Index investing and exchange traded funds

Index investing and exchange traded funds (ETFs) have profoundly changed the way investors seek returns, manage risk, and build portfolios. ETFs can provide access to diversified investment portfolios at a low cost. During periods of market volatility or illiquidity, they can also act as shock absorbers by allowing buyers and sellers to transact on the exchange without having to trade the underlying securities. The on-exchange trading of ETFs provides price discovery by helping investors identify the proper market price of securities based on factors like supply and demand. This process of price discovery can help increase market liquidity and resiliency.

This page is home to educational resources about index investing and ETFs.

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  • iShares Investigates: Market Indexes and Index Investing

    May 12, 2020

    This iShares short paper draws a distinction between the role of index providers and the role of index fund managers and explores the responsibilities of both.

  • iShares Investigates: ETF Market Realities – Answers to ten popular questions about ETFs

    Apr 27, 2020

    This short paper answers ten frequently asked questions about ETFs. Topics include various impacts of ETFs and index investing on markets, ETF market size, and the defining features of ETFs.

  • Terra Firma: How ETFs Helped Stabilize a Stressed Bond Market

    Apr 20, 2020 | By Barbara Novick and Samantha Merwin, CFA
    A BlackRock guest blog post on CFA Institute's Enterprising Investor, exploring the role that ETFs played amid the current coronavirus-driven market stresses.
  • Dispelling the Misperceptions: Three Ways ETFs Benefit Financial Markets

    Mar 30, 2020 | By Barbara Novick and Samantha Merwin, CFA
    A BlackRock guest blog post on CFA Institute's Enterprising Investor, using empirical evidence to dispel the ETF systemic risk narrative.
  • Comment on the CFA Institute Research Foundation’s paper, “ETFs and Systemic Risks”

    Feb 21, 2020 | By Barbara Novick and Sam Merwin, CFA
    Long-form response to the CFA Institute Research Foundation's paper, using empirical evidence to dispel the ETF systemic risk narrative.
  • Asset Management, Index Funds, and Theories of Corporate Control

    Nov 12, 2019 | By Matt Mallow

    This paper grounds the academic debate around asset managers, index funds, and corporate control firmly in the practical context of the operation and regulation of asset managers.

  • BlackRock’s take on the SEC’s ETF Rule

    Oct 18, 2019

    In this post, the iShares team examines the SEC's new rule that will help modernize the regulatory framework for exchange traded funds.

  • iShares Investigates: The ETF Ecosystem – Part 2: Authorized participants by the numbers

    Oct 07, 2019

    This short paper examines the number of APs across different categorizations, including size of funds and asset classes. Overall, it presents data that the universe of APs is broad and diverse, and that the broad engagement by APs supports a healthy ETF ecosystem.

  • iShares Investigates: The ETF Ecosystem – Part 1: Authorized participants and market makers

    Aug 29, 2019

    This short paper examines the central roles of authorized participants (APs) and market makers in ensuring the accuracy of ETF prices and smooth trading in all market conditions.

  • iShares Investigates: ETF Launches and Closures

    May 16, 2019

    This short paper outlines the rationale for launching and closing ETFs and provides some ‘fast facts’ on how the number of ETFs and mutual funds in existence has changed over time.

  • Index Investing Supports Price Discovery

    Apr 02, 2019

    In this Policy Spotlight, we show that the evidence does not support claims that index investing increases asset correlations or blunts stock price signals. Index investing and ETFs support price discovery and serve as 'shock absorbers' during market stress events.

  • Letter to SEC - Proposed Rule on Exchange Traded Funds

    Sep 26, 2018

    Letter to the SEC in response to their request for comment on the proposed rule on exchange-traded funds (ETFs).

  • Index Investing Supports Vibrant Capital Markets

    Oct 03, 2017

    Index investing has profoundly changed the way investors seek returns, manage risk, and build portfolios. Although the benefits of index investing for the investor are widely recognized, recent commentary has focused on its role in capital markets. In this ViewPoint, we outline some of the key elements of the debate, focusing on index investing in relation to company stocks and the equity markets. We also examine the development of theories around common ownership, building on our March 2017 ViewPoint entitled “Index Investing and Common Ownership Theories."

  • Response to Discussion Paper on Exchange Traded Funds - Central Bank of Ireland

    Aug 11, 2017

    Response to the Central Bank of Ireland’s Discussion Paper 6 on exchange-traded funds (ETFs).

  • A Primer on ETF Primary Trading and the Role of Authorized Participants

    Mar 09, 2017

    In this ViewPoint, we explain how shares are created and redeemed in ETFs. This process, known as ETF primary trading, facilitates inflows and outflows from the underlying portfolios of these mutual funds. We discuss authorized participants (APs), market makers, and the distinct roles they play in ETF primary trading. We also consider the possibility of an AP stepping back from its role and explain the expected impact on ETFs and markets.

  • Bond ETFs: Benefits, Challenges, Opportunities

    Jul 10, 2015

    This ViewPoint provides an overview of the structural features of ETFs. Further, we discuss the benefits of bond ETFs, including transparency and price discovery, and some of the challenges, including the need for a classification system that better distinguishes among several types of exchange-traded products. We offer some suggestions for concrete regulatory actions that can extend the benefits of ETFs to a broader investor base and improve financial stability.

  • ETFs Help Improve Market Stability: A Closer Look at Fixed Income ETF Behavior During Recent Bond Market Movement

    Oct 28, 2014

    This publication examines the behavior of bond markets and fixed income ETFs during the recent period of significant asset flows following the news of Bill Gross’s departure from PIMCO on September 26, 2014. Our analysis demonstrates that ETFs helped defuse uncertainty and facilitated orderly and stable markets. We believe this experience is an illustrative case study of how fixed income ETFs provide liquidity, price transparency, and fair allocation of costs amidst periods of market stability, as well as during periods when markets are challenged with uncertainty or significant asset flows.

  • Exchange Traded Products: Overview, Benefits and Myths

    Jun 28, 2013

    This ViewPoint provides a detailed overview of Exchange Traded Products with a focus on Exchange Traded Funds (ETFs). The paper explains some common misconceptions about the structure of ETFs and index investing. It also identifes several principles that we believe can help maximize the utility of ETFs and minimize the potential for any unintended consequences for investors and financial markets.

  • ETFs: A Call for Greater Transparency and Consistent Regulation - Oct 2011

    Oct 14, 2011

    In this ViewPoint, we provide background on the history and structure of ETFs, summarize recent concerns that have been raised by regulators, and recommend five reforms that would improve the marketplace for ETFs. We explicitly support uniform standards on labeling, transparency, disclosure, and reporting that would reduce systemic risk, improve investor protection, and help ensure that investors understand precisely the risks and attributes of the products that they are purchasing.

Third party publications reflect the views of the authors and do not represent the views of BlackRock.