ETF INVESTING: A BEGINNER'S GUIDE

iShares ETFs (Exchange Traded Funds) offer a simple and cost-effective way to invest broadly across global markets. Learn the basics and start your ETF investing journey with confidence.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

WHAT IS AN ETF?

An ETF is a collection of investments like stocks and bonds bundled together in a single fund. There are many different types of ETFs, but they’re primarily designed to provide exposure to a specific market or track a particular index like the FTSE or S&P 500.

ETFs are easy to trade – investors can buy and sell them on the stock market much like an individual stock.

WHY INVEST IN ETFs?

ETFs have many benefits that might make them a particularly good choice for beginner investors.

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LOWER FEES

With iShares ETFs, you can invest in a variety of assets through one fund, making it easier and more cost-effective than picking individual investments.1

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LESS RISK

ETFs provide diversification and are often less risky to own than an individual stock.*

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EASY TO TRADE

You can buy and sell ETFs on an exchange throughout trading hours, just like a stock.

*Risk: Diversification and asset allocation may not fully protect you from market risk.

ETFs EXPLAINED

ETFs EXPLAINED

ETFs are designed to track the performance of specific market indices, such as the FTSE and S&P 500, or selected industries like tech or energy. They provide investors with a simple way to access the world’s financial markets without having to buy individual stocks separately.

Say you invest in an ETF that tracks an index like the FTSE, which represents the 100 largest UK companies trading on the London Stock Exchange. You’re investing in a bit of every company in the index with a single trade – rather than having to buy a share in each company individually.

Investing in ETFs is easy.

Just open an account with any online broker or bank and decide which market or industry you'd like to invest in. Then you’re ready to pick an ETF. You can either invest a one-time amount or set up a regular investment plan to save you the headache of making frequent investment decisions.

There’s no fixed rule for how much money you need to invest. You can start with as little as 1 AED per month.2

ETFs can be based on asset classes like stocks, bonds and commodities. There are ETFs for particular countries or continents, and you can also find plenty that are based on industries and trends such as clean energy or healthcare innovation. So, no matter what you want to invest in, you’ll find an ETF that suits you.

Investing in ETFs can be an affordable way to access global financial markets, but there are different costs to consider, which may vary from provider to provider. Broadly, those costs fall into two main categories: ongoing and transactional.

Ongoing costs are the fees that investors pay to the ETF provider to manage and operate the fund. Often called expense ratios, these costs are usually expressed as a percentage of the fund's net asset value and are deducted from the fund's gross returns. The lower the expense ratio, the less your investment is spent on administrative fees and other operating costs. The ongoing costs are usually disclosed in the fund's fact sheet or product page.

Transaction costs are fees and expenses that investors pay to the bank or broker when they buy or sell ETFs. These vary on the provider and are often called commissions or exchange fees.

First, decide which region or industry you’d like to invest in. For example, if you want to invest in Dubai, you could pick an ETF that tracks an index made up of Dubai companies. Or, if you want to be more selective, you could invest in just one industry, like tech or healthcare.

iShares now offers over 1,400 different ETFs to choose from.3

Taxation of ETF investments may occur at three levels: the investment level of the ETF, the ETF itself, and the investor:

Investment-level taxation: Income or capital gains received by the ETF may be subject to withholding or capital gains taxes depending on the domicile and type of the underlying securities. These taxes are typically paid to countries where a fund’s underlying equity or debt securities are located. The applicable tax rates depend on the treaty between the countries where the underlying securities are situated and the country in which the ETF is domiciled.

In addition to withholding taxes and capital gains taxes, an ETF may also incur transaction taxes, such as stamp duty in the country of the underlying investment.

Fund-level taxation: Whether withholding taxes on the distributions made by the ETF to its investors apply, depends on the withholding tax rules in the ETF's country of domicile. The tax status and residence of the investor and the ability of the custodian bank of the investor to facilitate tax relief may also impact the level of withholding tax applied, for example in the case of US ETFs.

Investor-level taxation: At the investor level, the following taxes may be relevant before making any investment decision:

  • Income tax in the investor's home jurisdiction on realized and unrealized income from the ETF.
  • Capital gains tax in the investor's home jurisdiction on the transfer or sale of shares in the ETF.
  • Capital gains tax in the country of underlying investment made by the ETF on the transfer or sale of shares by the investor.
  • Stamp duty in the country of listing on the sale or purchase of shares in the ETF.
  • Withholding tax in the country of listing, where the account is maintained by the investor, or where the paying agent is located, on any actual or deemed distributions or payments from the ETF.

Please also refer to the prospectus of the ETF you may be interested in before investing for further information on the tax treatment of the ETF.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

BlackRock cannot provide tax advice. Investors requiring additional information on the tax treatment of their investment should consult their own tax accountant or advisor.

When it comes to investing, sooner is always better than later. After all, the longer your money’s invested in the markets, the better chance it has to grow. And while it may have made sense in the past to save up and invest with larger amounts, today’s lower trading fees mean you shouldn’t have to wait.4

Make sure that you’ve carried out your own research and feel confident that it’s the right time to invest, and that you don’t hold any significant short-term debts, as they could cost you more in interest than the amount of return you see on your investment.

An ETF savings plan involves regularly investing a fixed amount into ETFs, typically on a monthly or quarterly basis. This approach helps build wealth over time through consistent contributions and benefits from the diversification and cost-efficiency of ETFs. You can set up an ETF savings plan with an online investing platform or bank.

THE BENEFITS OF ETFS

Understanding the potential benefits of investing with ETFs can help you determine whether they’re an appropriate choice to help you reach your financial goals.

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DIVERSIFICATION

ETFs make it easy to invest broadly across multiple companies or assets, diversifying your investment and helping to mitigate risk.*

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LOW COST

The total cost associated with managing ETFs is typically less than actively managed mutual funds, so you can invest more of your hard-earned money.5

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FLEXIBLE

Unlike other types of investments, you can buy and sell ETFs on an exchange just like a stock whenever the market is open, which gives you more control over your investments.

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ACCESS

There is usually an ETF for whatever you’re looking to invest in, from an industry like tech to an asset class like global bonds — and even commodities like gold.

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TRANSPARENCY

iShares ETFs disclose their portfolio composition daily, so iShares ETF shareholders know exactly what they own.

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TAX EFFICIENT

Most ETFs are index funds, which typically trade less frequently than actively managed funds. Low turnover means fewer sales of stocks that have appreciated, generating fewer taxable capital gains.

*Risk: Diversification and asset allocation may not fully protect you from market risk.

UNDERSTANDING THE RISKS

Investing always involves some level of risk, and ETFs are no exception. Here are some of the risks you should be aware of before you invest in ETFs:

MARKET RISK

ETFs are subject to market fluctuations. The value of investments and the income from them may go down as well as up and you may not get back the amount you originally invested.

CONCENTRATION RISK

Investment risk is concentrated in specific industries, countries, currencies or companies. As a result, certain funds are more sensitive to local economic, market, political or regulatory events.

CURRENCY RISK

International ETFs sometimes invest a large proportion in values denominated in a foreign currency. Therefore, changes in the applicable exchange rate will affect the value of the relevant fund shares and your investment.

ETFs COMPARED TO OTHER FUNDS

ETFs invest in a basket of securities, such as stocks, bonds, and commodities, just like mutual funds. Unlike mutual funds, ETFs can be traded whenever the markets are open, just like individual stocks. In addition, ETFs typically have lower fees than mutual funds and are built to be tax-efficient, helping you keep more of what you earn.

HOW TO GET STARTED

You can’t invest directly with us, but we can guide you through the steps to get started.

1

OPEN A BROKER ACCOUNT

To invest in iShares ETFs, you'll need a brokerage account with a bank or an online trading platform. You can easily set this up online, similar to opening a bank account.

2

SELECT THE FUNDS

Next, you can evaluate funds and learn more about the ETFs that could help you meet your financial goals. You might be interested in investing in a certain industry, region or theme.

3

DECIDE HOW TO INVEST

Determine how much and how often you want to invest. You can set up a regular investment plan or make a one-time investment.

WHY iSHARES ETFS?

Our broad range of cost-efficient ETFs is designed to help you build a portfolio that fits your needs.

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ACCESS

iShares is Europe’s largest ETF provider, offering more than 1,400 products worldwide.3

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EXPERIENCE

iShares has been a leader in the ETF marketplace for more than two decades.

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QUALITY

Our team is made up of industry experts who continuously innovate to meet the ever-changing needs of investors.