The Index Fund Revolution

Index funds are simple, low-cost ways to gain exposure to markets. They’re most commonly available as mutual funds and exchange traded funds (ETFs). While stocks, bonds, commodities and real estate have been around for centuries, index funds have revolutionized how investors access these assets.

How index funds have revolutionized investing

Watch this video of Martin Small, head of BlackRock U.S. Wealth Advisory, “bridging” the connection between electric guitars and index investing as revolutionary vehicles of change.

Why index funds?

A comprehensive set of cost effective funds with transparent pricing.
We are at the forefront of index innovation, and aim to deliver any market exposure that is investable and rules-based.
BlackRock is trusted to manage more money than any other investment firm.1
Client focus
Client focus
We are focused on helping investors of all sizes build more cost efficient index portfolios.
Precise and consistent exposures are critical to delivering superior indexing.
We deliver index solutions that are tailored to client needs.

What to know about index funds

Round out your knowledge of indexing, ETFs and index mutual funds.

  • Institutional investors were the first adopters of index funds, more than four decades ago. Individuals quickly followed suit, thanks to the funds’ low cost, diversification and simplicity.

  • For example, indexes that track U.S. dividend-paying companies can have different rules on stock selection, leading to vastly different results.

  • Technology has made it possible to index strategies that were once only the province of active managers, such as smart beta ETFs that isolate factors like value, growth and low volatility.

  • While the annual expense ratio matters, you should make choices based on what’s important to you, be it tax efficiency, tracking error or types of companies in the index.

  • There’s a lot of work that gets done behind the scenes by skilled portfolio managers to help their funds deliver what they say “on the label.”

Index funds are still a small portion of stock and bond markets

Index funds have plenty of room to grow. They represent just 10% of global stocks and bonds and about a third of managed assets overall.

Room to grow

Index funds have plenty of room to grow.

Sources: World Federation of Exchange Database (WFED data as of Dec 2018), BIS (data as of Q2 2018), HFR, Cerulli, Simfund (data as of Dec 2018), iShares GBI (data as of Dec 2018), Global Heat Map, McKinsey Cube (data as of Dec. 2017).

How to invest in index funds

The two most common types of index funds are exchange traded funds (ETFs) and index mutual funds. While they’re similar in many ways, there are a few key differences to consider.

ETFsIndex mutual funds
Portfolio construction Professionally managed pool of securities that seeks to track a rules-based index. Professionally managed pool of securities that seeks to track a rules-based index.
Buying and selling On an exchange, like a stock Directly with the fund provider
Share pricing Market price set throughout the day, while exchange is open Net asset value (NAV) set once a day, after market close

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