iShares ETF – An Introduction to iShares

iShares ETF  is a combination of an index fund and a share. iShares ETFs are traded on the local stock exchange the same way as any publich company shares. iShares ETFs can be easily bought and sold through any brokerage account such as AvaFx.

Trading iShares ETF are done during normal trading hours and uses the same transaction types associated with stocks such as market or limit orders, short sales, or even margin buying.

iShares ETF are not shares of a company but are units of a fund holding a portfolio that closely tracks the performance for a chosen market index. In terms of market exposure, iShares ETFs work similar to a mutual fund and tracks specific market indexes as such iShares ETF investors own a pool of securities. So when you invest in a fund such as MSCI Emerging Markets, you actually invest in over 300 different companies.

The advantage with iShares ETF is that the risk is spread across several securities. iShares ETF Index investing requires an analytical approach and is time-tested in order to get a broad market exposure and at the same time a high degree of portfolio diversification at lower costs than active mutual funds.

What is the iShares Index

An index in the iShares ETF is primarily just a collection of various securities that represent a particular market segment, each holding within an index which is also referred to as a constituent.

iShares EU index is only a theoretical concept. For example, an index could be something as broad as the US stock market or can be as narrow as a single country or industry (iShares FTSE China 25 fund or the iShares EU). Any ETF’s performance can be easily impacted by costs.

The iShares indices can be customized in order to target various styles, sizes, sectors, or even geographic locations

iShares EU ETF funds are listed across a wide range of stock exchanges. These include:

  • Wiener Börse
  • Borsa Italiana
  • Chi-X
  • Euronext
  • Frankfurt Stock Exchange (Xetra)
  • London Stock Exchange
  • SIX Swiss Exchange

iShares ETF funds are flexible in terms of buying and selling. Meaning that iShares ETFS listed on multiple exchanges can be bought on one exchange and sold on another.

iShares ETFs make for a simple yet cost-effective ways to gain exposure to various markets. The goalr of iShares ETFs is to offer investors, returns that are based on the performance of the specific underlying index. Using the iShares ETFs as building blocks, investors will be able to diversify the risks from individual companies, the whole sectors or even from an entire country that is suffering from losses. At the same time, this will not mitigate the market risks, so investors can still lose some, if not all of their investment in the event that the value of the underlying shares decreases.

The risks from the ETF exposure varies per fund. For example investing in an ETF that has an international focus could potentially expose the investor to the currency risks while an emerging markets ETF is more likely to expose the investor to a less liquid or less efficient securities markets. From a fixed income ETFs perspective, investors should note that the price of bonds are usually influenced by changing the interest rates and thecredit spread.

iShares ETF Funds Advantages

The iShares ETFs can be a cost-efficient way of putting idle cash and can make for an alternative form of investing to forex trading. iShares ETFs are ideal for investors looking for a long-term investment strategy. At the same time, iShares ETFs could also be used to add diversification to existing portfolios as and when required.

Sector-based ETFs particularly offer quick and cost efficient way to implement tactical strategies which include sector rotation which is switching from one sector to another as and when the market conditions seem ideal. After a good research of the markets, investors can use iShares ETFs in order to increase or decrease their market exposure to the chosen sectors. iShares ETFs could potentially be used to seek the relative outperformance from the various asset classes or sectors. From a fixed income perspective, iShares ETFs can be tweaked in order to adjust the interest rate risk duration as well as credit risk among the bond portfolios in an anticipation of any future interest rate movements.

iShares ETFs make for a cost efficient investment tool to gain access to hitherto hard-to-reach markets including emerging markets.