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What are iShares?

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  • Written By: Mike Howells
  • Edited By: Michelle Arevalo
  • Last Modified Date: 07 September 2016
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iShares® are a brand of exchange-traded fund (ETF) that each track a different stock market index or bond. In essence, they are designed to emulate the performance of those two types of markets. They have existed since the 1990s are currently owned by the BlackRock® investment company. iShares® are intended to serve as diversified trading options for investors interested in tracking benchmarks, as opposed or in addition to mutual funds and shares in individual corporations.

ETFs generally are funds that trade like stocks, but contain multiple assets, like mutual funds. Unlike mutual funds, however, which are bought and sold at a set price once per day, EFTs trade at varying prices throughout the day. Also, it is possible to conduct more advanced transactions, such as short sales, limit orders, and options, with them. iShares® are just one kind of ETF, other types include commodity ETFs, currency ETFs, and even more complex funds that are actively-managed or leveraged to maximize gains in a buying or selling market.

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iShares® as a brand of ETFs were started in the mid-1990s by Barclays®, and were initially called World Equity Benchmark Shares (WEBS®). They were not the first ETFs on the market, however. That distinction went to Standard & Poor's Depositary Receipts (SPDRS®), which were introduced in 1993 and tracked the S&P 500® index. iShares® funds are listed on a number of stock exchanges worldwide, including the New York Stock Exchange® (NYSE), NASDAQ® and others. They may be traded just like any other shares, and comprise a large proportion of the roughly 1,500 ETFs that exist on American stock exchanges alone.

Proponents of iShares® claim they have lower fees, fewer taxes, and present a more palatable risk option than mutual funds or individual stock portfolios. Unlike mutual funds, iShares® disclose the contents of their portfolios daily, rather than on a quarterly basis, offering a greater degree of transparency for investors. There are iShare® funds designed to be equivalent to various categories of mutual funds, like large cap blends, small cap blends, international blends, and emerging markets.

To the novice investor, iShares® — and ETFs in general — should be considered a good supplement to mutual funds, money markets, bonds, and CDs in making up the backbone of a diverse portfolio. While unlikely to skyrocket in value, it is also rare that their value will plummet. As with any smart investing strategy, the goal should be consistent growth over time from a variety of funding sources.

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John57
Post 3

The number of ETFs that are in my investment account seems to grow all the time. I used to be a big mutual fund investor, but since they started issuing iShares I have been investing in more of them.

I still have some mutual funds, but if I have new money to invest now, I will put most of it in iShares or an ETF. Another thing I like about them is you can also use options on these funds.

You don't have the ability to do this with mutual funds. I feel like having iShares in my portfolio gives me the flexibility I want, while allowing me to manage my risk at the same time.

golf07
Post 2

@julies - I also enjoy buying ETF funds. Not only do you have a whole group of stocks in one fund, but you also don't seem to have has much volatility.

With more than one stock being included in the fund, you can spread that risk out a little bit more. I have a gold ETF that has done quite well for me over the last several years.

I see buying an ETF similar to buying a mutual fund, but I have the ability to be a lot more flexible with it. It can be traded any time the market is open and is basically just like any other stock I own when it comes to getting in and out of it.

julies
Post 1

I started buying iShare ETFs a few years ago and really like the diversity they have. It is cheaper to buy one ETF than it is to buy several individual stocks that are included in that exchange-traded fund.

There is an element of risk any time you are buying and selling stocks, but I feel like my risk is not as large when I am buying in a fund that has many different stocks.

By buying a few ETF funds, I can diversify my portfolio without the major expense of owning each of those stocks individually.

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