Buying and Owning ETFs

iShares Trade like Securities on an Exchange

Buying and selling shares of iShares ETFs work in the same way as stocks:

• can be bought or sold anytime during stock exchange trading hours
• can be traded through any broker, investment adviser or brokerage account

Prices fluctuate according to changes in the funds' underlying portfolios and also due to changes in market supply and demand of the ETFs themselves.

Creation/Redemption Process

The number of shares available for trading in the secondary market can be increased or decreased according to investor demand. Creation/redemption is a feature of open-ended funds including ETFs such as iShares. This feature allows new shares of ETFs to be created by Participating Dealers by allowing them to deliver a basket of securities in exchange for large blocks of ETFs (up to 2,000,000 shares). The redemption process is the reverse where Participating Dealers deliver ETFs in exchange for a basket of securities. The Creation/redemption process is considered a "primary market activity" as technically, new securities are being issued.

Trading Singapore listed iShares

Singapore listed iShares ETFs are priced, traded and settled in Singapore dollars. Settlement occurs on the second business day after the trade date. ETFs can be held long, purchased via margin loan, sold short or used in conjunction with derivative hedging strategies. Some ETFs pay dividends which are generally payable quarterly, semiannually or annually depending on the ETF.

iShares ETFs can be bought and sold through a variety of different execution channels. Below are some examples of dedicated execution platforms iShares works with.

Using iShares ETFs in Portfolios

Balancing the relationship between risk and return, while also focusing on reducing cost and taxes, can be the key to developing a well constructed portfolio. Because return and risk are inextricably linked, the success of any investment plan depends on strategies for managing risk.

You can incorporate iShares ETFs in conjunction with active strategies to manage total portfolio volatility and to reduce the weighted cost of maintaining exposure to a specific asset class.

Asset Allocation

Asset allocation refers to how an investor divides up a portfolio among the major asset classes, for example between shares, bonds and cash. By investing in a variety of asset classes and across a range of geographies, sectors and styles, the negative impact of any poor performing single asset class can be minimized. Understanding the risk/return characteristics of each asset class and carefully determining its weighting within a portfolio is a key component of managing a portfolio. ETFs make it easy to invest in specific asset classes and implement your target asset allocation.

Source: BlackRock