WHAT ARE INDEX FUNDS AND HOW DO THEY WORK?

Simple, low-cost ways to gain exposure to markets.

INDEX FUND DEFINITION

Index funds are simple, low-cost ways to gain exposure to markets. They’re most commonly available as mutual funds and exchange traded funds (ETFs). While stocks, bonds, commodities and real estate have been around for centuries, index funds have revolutionized how investors access these assets.

BENEFITS OF iSHARES INDEX FUNDS

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Value

A comprehensive set of cost-effective funds with transparent pricing.

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Innovation

We are at the forefront of index innovation, and aim to deliver any market exposure that is investable and rules-based.

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Expertise

BlackRock is trusted to manage more money than any other investment firm.1

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Client focus

We are focused on helping investors of all sizes build more cost-efficient index portfolios.

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Performance

Precise and consistent exposures are critical to delivering superior indexing.

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Customization

We deliver index solutions that are tailored to client needs.

INDEX FUNDS FAQs

ETFs trade like stocks on exchanges, offering intraday pricing and no minimum investment amount. Mutual funds are bought or sold directly from the manager at end-of-day prices and have minimum investment amounts. Learn more about the advantages of ETFs here.

The typical investment objective of an index fund is to provide investment results, before fees and expenses, that closely match the performance of its underlying index. For instance, to deliver this return with an ETF, the ETF provider manages a vehicle that either physically replicates the holdings of the index (physical ETF), or replicates the index performance by using a derivative structure for certain exposures where market access can be more difficult (synthetic ETF).

Risks may include market volatility and the impact of fees on returns. Investors should carefully consider these factors and assess their risk tolerance before investing in index funds.

Investors should be aware that, like any other form of investment in the equity and bond markets, index funds are not guaranteed products but are subject to risk of loss. In the case of investment in a fund with securities not listed in the investor’s base currency (e.g., in an ETF for Japanese equities), fund returns may be affected by exchange rate fluctuations. Some funds therefore also hedge currencies to reduce this risk. There is the risk that fund returns may deviate from the return determined for the index on account of costs, cash holdings, additional returns, or other factors. So it is usually more efficient for the investor to invest in an ETF than directly in the index’s stocks.