Index investing

 Capital at risk. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed.

Why index investing?

Index investing provides efficient and transparent exposure to desired markets. The key features of index investing are presented below.

Transparency

Transparency

Index products are straightforward and transparent in their investment objective – to achieve results in line with their chosen benchmark. The methodology of the underlying benchmark indices and, in most cases, the holdings in index funds are publicly available.

Consistent market exposure

Consistent market exposure

Index products aim to deliver the same returns as their chosen market by investing in the constituent securities that make up the relevant index. An investor who wishes to gain exposure to the FTSE 100 Index, for example, could buy an FTSE 100 index product to seek returns (less fees) in line with that index.

Efficient building blocks

Efficient building blocks

Index products can provide the foundation or starting point for a diversified portfolio, with low-cost exposure to a given segment of the market. In other words, using index funds in your portfolio can free-up funds for other investment.

Diversification

Diversification

Index products are made up of a broad portfolio of individual securities and can help reduce the risk that comes with investing in a single security.

Cost-effectiveness

Cost-effectiveness

With fees typically lower than for actively managed products, index products may offer more cost-effective access to desired markets.


Index vehicle

There are two common types of index vehicles:

  • Index funds
  • Exchange Traded Funds (ETFs)

Index funds and ETFs are similar in that both seek to track the performance of an index. The main difference is that ETFs can be bought and sold throughout the day – they trade on recognized public stock exchanges with live pricing, just like ordinary shares. Instead, index funds are valued once per day – buyers and sellers trade at this price (plus or minus any associated transaction fees). Investors can choose the level of flexibility they require and decide which type of index vehicle is most appropriate for them.

BlackRock’s iShares range includes more than 800 ETFs, providing investors with unrivalled access to desired asset classes, sectors and other investments.

A summary of the key features of the two types of index vehicles are presented below:

Index fundsETF
Vehicle structure Resemble traditional funds Resemble ordinary shares
Buy and sell venue • Direct from the fund management company
• Fund platforms
• Regulated stock exchanges
• Fund platforms
Pricing Once a day In real time during market opening hours
Dealing frequency Daily In real time
Minimum investment Varies 1 share
Exposures Typically offer exposure to main asset classes A wide range of asset classes
and sector exposures are typically offered
Transparency of holdings Varies Daily disclosure of fund holdings

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Why BlackRock for indexed investments?

BlackRock has been managing index strategies for over 40 years and pioneered the first institutional index strategy in the 1970s. Today, BlackRock is one of the leading providers of index solutions globally.

Our global footprint and scale enable us to access a broad range of market opportunities.

Our index funds have been used for many years by our clients as building blocks within their portfolios.