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You may have heard of ETFs, but perhaps you're still unsure exactly what they are. Maybe you even think they sound like extra-terrestrial funds, and you don't have the risk tolerance to invest in Mars.

Well, ETFs really aren’t that "out there." They’re simply an easy way to invest in the stock and bond markets, and they can help you keep more of what you earn.

ETF stands for "exchange traded fund." In other words, it is an investment fund, similar to a mutual fund, that trades on an exchange (such as the New York Stock Exchange) just like a stock.

And ETFs are not new. They've been around for over 20 years, and iShares has been in the business for more than a decade. ETF investment has grown to nearly $3 trillion around the globe as all types of investors see the potential benefits of holding these funds.

What are those potential benefits?

Depending on your age, investment experience, risk tolerance or level of wealth, if you do your homework to find the right ETFs for your portfolio, they may help you reach your goals in several ways:

  • Save money — Most ETFs are designed to track a designated index, which can minimize trading of securities within the fund. That helps keep costs low. Many ETFs charge less than the typical actively managed mutual fund in the same investment category. In fact, iShares Core funds are one-tenth the cost of similar active mutual funds.i They have also been more tax efficient.ii
  • Diversify — With more than 700 iShares funds available in the U.S., you can find an ETF to help meet virtually any goal: a multi-asset fund that provides instant diversification, "slices" of a market that can help fill gaps in your current portfolio, or funds that let you act on your current market views. Unlike mutual funds, you can see online exactly what a fund invests in daily to be sure that you’re buying what you really want.
  • Capture market opportunities — Because ETFs trade like a stock, you know the going prices throughout the day. Buy or sell shares whenever the stock markets are open using limit, market or stop-loss orders.iii
  • Earn income — ETFs are an easy way to invest in all types of fixed income, from low-risk government bonds to higher yielding corporate debt. Other ETFs focus on company stocks that pay higher dividends.
  • Manage risk — Many new ETFs have emerged to help investors manage the effects of currency exchange or inflation, reduce volatility, or focus on specific factors such as growth or quality.
  • Stay invested — Maintain exposure to a particular market or sector while you decide exactly what to do with your cash holdings. Of course there is more risk when investing in an ETF than holding in cash, but you can potentially get a greater return.

Build your core

A common way that investors use ETFs is in the core of their portfolios. ETFs are an easy way to get instant diversification or to invest broadly over a specific market segment, such as value companies, Europe or short-term bonds. And when you’re in it for the long term, the lower costs can make a big difference toward the overall growth of your investments.

See how you can build the foundation of your portfolio with iShares Core ETFs.


The Growth of Global ETF Assets

Data is as of December 30, 2015 for Europe and December 31, 2015 for the US, Canada, Latin America, and some Asia ETPs. Global ETP flows and assets are sourced using shares outstanding and net asset values from Bloomberg, as well as BlackRock internal sources, for the US, Canada, Europe, Latin America and some ETPs in Asia. For Middle East and Africa, assets and net flows data is not available. Inflows for years prior to 2010 are sourced from Strategic Insights Simfund. Asset classifications are assigned by BlackRock based on product definitions from provider websites and product prospectuses. Other static product information is obtained from provider websites, product prospectuses, provider press releases, and provider surveys.