What is an ETF?

An ETF (Exchange Traded Fund) is a diversified collection of assets (like a mutual fund) that trades on an exchange (like a stock). ETFs are an easy-to-use, low cost and tax efficient way to invest your money.

What are the benefits of ETFs?

 

ETFs outperform mutual funds by 75%

iShares Core ETFs have outperformed more than 75% of their mutual fund peers on average over the past 5 years1

 

ETFs are 1/3 the price of a mutual fund 1/3 the price of a
typical mutual fund2
ETFs are 1/2 the tax cost of a mutual fund 1/2 the tax cost of the
average active mutual fund3

 

Learn more about why to use ETFs.

Word on the street

We took to the streets of San Francisco and asked people, "What is an exchange traded fund?" In their words, here's what they had to say.

Comparing ETFs and mutual funds

Many investors are familiar with mutual funds. How are ETFs similar? And what makes them different?

Hover over the icons to learn more.

Comparing ETFs and mutual funds

Learn more about the differences in investment strategy, fees,
and tax implications of ETFs vs mutual funds
.

DiversificationKnowing what you ownBuying and sellingFund performanceCostRisk and rewardProfessional management
Similarities
Diversification
Diversification
You get a diversified collection of stocks and/or bonds, which can potentially help reduce risk compared to individual securities.
Professionally managed
Professionally managed
The funds are overseen by professional managers.
Risk and reward
Risk and reward
The risk profile of an ETF is derived from its underlying holdings, as with mutual funds.
Differences
Cost
Cost
ETFs typically cost less than comparable mutual funds (⅓ the cost, on average), and there are no hidden loads or fees. (Your broker may charge a transaction fee, though many iShares ETFs are available commission-free at providers like Fidelity⁴). What’s more, your taxes may be significantly lower: tax costs for iShares ETFs on average are less than ½ those of the average mutual fund³.
Fund performance
Fund performance
Most ETFs seek to closely match the performance of an established stock or bond index, such as the S&P 500 or the Bloomberg Barclays U.S. Aggregate Bond Index. Actively managed mutual funds try to beat the index, which can be hard to do, especially after fees and taxes. iShares Core ETFs have outperformed more than 75% of their mutual fund peers on average over the past five years¹.
Buying and selling
Buying and selling
As with stocks, you can buy and sell ETFs at the market price whenever the market is open. Mutual fund shares are purchased directly from the fund at Net Asset Value (NAV) and priced once a day after the market closes.
Knowing what you own
Knowing what you own
Because ETFs usually aim to track an index, their holdings change relatively little over time – without the “style drift” that may surprise mutual fund investors.

Learn more about the differences in investment strategy, fees, and tax implications of ETFs vs mutual funds.

How to use ETFs

Everyone’s investment goals are unique. What outcomes are you targeting?

Build a stronger core with ETFs

Build a stronger core

iShares Core ETFs are diversified, low-cost funds designed to help build a strong foundation for your portfolio.

Generate income with ETFs

Seek income

ETFs can help generate income through bonds, dividend-paying stocks, and preferred stocks.

Reduce risks with ETFs

Prepare for market turbulence

Minimum volatility ETFs are designed to help reduce risk and keep you invested.

Invest in iShares ETFs

Invest internationally

iShares ETFs offer access to virtually all non-US investable markets, from broad exposures to single countries.

ETF opportunities

Act on opportunities

ETFs offer the same trading flexibility as stocks, with added diversification.

By the
numbers

1993
The first ETF was introduced in 1993

1997
iShares has been a leading ETF provider since 1997

3,000,000,000,000
ETFs are now a $3 trillion industry

300+
iShares provides the widest array of ETFs, with 300+ offerings