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Eight Financial Innovations to Believe In

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CBS Money Watch reporter Eric Schurenberg talks about the financial innovations of past, present and future. He writes that although we've seen significant development in financial innovation, its been far from stellar. Schurenberg sees the following eight as the best innovations in recent years.

Credit and debit cards: They're a little like fire: Risky in the wrong hands, but overall a great advance for civilization.

Mortgage-backed securities: They put more money for home loans into circulation and lowered rates for homeowners. It wasn't until Wall Street further bundled them into CDOs and bankers abandoned all lending standards that they became the enablers of the housing crisis.

The money market fund: Okay, maybe the money market fund has been over-engineered to seem safer than it really is. But by unlocking market interest rates to ordinary savers, money funds freed us from being monopolized by banks.

The index mutual fund: The index fund brought low cost investing and the best academic thinking about markets to the ordinary person. Here on CBS MoneyWatch.com, Nathan Hale eloquently explains why index funds are something to be thankful for.

The 401(k): Until employers pushed it to replace traditional pensions as the foundation of the U.S. retirement system'a role it was never designed to play'the 401(k) was a clever and elegant way to democratize benefits that had been limited to top executives.

The ETF: I like the ETF, when used as a low-cost alternative to index mutual funds, but like most financial innovations, Wall Street has done its best to turn it toxic. The latest variations are no more than invitations to gamble on narrow market sectors, and can trade at wide discounts and spreads, totally negating the benefits of low cost.

The target-date retirement fund: Yes, they lost money in the crash, but what didn't? Their basic idea is sound. Over the course of most people's career, they'll do far more good than harm.

What other financial innovations have there been that we can "believe" in? Is Schurenberg missing a few? What innovations can we look forward to in the future?

Learn more: Eight Financial Innovations to Believe In

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