VTGreg

Anyone have experience with these? Looking at using these as an investment vehicle to aid in diversification.

Cubsfan

Ok, since I didn't know what they were:
http://www.investopedia.com/terms/i/ishares.asp

Also, the home page seems to be www.ishares.com What kind of diversivication were you looking for? There's a Dow Jones Broad US market one which would be good for diversivication, as well as some globabl stock market index funds which would help. However you aren't going to get much diversivication by getting any funds within a sector (although you would get diversivication within that sector).

What's the minimum investment on these?

Merlin

I use these everyday at work. What would you like to know about them. If you are looking at diversification, they work about as well as any other index fund and they do give you many more choices for markets/sectors.

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Cubsfan

Could you explain a little more what they are and how they work? Is it basically like buying a share of stock?

Merlin

ETF, or exchange traded funds are securities that are traded on the open market like stocks. But instead of being shares in a single company they are shares in a mutual fund. If you understand what closed end funds are or spyders (S&P depository receipts) are they are the same thing. A fund is created with so much money in it that invests in a particular index of stocks. Let's take the EAFE (Europe, Australia, Far East) for example. The iShare fund would buy a proportionate amount of all the stock in the index. You then can purchase ownership (shares) of this index. If the value of the index goes up then you would expect your iShares to go up about the same. There can be deviations as they are not directly linked hawever the arbirtagers are out there to keep it pretty close. In the long run you won't do as well as the index as the folks who manage the fund do charge a fee for their services. Just like all other fund managers.

So as you can see, iShares can be a good way to invest money and gain diversification without having a large sum.

VTGreg

The fees are relatively low for most of the funds. In addition, the taxes are different. Based on what I have read you likely wouldn't need to pay as much in capital gains as you would with traditional mutual funds because you aren't linked to others that own the fund.

Merlin

True, that is mainly because the fund would have substantially less turnover. Less buying and selling = fewer taxable events.

VTGreg

True, but it also seemed like with mutual funds when someone else that owns the same fund sells it affects you from a tax stand point. Didn't quite understand that, but that was the differential from a tax standpoint since you can find mutual funds that are low turnover.

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On a side note, you can also look for mutual funds that have no minimum buy-ins, which means you can diversify your portfolio by investing $50, $100, $10,000 (any amount you wish) and obtain shares in a mutual fund.

There are a handful of options when it comes to funds, albeit a mutual or index fund. They are all great investment tools and should definitely be considered if you want steady growth with moderate risk.

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