FUND YOUR FUTURE with income ETFs - Sean Murphy, CFA iShares Product Consultant - Fidelity Investments
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Sean Murphy, CFA
iShares Product Consultant
October 24, 2019
FUND YOUR
FUTURE
with income ETFs
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TODAY’S
INCOME
CHALLENGE
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2Investors are still in a lot of cash
On average, Americans hold 58% of their liquid investible Cash yields have not kept pace with inflation
assets in cash
1.60%
0.88%
Cash
58%
0.21%
0.10%
Savings Money Market 1-year CD Inflation
Accounts Account
Source: BlackRock Global Investor Pulse Survey 2017. Based on a survey of 4,000 individual US investors. On Source: BankRate.com using national averages for savings accounts, money market accounts, and 1-year CD
average, Americans hold 58% of their liquid investible assets in cash. rates as of 3/1/19. Inflation represented by 1-year change in the consumer price index as of January 31, 2019.
Past performance does not guarantee future results.
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3Yields remain below historical averages
Yields are low across the income landscape, with less than 25% of bond assets yielding over 4%.
Fixed Income Assets Yielding Over 4%, 1999-Q2 2019
100%
US Treasury
Euro Core
75%
US Agencies
US Municipal
Euro Periphery
50%
US MBS
Global Credit
US CMBS
25%
Emerging Market
Global High Yield
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.
Source: BlackRock Investment Institute, Barclays and Thomson Reuters, 6/30/2019. The bars show market capitalization weights of assets with an average annual yield over 4% in a select universe that represent s about 70% of the Barclays Multiverse Bond Index. US Treasury represented by the Barclays US
Treasury index. Euro core is based on the Barclays French and German government debt indexes. US Agencies represented by Barclays US Aggregate Agencies index. US Municipal represented by Barclay Municipal Bond index. Euro periphery is an average of the Barclays government debt indexes for Italy, Spain and
Ireland. US MBS represented by the Barclays US Mortgage Backed Securities index. Global Credit represented by the Barclays Global Aggregate Corporate index. US CMBS represented by the Barclays Investment Grade CMBS index. Emerging Market combines the Barclays EM hard and local currency debt indexes.
Global High Yield represented by the Barclays Global High Yield index.
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4Consider multiple asset classes for income
But know that high income assets can be volatile. Concentrated positions come with downside risk. Relative value can change quickly across asset classes.
Yield and Intra-Period Decline: Major Income Asset Classes Over Trailing 3 Years
Traditional sources of income Alternative sources of income
10%
7.86%
5.87% 5.55% 6.26% 6.70%
Current 5%
3.16% 4.04% 3.82%
Yield 1.95% 2.49% 1.91% 2.47%
0%
-5%
-4.38% -4.49% -3.78%
-5.40%
-7.22%
-10% -8.62% -9.24%
3 Year
-15%
Maximum
Loss -15.16% -14.65%
-20% -19.36% -18.71%
-25%
-30% -28.16%
Treasuries Core Inv. Grade US Global Dividend High US EM Preferred Bank MLPs
Bonds Debt Equity Equity Equities Yield REITs Debt Stock Loans
Index performance is for illustrative purposes only and do not predict or depict the yield of any fund. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Data represents past performance and is no guarantee
future results. Source: Bloomberg and Standard & Poor’s. As of 6/30/19. Max drawdown is peak-to-trough decline over the trailing 3 year period. Index yields are shown for illustrative purposes only and do not predict or depict the yield of any Blackrock fund. Past performance does not guarantee future results. Fixed
income yields are represented by yield to worst. All other yields represented by trailing 12 month yield. For represented indexes and their definitions, see Important Notes.
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5WHY USE ETFs
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6ETFs offer a low cost, tax efficient way to invest
Stock ETFs Mutual fund
Tradable during Diversified funds Diversified
that trade like
What are ETFs? the day
stocks
Like a stock, an ETF can be Like a mutual fund, an ETF
bought and sold whenever is a professionally
the market isopen managed, diversified
portfolio
Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to
shareholders. For more information on the differences between traditional mutual funds and ETFs, see the end of this document.
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7Why use ETFs?
COMPETITIVE LOW COST TAX EFFICIENT
PERFORMANCE
Over the last 5 years iShares iShares ETFs cost 1/3 as much 6% of iShares ETFs on average
market cap S&P style box ETFs as the typical mutual fund† paid capital gains distributions
outperformed 73% of peers over the last 5 years vs. 58% of
across all nine style boxes* mutual funds‡
*Morningstar, as of 06/30/2019. Comparison universe is ETFs and mutual funds in the Morningstar category and uses total return. Overall figure is a weighted average of the percentage of funds that the iShares ETF outperformed in each style box, weighted based on the number of funds in the Morningstar
category. The funds outperformed 53.7% and 76.6% of peers on a 1 and 10 year basis, respectively. Performance may be different for other time periods. iShares market cap S&P style box ETFs are IVV, IJH, IJR, IVW, IVE, IJK, IJJ, IJT, and IJS. Past performance is no guarantee of future results. †Source Morningstar, as
of 6/30/19. Comparison is between the average Prospectus Net Expense Ratio for the iShares ETFs (0.34%) and active open-end mutual funds (0.96%). ‡ Source: Morningstar, as of 06/30/19. Average number of mutual funds that paid a capital gain distribution each year over 5 years. Universe includes all U.S.
open ended mutual funds, oldest share class used. Universe includes all funds incepted before 10/31 in each year and excludes funds that closed before 10/31 in each year. Past distributions are not indicative of future distributions.
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8THE INCOME
ETF TOOLKIT
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9The income ETF toolkit
What role does income play in your portfolio?
Short duration strategies
Put cash to work
SHV ICSH NEAR MEAR
Core bonds and municipals
Help diversify risk AGG IUSB LQD MUB
High yield, EM bonds and preferred
Seek to generate income
HYG EMB PFF DGRO HDV IDV
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
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10Key considerations
Income Quality Risk
• Is the yield level sufficient given income • What measures are used to evaluate a • What, if any, process is used to remove
needs? company’s ability to continue paying companies that are in distress?
attractive yields?
• Is the screening methodology forward or • Are “extreme” yielders analyzed or removed?
backward looking? • Is the fund specifically designed to screen for
• Are there risks or biases that are present in
constituents with strong balance sheets?
• Are there any special tax considerations for the fund due to the index methodology?
using this product that would affect realized • Are there considerations for the sustainability
• Is there consideration for sector or stock level
yield? (Capital Gains History/Estimates, of earnings, or the proportion of earnings
concentration?
Qualified Dividend Income Levels, etc.) paid out as dividends?
For illustrative purposes only. This is not intended to be an exhaustive list. The information presented does not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy or investment decision.
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11The income ETF toolkit
What role does income play in your portfolio?
Short duration strategies
Put cash to work
SHV ICSH NEAR MEAR
Core bonds and municipals
Help diversify risk AGG IUSB LQD MUB
High yield, EM bonds and preferred
Seek to generate income
HYG EMB PFF DGRO HDV IDV
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
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12iShares Ultra Short-Term Bond ETF ACTIVE (ICSH)
iShares Ultra Short-Term Bond ETF ACTIVE Sector breakdown:
Seeks to provide income by investing in a
ICSH broad range of short-term bonds and money Financial Company Commercial
Paper, 7%
market instruments. However, ICSH is not a
money market fund Tri-Party Repo
8%
Floating Rate
20.5%
Fund facts Near
Expense Ratio 0.08% Commercial Paper
Transparency Daily 18%
Inception December 11, 2013
Objective Seeks current income consistent with preservation of capital Other Note
• Credit Quality – at least 80% Investment grade (BBB- or higher 33%
Investment and A-2/P-2 or higher) Certificate of Deposit
Guidelines • Weighted Average Maturity (WAM) – 1 year or less using final 14%
maturity or 180 days using the average interest rate reset date
Government (Treasuries, Agencies, Supranational), Corporate Bonds,
Eligible Bonds MBS, CMBS, ABS, Munis, Money Market Securities, Investment
Companies, 144a Securities, Repo
Source: BlackRock, as of 10/14/19. Credit quality ratings on underlying securities of the fund are received from S&P, Moody’s and Fitch and converted to the equivalent S&P major rating category. This breakdown is provided by BlackRock and takes the median rating of the three agencies when all three agencies
rate a security the lower of the two ratings if only two agencies rate a security and one rating if that is all that is provided. Allocations are subject to change.
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13Putting cash to work in an active vehicle
ICSH NEAR MEAR
• Primarily invests in commercial paper, certificates of • Primarily invests in short maturity corporate and • Primarily invests in variable rate demand notes and
deposits and short maturity bonds securitized bonds, through both fixed and floating short maturity muni bonds
rate notes
• ICSH is not a money market fund • Actively managed by BlackRock's Municipal Cash
• Actively managed by BlackRock's Short Duration Team
• Actively managed by BlackRock's Cash Management Team
Team
3.0%
2.5% NEAR
ICSH
30-Day SEC Yield (%)
2.0%
1.5%
US
US Treasury#REF!
Treasury Yield Curve
#REF!
MEAR
1.0%
0.5%
0.0%
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00
Duration (Years)
Note: US Treasury curve sourced from Bloomberg Active US Treasury Curve. 30-day SEC yield percentage: ICSH: 2.27, NEAR :2.34 , MEAR: 1.39. Effective durations: ICSH: 0.42 years, NEAR: 0.40 years, MEAR: 0.68 years.
Source: Bloomberg, Blackrock, as of 10/14/19. Performance data represents past performance and does not guarantee future results. Investment return and principal value will fluctuate with market conditions and may be lower or higher when you sell your shares. Current performance
may differ from the performance shown. For most recent month-end performance see www.iShares.com. For standardized performance, see the slides entitled Standardized Performance at the end of this presentation.
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14The income ETF toolkit
What role does income play in your portfolio?
Short duration strategies
Put cash to work
SHV ICSH NEAR MEAR
Core bonds and municipals
Help diversify risk AGG IUSB LQD MUB
High yield, EM bonds and preferred
Seek to generate income
HYG EMB PFF DGRO HDV IDV
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
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15Core bonds can help diversify equities
Negative stock market calendar years, 1989-2018:
20
◼ Bloomberg Barclays US Aggregate Bond Index
11.63 10.26
Bonds
8.96 8.43
5.24
0.01
0
-2.1
-3.1 -4.38
-9.1
-11.89
Stocks
-20
◼ S&P 500 Index
-40 -37
1990 2000 2001 2002 2008 2018
Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction cos ts or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future res ults.
Source: Morningstar. As of 9/30/19. Bond returns represented by the Bloomberg Barclays U.S. Aggregate Index from 1989 (when t he index came into existence) to 2018. Stock returns represented by the S&P 500 Index from 1989 to 2019 for comparative purposes . It is not possible to invest directly into
an index.
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16U.S. bond ETF growth is remarkable
U.S. Bond ETF AUM
$737 B
$0
2002 2004 2006 2008 2010 2012 2014 2016 2018
Source: Bloomberg 6/30/2019. Based off all US bond ETFs domiciled in the US.
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17Help diversify equities
With the stock market near record highs, bond diversification may be more important than ever.
Keep equity correlations low while seeking attractive total return
Diversify
AGG IUSB LQD equities
iShares Core iShares Core iShares iBoxx $
60% AGG
U.S. Aggregate Total USD Investment Grade
40% LQD
Bond ETF Bond Market ETF Corporate Bond ETF
S&P 500 correlation -0.15 -0.05 0.17 -0.02
Return 2.89% 3.15% 4.69% 3.57%
Risk 3.35% 3.11% 5.13% 4.13%
Source: BlackRock as of 09/30/19. Correlation, Risk and Return based on 3-year annualized NAV return and standard deviation ending 09/30/19. Diversification may not protect against market risk or loss of principal. This information should not be relied upon as research, investment advice or a recommendation
regarding the Funds or any security in particular. This information is strictly for illustrative and educational purposes and is subject to change. This information does not represent the actual current, past or future holdings or portfolio of any BlackRock client.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the
original cost. Current performance may be lower or higher than the performance quoted. For Most recent Month-end performance see www.ishares.com. For Standardized Performance please see the appendix.
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18The income ETF toolkit
What role does income play in your portfolio?
Short duration strategies
Put cash to work
SHV ICSH NEAR MEAR
Core bonds and municipals
Help diversify risk AGG IUSB LQD MUB
High yield, EM bonds and preferred
Seek to generate income
HYG EMB PFF DGRO HDV IDV
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
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19Consider diversifying high yield bonds with preferred stocks and
emerging market bonds
Many investors fail to look beyond high yield Preferred stocks and EM bonds complement high yield bonds²
Morningstar fund category AUM¹ (billions)
$256 Preferred
High yield
bonds
stocks
(HYG)
(PFF)
EM bonds
(EMB)
High yield alone*
$60 Blend
(HYG)
$23 Better diversification (Correlation to S&P
0.59 0.69
500)*
High yield EM bonds Preferred Higher yield* 4.72% 4.65%
bonds stocks
Lower standard deviation* 4.57% 4.96%
2 Source: Morningstar. As of 09/30/2019. Yield Source: iShares.com, as of 10/14/2019 Past performance does not guarantee future results.
Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed,
may be worth more or less than the original cost. Current performance may be lower or higher than the performance
HYG EMB PFF quoted. For standardized performance, see appendix.
This information should not be relied upon as research, investment advice or a recommendation regarding the Funds or any security in particular. This information is
strictly for illustrative and educational purposes and is subject to change. This information does not represent the actual current, past or future holdings or portfolio of any
BlackRock client.
* Based on 30-day SEC yield, 5 year standard deviation and 5 year correlation. Portfolio blend is represented by an equal weight blend of: EM Bonds, iShares J.P. Morgan
1 Source: Morningstar. As of 09/30/2019. Based on the Morningstar category AUM of Emerging Market Bonds and Emerging USD Emerging Markets Bond ETF; High yield bonds, iShares iBoxx $ High Yield Corporate Bond ETF; Preferred stocks, iShares U.S. Preferred Stock ETF. High yield alone is
Markets Local Currency Bond, High Yield Bond and Preferred Stock. represented by Morningstar High Yield Bond category average (mutual funds only).
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20Dividends have been a major component of stock market returns
The compounding effect of reinvested dividends has explained a meaningful portion of S&P 500 performance
over the last 30 years
2500
2000
1500
1000
500
0
Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Dec-17
S&P 500 Total Return S&P 500 Price Return
Source: Morningstar. Data from December 1987 to September 2019. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.
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21Dividend stocks have offered a consistent source of income that can be used to
help meet current spending needs
Importance of dividends for portfolio income
100%
90%
80%
70%
60%
Equities currently provide
50% a majority of the income
in a typical 60-40 portfolio
40%
30%
20%
10%
0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Equity Share of Portfolio Income Fixed Income Share of Portfolio Income
Sources: MSCI and Bloomberg, September 2019.
Notes: The chart depicts the share of income coming from equity dividends in a hypothetical illustrative portfolio that is made up of 60% MSCI World Index / 40% Barclays Aggregate Index. Share of income is calculated by dividing the dividend yield on the MSCI World Index by the total income on the illustrative
portfolio, using the yield of the Bloomberg Barclays US Aggregate Index as a proxy for bond income within the illustrative portfolio. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest
directly in an index. Past performance does not guarantee future results. There is no guarantee that dividends will be paid.
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22iShares Core Dividend Growth ETF
Universe of US stocks
DGRO seeks to track an index that identifies US companies that are growing dividends
and has the following quality screens:
5+ years of
consistent div.
growth
Dividend payout
ratioiShares Core High Dividend ETF
Universe of US stocks
The index identifies high dividend paying U.S. companies with sustainable business
models and good financial health
Security
High dividend
yield
Economic moat Financial health weightingInternational dividend stocks may help improve portfolio diversification and yield
International stocks have historically yielded more than US stocks
6.00
5.00
Trailing 12 Month Dividend Yield (%)
4.00
3.00
2.00
1.00
0.00
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
S&P 500 MSCI World ex USA
Index Index
Source: Bloomberg, Morningstar as of 9/30/2019. Based on index data from 1/31/1995 to 9/30/2019. Diversification and asset allocation may not protect against market risk or loss of principal. Index returns are for illustrative purposes only and do not represent actual iShares Fund performance. Index
performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. For standardized performance for the iShares funds, please see the end of this document.
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25iShares International Select Dividend ETF
Universe of International Stocks
IDV seeks to track an index that identifies companies in Europe, Pacific, Asia, and
Canada that have paid dividends for the last 3 years
Stable or
High
dividend yield
growing div. per
Security
weightingWhy ETFs
Competitive Low cost Tax efficient
Performance
IN
The Income ETF Toolkit
SUMMARY
Put cash to Help diversify Seek to generate
work equities income
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27APPENDIX
ICRMH1019U-982600-28/32Standardized performance
Fees as of current prospectus. All other data as of 9/30/19.
30-Day Contractual
1-Year Returns 5-Year Returns 10-Year Returns Since Inception
Fund Inception Gross Expense SEC Yield Fee Waiver
Ticker Fund Name
Date Ratio (With / Without Expiration
Waiver) (If Applicable) NAV Mkt Price NAV Mkt Price NAV Mkt Price NAV Mkt Price
SHV iShares Short Treasury Bond ETF 1/5/2007 0.15% 1.85% -- 2.43% 2.42% 0.92% 0.93% 0.49% 0.49% 1.01% 1.01%
ICSH iShares Ultra Short-Term Bond ETF 12/11/2013 0.08% 2.31% -- 3.18% 3.16% 1.55% 1.56% -- -- 1.40% 1.41%
NEAR iShares Short Maturity Bond ETF 9/25/2013 0.25% 2.36% -- 3.08% 3.00% 1.65% 1.63% -- -- 1.54% 1.54%
MEAR iShares Short Maturity Municipal Bond ETF 3/3/2015 0.25% 1.35% -- 2.08% 2.12% -- -- -- -- 1.10% 1.12%
AGG iShares Core U.S. Aggregate Bond ETF 9/22/2003 0.06% 2.26% / 2.25% June 30, 2026 10.27% 10.35% 3.33% 3.32% 3.64% 3.59% 4.10% 4.10%
IUSB iShares Core Total USD Bond Market ETF 6/10/2014 0.07% 2.49% February 29, 2024 10.02% 9.96% 3.60% 3.58% -- -- 3.51% 3.53%
iShares iBoxx $ Investment Grade Corporate
LQD 7/22/2002 0.15% 2.94% -- 14.96% 15.03% 5.00% 5.01% 5.84% 5.74% 5.74% 5.73%
Bond ETF
MUB iShares National Muni Bond ETF 9/7/2007 0.07% 1.62% -- 8.35% 8.41% 3.25% 3.24% 3.65% 3.62% 4.06% 4.06%
HYG iShares iBoxx $ High Yield Corporate Bond ETF 4/4/2007 0.49% 4.83% -- 6.42% 6.41% 4.40% 4.33% 6.66% 6.51% 5.54% 5.51%
iShares J.P. Morgan USD Emerging Markets
EMB 12/17/2007 0.39% 4.33% -- 11.38% 11.33% 5.12% 5.07% 6.13% 5.94% 6.16% 6.15%
Bond ETF
PFF iShares Preferred and Income Securities ETF 3/26/2007 0.46% 4.88% -- 6.84% 7.06% 4.80% 4.83% 6.75% 6.72% 4.36% 4.36%
DGRO iShares Core Dividend Growth ETF 6/10/2014 0.08% 2.45% -- 8.25% 8.22% 11.97% 11.95% -- -- 11.38% 11.38%
HDV iShares Core High Dividend ETF 3/29/2011 0.08% 3.60% -- 7.59% 7.59% 8.37% 8.36% -- -- 11.32% 11.32%
IDV iShares International Select Dividend ETF 6/11/2007 0.49% 5.30% -- -0.31% -0.05% 1.99% 2.01% 4.94% 4.91% 1.38% 1.37%
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29Standardized performance continued
The performance quoted represents past performance of specific funds and does not guarantee future results for such funds. In vestment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less
than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to t he most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com.
Shares of iShares Funds are bought and sold at market price (not NAV) and are not individually redeemed f rom the Fund. Brokerage commissions will reduce returns. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. eastern time (when NAV is normally determined f or most iShares
Funds), and do not represent the returns you would receive if you traded shares at other times. Performance shown reflects fee waivers and/or expense reimbursements by the investment advisor to the fund for some or all of the periods shown. Performance would have been lower without such waivers.
ICRMH1019U-982600-30/32
30Important notes
Index
Treasury represented by the Barclays US 7-10 Year Treasury Bond Index, including US Treasury securities with a maturity of 7 - 10 years.
Core bonds represented by the Barclays US Aggregate Index, comprising more than 5,000 investment-grade taxable bonds.
Investment grade bonds represented by the Barclays Investment Grade Index, consisting of publicly issued, fixed rate, non-convertible investment grade debt securities.
High yield represented by the Barclays HY 2% Issuer Capped Index, comprising issues that have at least $150 million par value outstanding, a maximum credit rating of Ba1 or BB+ (including defaulted issues) and at least 1 year to maturity. Each issuer is limited to 2% of the index.
BB High yield represented by the Barclays BB High Yield Index.
Bank loans represented by the S&P Leveraged Loan Index, designed to reflect the largest facilities in the leveraged loan market. It mirrors the market-weighted performance of the largest institutional leveraged loans based upon market weightings, spreads, and interest payments.
BB Bank Loans represented by the S&P Leveraged Loan BB Index.
US equity represented by the S&P 500 Index, covering 500 industrial, utility, transportation and financial companies of the US markets (mostly NYSE issues).
World equity / Global equity represented by the MSCI World Index, consisting of a market value weighted average of the performance of about 1,350 securities on the stock exchange of selected countries.
Dividend Paying Stocks represented by the MSCI USA High Dividend Yield Index, reflecting the performance of the high dividend yield of large- and mid-cap stocks in the US.
Preferred stock represented by the S&P US Preferred Stock Index measures the performance of preferred stocks listed in US with a market capitalization over $100 million.
Emerging Market Debt represented by the Barclays EM Debt Index, an unmanaged index that tracks total returns for external-currency-denominated debt instruments of the emerging markets.
US REITs represented by the FTSE NAREIT All Equity REITS Total Return Index, measuring the stock performance of companies engaged in the ownership and development of the real estate markets.
International REITs represented by the FTSE NAREIT ex-US Equity REIT Index, measuring the stock performance of companies engaged in the ownership and development of the real estate markets outside the US.
Global REITs represented by the FTSE EPRA/NAREIT Developed USD Index – A composite of the existing EPRA Europe Index, EPRA/NAREIT North America Index, and EPRA/NAREIT Asia Index. The index contains publicly quoted real estate companies that meet the EPRA Rules in 21 countries throughout Europe, North
America, & Asia.
MLPs represented by the Alerian MLP Index, a market-cap weighted, float-adjusted index composite of the 50 most prominent energy Master Limited Partnerships (MLPs).
It is not possible to directly invest in an unmanaged index.
Barclays U.S. Aggregate Bond Index — An unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year.
EM Equities represented by the MSCI Emerging Markets Net Return Index which is designed to measure equity market performance in global emerging markets.
Energy Stocks represented by the Energy Select Sector Total Return Index which includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services.
US Dividend Stocks represented by the Morningstar Dividend Yield Focus Index which is designed to track high-yielding, qualified dividend-paying, U.S.-based securities screened for companies with superior quality and financial health. The index is a subset of the Morningstar US Market Index, a broad market index
representing 97% of U.S. equity market capitalization. The Morningstar Dividend Yield Focus Index represents the top 75 high-yielding stocks that meet the screening requirements.
International Dividend Stocks represented by the Dow Jones EPAC Select Dividend Total Return Index which aims to represent the performance of high dividend-paying companies in the EPAC (Europe, Pacific, Asia and Canada) region, which covers developed markets excluding the U.S.
Global Equity ex-US represented by the MSCI All Country World Index ex-US, which is a free-float weighted equity index.
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31Important notes continued
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may
be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal .
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be
subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be
subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.
Securities with floating or variable interest rates may decline in value if their coupon rates do not keep pace with comparable market interest rates. The iShares Floating Rate Bond ETF's income may decline when interest rates fall because most of the debt instruments held by the Fund will have floating or variable rates.
Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market. Shares of ETFs trade at market price, which may be greater or less than net asset value. Actively
managed funds do not seek to replicate the performance of a specified index. Actively managed funds may have higher portfolio turnover than index funds. The iShares Short Maturity Bond ETF will invest in privately issued securities that have not been registered under the Securities Act of 1933 and as a result are
subject to legal restrictions on resale. Privately issued securities are not traded on established markets and may be illiquid, difficult to value and subject to wide fluctuations in value. Delay or difficulty in selling such securities may result in a loss to the iShares Short Maturity Bond ETF. The fund may invest in asset-
backed (“ABS”) and mortgage-backed securities (“MBS”) which are subject to credit, prepayment and extension risk, and react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly reduce the value of certain ABS and MBS.
Real estate investment trusts (“REITs”) are subject to changes in economic conditions, credit risk and interest rate fluctuations. Investment in a fund of funds is subject to the risks and expenses of the underlying funds.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in
concentrations of single countries.
Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.
Diversification and asset allocation may not protect against market risk or loss of principal. The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any
strategies discussed will be effective.
Preferred stocks are not necessarily correlated with securities markets generally. Rising interest rates may cause the value of the Fund’s investments to decline significantly. Removal of stocks from the index due to maturity, redemption, call features or conversion may cause a decrease in the yield of the index and the
Fund. There is no guarantee that any fund will pay dividends.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. eastern time (when NAV is normally determined for most ETFs), and do not
represent the returns you would receive if you traded shares at other times.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Markit Indices Limited, Morningstar, Inc or S&P Dow Jones Indices LLC. None of these companies make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the companies listed above.
©2019 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. All other marks are the property of their respective owners.
The information provided in this communication is solely for educational purposes and should not be construed as advice or an investment recommendation. Fidelity Investments is a separate company, unaffiliated with BlackRock, Inc.. There is no form of partnership, agency affiliation, or similar relationship between
BlackRock, Inc. and Fidelity Investments, nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by BlackRock, Inc. and does not guarantee or assume any responsibility for its accuracy or completeness.
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