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Understanding ETFs

Exchange Traded Funds (ETF) offer an easy-to-use, low cost, and tax efficient way to invest your money. We took to the streets of San Francisco and asked people, “What is an ETF?” Here’s what they had to say.

Top ETF Questions & Answers

  • What are the benefits of ETFs?

    They can help you grow your money. Over time, index ETFs have outperformed 90% of the average U.S. style box mutual funds in their associated investment categories2.

    They cost less than other investment  types. Generally, iShares ETFs cost about 1/3 as much as the typical mutual fund and have ½ of the average tax cost when compared to similar mutual funds.3

    iShares ETFs make it easy to invest your money in either broad market categories like the S&P 500, or in specialty or niche sectors with one simple trade.

  • Are ETFs actively managed?

    iShares ETFs are overseen by some of the most experienced portfolio managers in the industry. Most are index funds, meaning they seek to track the performance of a market index. This differs from active funds, such as many mutual funds, where the fund manager is attempting to "beat" the index in terms of performance. iShares index style box funds have outperformed 90% of active fund peers over the past 5 years2.

  • How do you buy an ETF?
  • How do you use ETFs as an investment?

    Many use ETFs to invest for the long term, such as saving for retirement or seeking wealth. Others take advantage of ETFs to help achieve shorter-term goals, like generating new income sources or managing volatility.

Find out how iShares Funds Can Help You Keep More of What You Earn

The savings in fees and taxes by investing with iShares Funds can really add up. Learn more.

1 Shares 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.

2 Morningstar, 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.
Click here for standardized returns.
For more information on the differences between iShares ETFs and mutual funds, click here.

3 "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.

Good to Know

iShares ETFs cost about 1/3 as much as the typical mutual fund and have 1/2 of the average tax cost when compared to similar mutual funds.3

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.

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.

Before engaging any broker-dealer or Fidelity, you should evaluate the overall fees and charges of the firm as well as the services provided. Fidelity and BlackRock have entered into a long-term marketing program that compensates Fidelity to promote iShares ETFs; as part of this agreement, Fidelity offers 65 iShares ETFs commission-free online for qualified buyers and sellers, including all Core ETFs. Additional information about this arrangement, including any compensation, is contained in the ETFs' registration statements. ETFs 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 their affiliates.

For more information on the differences between ETFs and mutual funds, click here.

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

©2015 BlackRock, Inc. All rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, FACTORSELECT, iTHINKING, iSHARES CONNECT, FUND FRENZY, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES, the iShares Core Graphic, CoRI and the CoRI logo are registered and unregistered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

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