Exchange-traded funds in Depth: Barclays iShare

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We have been getting a large number of visitors to the website enquiring about ETFs. Although you may think that ETFs are something exotic or mysterious, they are not. So, just to get this in perspective we shall expand a bit on one particular ETF (Exchange Traded Fund), namely the Barclays iShare FTSE100.

Firstly this and all ETFs can be considered to be a share like any other share quoted on an exchange. Hence its price will move around throughout the day and can be bought or sold at any time during market hours and in any quantity. Theoretically you can buy one share if you like (dont try it!).

The iShare FTSE100 (Ticker ISF) offers investors exposure to the 100 largest UK companies and therefore provides a diversified base of core UK equities.

It is managed by Barclays Global Investors and is listed on the London Stock Exchange. You can therefore buy or sell these shares through any broker as you would any other share. It is possible to sell short, depending on your particular brokers rules. Dividends are paid quarterly and based on the dividends paid by the FTSE100 constituent companies.

This ETF tracks the FTSE100 by way of the managers buying the actual companies shares that make up the Index (as opposed to buying the index options or futures)

The Total Expense Ratio (TER) is 0.4% (this is included in the market price). There will also be brokerage costs (should be the same as equities) but no stamp duty. All ETFs are PEP or ISA-able.

The correlation between the performance of the index and this ETF is a couple of percentage points, and the net asset value……

There are 240m shares outstanding and the total net assets are £1.5bn

So, who would buy the Barclays iShare FTSE100?

Anyone who thinks the FTSE100 (the market) is going up. Someone who wants to gain immediate exposure to equities, whilst deciding which stocks or sectors to choose.

What are the alternatives?

Index Investment fund. Select companies from the FTSE100 constituents.

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