Despite all the benefits, there are still some misperceptions about ETFs. Here are some additional things to keep in mind:
It's not uncommon to see spikes in ETF trading when the broader market is more tumultuous. This is because ETFs can be traded throughout the day when the market is open, not because ETFs determine the direction of the market.
The price of ETFs fluctuate during the day as investors buy and sell them based on news happening around the world. Sometimes ETFs trade at a discount or a premium compared to the value of their underlying holdings (i.e., the stocks or bonds in the fund), but it is often the value of the holdings that catches up to the price.
Securities lending is a well-established practice where ETFs make short-term loans to large financial institutions. It can incrementally increase return for shareholders. Because securities lending is an important component of a fund's return, we encourage all investors to learn more about how it works.
Each index provider creates their own combination of requirements to define a universe of indices. Understanding these differences can help you guarantee that your or your clients' portfolios have the correct ETF to meet their investment needs.
Designed to provide an easy mechanism for gaining different types of exposure, iShares ETFs represent an ideal tool for implementing a variety of asset allocation strategies. Learn how to take advantage of iShares' flexibility to diversify and thus, intelligently control risk exposure and reduce the volatility of investments.