How do ETFs work

ETFs are index funds, but have the trading characteristics of a share as they are traded on exchanges.

Primary vs Secondary Stock Exchange

When it comes to buying and selling ETFs, they work like a share

iShares ETFs trade on your local stock exchange in the same way as shares of any public company. You can easily buy and sell iShares through any brokerage account.

ETFs can be traded at any time during normal trading hours.

iShares are not shares of a company, they are units of a fund which holds a portfolio designed to closely track the performance of a chosen market index.

When it comes to market exposure, ETFs work like a mutual fund

Each iShares ETF closely tracks a specific market index, offering new ways to get cost-effective exposure to the markets you want. Like traditional mutual fund owners, iShares investors own a pool of securities.

This has the advantage of spreading your risk over several securities, not just one. Index investing is a time-tested, analytical approach to getting broad market exposure and a high degree of diversification at much lower costs than active mutual funds. An active mutual fund is a fund that aims to provide above-average performance by using human judgement and/or quantitative tools to select and trade stocks and asset classes. Active fund managers try to outperform indices or meet specific total return targets. Index fund managers, by contrast, try to match the performance of indices as closely as possible.

All financial investments involve an element of risk to both income and capital. Transaction or brokerage fees will apply. Liquidity is not guaranteed.