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.
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.
