Though the exchange traded fund, or ETF, has been around since the 1990s, it has become more popular within the last few years. It marries the best of many worlds, the broad portfolio diversity of a mutual fund with the ease of trading and low cost of an individual company's shares.
In the world of ETFs, the big dog is iShares. Created by Barclays Global Investors, iShares has grown into the largest issuer of ETFs domestically and globally. Barclays has over $2 trillion of assets under management, so when it created iShares, it went big. iShares now has over 320 funds for institutions and individuals.
iShares sells ETFs organized in these categories:
1. Market capitalization ETFs: Large, mid or small cap
2. Sector/industry: Including health care, energy or technology among others
3. Domestic or international: iShares funds cover domestic markets but also specialize in any continent or global classification
4. Ishares ETF Commodities: Gold or silver, for example
Action Steps
The best contacts and resources to help you get it done
Determine the iShares ETF to choose
Picking the right ETF doesn't have to be intimidating, but there are many to choose from. iShares has 320 ETFs, broken down to cover just about any index or cap level you're looking for.
I recommend: Before wading into the deep waters of what iShare offers, consider the advice from an investment adviser such as
Edward Jones. Or, choose something that you have some background with and that is of interest to you. Investment research house
Motley Fool keeps a list of the top-performing ETFs updated on a regular basis. See a
list of iShares ETFs, get an
introduction to ETF trading, or track
performance if iShares ETFs on the iShares site.
Where to purchase ETF iShares
Most people like ETFs because of the ease of purchasing them. They are traded on the New York Stock Exchange and shares can be purchased through any online or bricks-and-mortar brokerage. You can find much iShares information on its website. iShares index funds follow most major indices such as the S&P 500 or Dow Jones Industrial Average.
I recommend: Fidelity and
E*Trade offer free online accounts which can be used to buy and sell all iShares ETF products and any iShares trust. Most communities have a branch where you can visit a broker from a firm such as
Wells Fargo, and purchase iShares.
Following your iShares ETF pick
Once you've picked an ETF comes the hard part--following it. Knowing when to sell is the most difficult part of investing. Investment advisers recommend people check their investments each day. Look at an individual sector and figure out if it is good or bad for your investment. If you picked the iShares ICF product, which tracks the top Real Estate Investment Trusts, you'll want to keep an eye on commercial real estate. As that sector goes, so too do your iShare indexes.
I recommend: While Yahoo, MSN and Google have great financial sections which can be used to check on an individual investment,
The Street.com is a good resource for news about the bigger picture. Also, check the
ETF screener on its website as it gives detailed information about all iShares ETF commodities and any iShares trust.
Tips & Tactics
Helpful advice for making the most of this Guide
- Stay diversified. If you want to pick four iShares products, don't pick them all in the financial sector or in Asia. Spread your investments around and have them in multiple sectors and geographic areas so pain in one sector won't tank your whole portfolio.
The official source of iShares is the iShares page at Business.com
Related Resources from Business.com
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