Why ETFs?

iShares Core ETFs have outperformed 80% of their mutual fund peers on average over the past five years¹.

 iShares Core ETFs have outperformed the following percent of comparable mutual funds

Infographic: Percent of iShares Core ETFs that have Outperformed Comparable 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 80.6% (1955/2426), 83.6% (1804/2157) and 87.8% (1330/1515) of their active mutual fund peers 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.


How’s it possible that ETFs can outperform?

How’s it possible that ETFs may outperform mutual funds? After all, most iShares ETFs are index funds that don’t attempt to beat their benchmark index.

Several factors come into play:

Consistently picking winners is tough

Consistently picking winners is tough

Only 15% of active mutual funds have actually beaten the market over the past 5 years.2

Cost matters

Cost matters

iShares ETFs cost about 1/3 as much as the typical mutual fund.3

Tax efficiency matters

Tax efficiency matters

Over the past five years, 97% of iShares ETFs have not paid a capital gains distribution.4