Exchange Traded Funds (ETFs) are one of the fastest growing investment products in the world, offering investors a simple and cost-effective way to achieve diversification in their investment portfolios.

ETFs blend the benefits of both managed funds and shares. They offer efficient, low-cost diversification, combined with flexibility and liquidity.

ETFs can be bought and sold on a stock exchange like shares. And, like managed index funds, they contain a diversified portfolio of securities designed to track specific indices. Some indices are narrow, tracking a single market sector with minimal holdings, while others are as broad as the entire market with hundreds of holdings. This means investors can use ETFs to gain the exposure and diversification they want, quickly and simply.

Top ETF Questions & Answers

  1. How do exchange traded funds (ETFs) differ from mutual funds or stocks?

    ETFs combine some popular features of both. Just like a mutual fund, an ETF is a collection of stocks or bonds. And like a stock, you can buy and sell an ETFs throughout the day as long as the market is open, with one trade.

  2. Are ETFs actively managed?

    Most ETFs are index funds, meaning they seek to match the components of a market index. This differs from active funds, such as some mutual funds, where the fund manager is attempting to "beat" the index in terms of performance.

  3. How do you buy an ETF?

    ETFs trade on the Australian Securities Exchange (ASX). They can be traded anytime during ASX trading hours, using the same strategies associated with shares (market, limit and stop orders, for example). iShares can be bought or sold, just like shares and traded via financial advisers, stockbrokers or online brokers.

  4. How do you use ETFs in your portfolio?

    Many use ETFs to invest for the long term, such as saving for retirement or seeking wealth. Others take advantage of ETFs to help achieve shorter-term goals, like generating new income sources or managing volatility.

ETF Creation and Redemption

Ever wonder what allows ETFs to be liquid? The answer is "creation and redemption," the process that lets ETFs trade even when volume is low. Using simple illustrations and a metaphor about flowers, this seven-minute animation will change the way you look at ETFs.

Benefits of iShares ETFs

iShares ETFs can provide investors with a number of benefits, including:


iShares ETFs can provide a quick, simple way to diversify your portfolio. All with one simple trade on the ASX.

With iShares ETFs you can gain exposure by asset class, market capitalisation, country and sector. The simple and flexible nature of iShares ETFs means they can play a central role in any investment portfolio adopting a number of strategies using iShares ETFs.

Cost efficiency Cost efficiency
iShares ETFs can be a cost-effective way to gain exposure to a diversified portfolio of securities. They are generally less expensive than investing in actively managed funds and even some index funds. They can also be less costly than purchasing a large number of individual shares, as there are less trading costs.

Flexibility Flexibility
Like shares, iShares ETFs provide investors with the flexibility to trade at any time during market hours. Priced throughout the trading day, iShares can be bought or sold like a share, through any broker, investment adviser or online trading platform. And, because ETFs trade like shares, they can be bought on margin and place limit and stop orders.

Accessibility Accessibility
One trade on the ASX allows an investor to gain exposure to a diversified portfolio. For example; with the minimum investment size for some bonds being up to $500,000, it can be difficult to achieve a diversified exposure to fixed income assets.

Transparency Transparency
Portfolio holdings of each iShares ETF are publicly disclosed as often as daily. You always know what you own.

Liquidity Liquidity
iShares ETFs can be traded on the ASX as easily as any share, allowing you to quickly respond to changing market conditions.

Tax efficiency Tax efficiency
Compared to actively managed funds, ETFs may prove more tax efficient as a result of lower levels of portfolio turnover.

Shares of iShares Funds may be bought and sold throughout the day on the exchange through any brokerage account. However, shares may only be created or redeemed directly from the Fund by Authorized Participants-- typically large institutional investors--in very large creation/redemption units. 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.