The following was authored by Hollie Fagan, Head of BlackRock’s Registered Investment Advisor business.
More and more investors are looking at ETFs and wondering if they should incorporate them in their portfolios. Talking to your financial advisors about ETFs is a good start.
Exchange traded funds (ETFs) have joined mutual funds and individual stocks as mainstream investment tools, and their popularity is only growing. The past year saw record flows into stock and bond ETFs. Today, one in four U.S. investors owns ETFs, according to BlackRock’s ETF Pulse survey; half of all investors plan to purchase them in the next 12 months.
Whether you’re already an ETF investor or have just been hearing about them, you may be curious to know more or understand them better. This is a great conversation to have with your financial advisor.
Here are five questions (and brief answers) to help you get started.
1. What’s the difference between an ETF and a mutual fund?
ETFs and mutual funds have a lot in common: They’re both diversified, managed bundles of securities that are divided into shares, and bought and sold by investors. ETFs are traded on an exchange just like a stock and usually track an index; however, they’re also structured somewhat differently. These features mean they’re typically cheaper to own than mutual funds, through lower annual management fees and potential tax efficiency. For more information on the differences between ETFs and mutual funds, click here.
About the survey
The BlackRock 2016 U.S. ETF Pulse survey was conducted from September 12–26, 2016, by TNS, an independent research company. The survey interviewed over 1,000 individual investors and 400 financial advisors, from nationally representative online samples of household financial savings/investment decision makers age 21–75, with $100K+ in investable assets and aware of ETFs; and financial advisors age 21–75 with $25MM+ in assets under management.
Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
Investment comparisons are for illustrative purposes only. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products’ prospectuses. When comparing stocks or bonds and iShares Funds, it should be remembered that management fees associated with fund investments, like iShares Funds, are not borne by investors in individual stocks or bonds.
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. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. Diversification and asset allocation may not protect against market risk or loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
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