iShares is a brand name used to describe a type of exchange-traded fund (ETF) that is managed and marketed by BlackRock, Inc., one of the world's largest asset management companies. An iShares ETF is designed to track the performance of a specific index, such as the S&P 500 or the Nasdaq Composite. These ETFs are known for their provision of diversification and liquidity, as they trade on stock exchanges throughout the day like a common stock.
The iShares ETFs are structured as open-end funds, meaning that they continually issue new shares and redeem existing shares based on investor demand. They are created by an authorized participant, typically a large financial institution, through a process called creation and redemption. The authorized participant collects a portfolio of securities that is representative of the underlying index, then exchanges it for iShares ETF shares. This allows the authorized participant to profit from any discrepancy between the ETF market price and the net asset value (NAV) of the underlying securities.
Investors can purchase iShares ETFs through brokerage accounts, just like stocks. They provide a convenient way for individuals and institutions to gain exposure to various sectors, regions, and asset classes without directly owning the underlying assets. iShares ETFs are considered a popular investment vehicle due to their low expense ratios, transparency, and flexibility.