ETF Structure

• The iShares funds are all exchange traded funds -- ETFs. Technically, the iShares ETFs are no-load funds, except investors cannot buy shares directly from iShares. ETF shares are produced in "creation" unit blocks of 50,000 shares. The creation units are purchase by large investment firms that often trade shares of the stocks or bonds that make up the ETF portfolio in exchange for iShares ETF shares.
  
  

Where ETFs are Bought and Sold

• After a financial firm buys a block of ETF shares from iShares, the shares are sold into the stock market where the fund trades. All iShares exchange traded funds are bought and sold by investors through the stock exchanges. The procedure for buying or selling shares of an iShares fund is the same as buying or selling an individual stock. The price of the shares of an ETF is set by stock market supply and demand. The share price will closely track the fund's specified index because each share is backed by the same securities represented by the index.
  
  

Costs to Trade ETFs

• The cost to buy shares of an iShares ETF is the stock trading commission charged by the broker where the investor has her account. The stock commissions for the major online, discount stock brokers are in the range of $4 to $12. In most brokerage accounts the commission is the same no matter how many shares an investor buys in a single trade. The cost to sell ETF shares is the same broker commission.
  
  

IShares Cost Considerations

• For a buy-and-hold investor, the stock commission paid buy an iShares fund is much less than the commission charged on a load mutual fund and more than the zero cost to buy a no-load mutual fund. If an investor wants to make systematic purchases of an iShares fund, the commission costs will add up compared to a no-load mutual fund. Exchange traded fund share prices fluctuate through out the stock market trading day. No load mutual fund share prices are set only once a day, after the stock market closes.