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5 ETF Must-Knows

1. What is the difference between ETFs and mutual funds or stocks?

iShares ETFs combine popular features of both. Like a mutual fund, an ETF is a collection of stocks or bonds. And like a stock, you can buy and sell an ETF throughout the day as long as the market is open.1

2. What are the benefits of ETFs?

They can help you grow your money. Over the past 5 years, iShares S&P style box ETFs have outperformed 90% of active mutual funds in the same category.2

On average, they cost less than other investment types. Generally, iShares ETFs cost about 1/3 as much and have 1/2 the average tax cost than the typical mutual fund.3

iShares ETFs make it easy to invest in a wide array of markets, whether broad like the S&P 500, in niche sectors, or targeted to a specific goal.

3. Are ETFs professionally managed?

iShares ETFs are overseen by some of the most experienced portfolio managers in the industry. Our fund managers aim to ensure the ETF does what it's supposed to do. This includes closely matching the ETF's benchmark index, keeping its fees low, and minimizing the potential for capital gains taxes.

Index ETFs differ from actively managed funds, in which the manager attempts to "beat" the market's performance, which often increases fees and taxes. Beating the markets – especially after fees – can be quite challenging.

In fact, iShares S&P ETFs have outperformed 90% of actively managed U.S. mutual funds in their associated Morningstar "style box" categories.2

4. How do you buy an ETF?

There are two easy ways to purchase iShares ETFs:

  1. Talk to your advisor about adding iShares ETFs to your portfolio.
  2. Purchase iShares ETFs directly from any online brokerage account. Fidelity offers 70 iShares ETFs commission-free.4

5. How do you use ETFs in your portfolio?

ETFs are extremely versatile. Many investors use them to pursue long term goals, such as funding their retirement or growing wealth. Others take advantage of ETFs to help achieve specific goals, such as seeking income or managing against jumpy markets. And those with strong market views use ETFs to seek timely new opportunities, instead of picking individual stocks, bonds or mutual funds.


NEXT See more about ETF costs and performance.


1Shares of iShares Funds may be bought and sold throughout the day on the exchange through any brokerage account. However, shares may only be created or redeemed directly from the Fund by Authorized Participants--typically large institutional investors--in very large creation/redemption units. When comparing stocks or bonds and iShares Funds, it should be remembered that management fees associated with fund investments, like iShares Funds, are not borne by investors in individual stocks or bonds.

 

2Morningstar, as 12/31/2014. Post-tax comparison made between the returns at NAV of iShares S&P domestic equity style box funds and all share classes of all active Open-End Mutual Funds within the Morningstar US style box category available in the US at the beginning of the investment period that survived through the end of the investment period. Returns are calculated after taxes on distributions, including capital gains and dividends, assuming the highest federal tax rate for each type of distribution in effect at the time of the distribution. Overall figure is a weighted average of the percentage of funds that the iShares ETF outperformed in each style box, weighted based on assets in each style box. Performance may be different for other time periods. US style box mutual funds are those active funds categorized by Morningstar as US Large Cap Growth / Blend / Value, US Mid Cap Growth / Blend / Value or US Small Cap Growth / Blend / Value. Past performance is no guarantee of future results.

 

3Source: Morningstar, as of 12/31/14. Comparison is between the Prospectus Net Expense Ratio for the average iShares ETF (0.38%) and the average Open-End Mutual Fund (1.27%) available in the U.S. and have 10 year track records (excluding municipal bond and money market funds). "Tax cost" is a Morningstar measure of the impact of taxes on capital gains and income distributions on performance. The average tax cost of the iShares ETFs and active Open-End Mutual Funds included in the comparison = 0.53% and 1.05%, respectively.

 

4ETFs are subject to a short-term trading fee by Fidelity, if held less than 30 days. Other conditions and fees may apply. See Fidelity.com/commissions for details. BlackRock is not affiliated with Fidelity or any of its affiliates.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares ETF and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.

Certain traditional mutual funds can also be tax efficient.

Investment comparisons are for illustrative purposes only. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products' prospectuses.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

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