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.
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.
2. What are the potential benefits of ETFs?
ETFs can help you grow your money. iShares Core ETFs have outperformed 80% of their mutual fund peers on average over the past five years.2 See more about ETF performance.
On average, ETFs cost less than other investment types. Generally, iShares Core ETFs cost about 1/3 as much and have 1/2 the average tax cost than the typical mutual fund.3 Learn more about ETF cost savings.
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.
Percent of iShares Core ETFs that have Outperformed Mutual Funds
Source: Morningstar, as of 1/31/2016. Post-tax comparison between the 1, 3 and 5 year returns at NAV of the iShares Core ETFs and the oldest share class of active open-end mutual funds within the same Morningstar categories as the iShares Core ETFs. Mutual funds are generally more tax inefficient than ETFs and, as a result, are typically more negatively impacted than ETFs when comparing performance based on post-tax returns rather than total returns. The number of ETFs and mutual funds used for each period varies based on the inception date of the iShares Core ETFs. iShares Core ETFs included in this comparison vary based on the time period analyzed: 1 year (19 Core ETFs existed for the full 1-year period ended 1/31/15); 3 year (15 Core ETFs existed for the full 3-year period ended 1/31/13); and 5 year (9 Core ETFs existed for the full 5-year period ended 1/31/11). iShares Core ETFs outperformed their active mutual fund peers by 80.6% (1955/2426), 83.6% (1804/2157) and 87.8% (1330/1515) over the 1, 3 and 5 year periods ended 1/31/16, respectively. Performance was averaged for Morningstar categories containing more than one iShares fund, and may be different for other time periods. 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. Past performance is no guarantee of future results. For more information on the differences between iShares ETFs and mutual funds, click here.
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 seeking to closely match the ETF to its benchmark index, and minimizing the potential for unwanted capital gains distributions.
ETFs differ from actively managed funds, in which the manager generally attempts to "beat" the market’s performance, which often comes with higher fees and taxes. Beating the markets – especially after fees – can be quite challenging.
iShares Core ETFs have outperformed 80% of their mutual fund peers on average over the past five years.2
4. How to buy an ETF?
Buying iShares ETFs is easy. They offer the same trading flexibility as stocks, meaning they can be bought and sold during market hours but with the added potential benefit of being diversified.
|Talk to your financial planner about adding iShares ETFs to your portfolio|
|Purchase directly through Fidelity, where 70 iShares ETFs trade commission-free online4|
|Purchase iShares funds through any online brokerage account|
See the Guide to Buying and Selling ETFs for more information.
5. How do you use ETFs in your portfolio?
For more information on the differences between iShares ETFs and mutual funds, click here.