, SPDRs looks a bit plain-vanilla itself. Indeed, ETFs have become a veritable industry, cranking out novel products such as the Rydex Equal Weight Financials (RYF), which bypasses the traditional market-cap-weighted approach to index investing by allocating common sums to companies such as Citigroup, Goldman Sachs, and Bank of America (NYSE:BAC), each of which appears among the ETF's top holdings.

Leveraged ETFs are all the rage these days, too. Ultra QQQ ProShares (AMEX:QLD), for example, is designed to return two times the daily return of its underlying benchmark, the Nasdaq 100, and includes race cars such as Apple (NASDAQ:AAPL), Research In Motion (NASDAQ:RIMM), and Google (NASDAQ:GOOG) near the top of its lineup.

Shorting the market is a cinch with ETFs, too, with vehicles like Rydex Inverse 2x S&P 500 (AMEX:RSW) strapping on rocket boosters amid the market's sharp downturn this year. (Year to date, this "doubling down" ETF has returned nearly 76%).

The ETF revolution
Setting aside for a moment the pros and cons of the more exotic investment vehicles, I think that, on balance, the ETF revolution has been a positive development for individual investors. Sophisticated tools and techniques that used to be available only to professional money managers are now within easy reach of anyone with a brokerage account.

Moreover, if assets under management in ETFs are any indication, investors have given the industry a big thumbs-up, too. According to the Investment Company Institute –- the fund industry's keeper of facts and figures -- nearly $600 billion is residing in roughly 700 ETFs, a "product line" figure that's up from "just" 546 at the close of 2007.

A pause that refreshes?
Those numbers are worth pausing over, indicating as they do both the popularity of ETFs and the likelihood -– the certitude, really –- that the industry has cranked out some products that virtually no investor needs. Then, too, the convenience and accessibility that ETFs provide is a double-edged sword, providing fodder for hyperactive day trading and market calls.

Traditional mutual funds, by contrast, are priced just once per day -– after the market's close -– and therefore don't present quite the temptation that ETFs do. Traditional funds have the edge when it comes to dollar-cost averaging as well. Provided the fund you're after is of the no-load variety and appears on your brokerage's no-transaction fee (NTF) list -– or if you just go directly through the shop that offers the fund -– you'll never have to cough up a commission to invest in a traditional fund. Not so with ETFs, for which your broker will ding you just as he or she would for stock transactions. Fair, after all, is only fair.

Freedom of choice
The bottom line, then, for me is this: While much has changed in the wonderful world of money management over the past 15 years, some notions remain permanently true: Diversification across a wide swath of the market via vehicles that boast a focus on fundamentals is a terrific way to build wealth over time. ETFs can and should be a part of the game plan for many investors, but they're just pieces of the puzzle.

Still, when it comes to investing intelligently, I think having multiple options is a good thing. Indeed, at Ready-Made Millionaire -- the real-money Fool service that I head up -- we've plunked down approximately $50,000 on a high-octane ETF. Importantly, though, this fund appears in the context of a carefully calibrated portfolio that includes best-in-breed traditional funds as well as cherry-picked individual companies that we think have what it takes to beat the market over the next three to five years and beyond.

An intelligently constructed portfolio is the puzzle itself, and if you'd like to see how we've assembled ours, just click here to learn more about Ready-Made Millionaire and to snag a free copy of our special report, The 11-Minute Millionaire. 

Shannon Zimmerman runs point on Ready-Made Millionaire and doesn't own shares of any of the companies mentioned. Google is a Motley Fool Rule Breakers recommendation, Apple is a Stock Advisor choice, and Bank of America is an Income Investor selection. The Motley Fool owns shares of SPDRs. The Fool has a strict disclosure policy.