This article was last updated on March 26, 2020
BlackRock is an American asset management firm that manages more money than any other firm of its kind worldwide, with over $7 trillion assets under management as of January 2020.
Their acquisition of iShares only increased their position in the market.
This article will review the funds and discuss how to buy. If you have any questions, or are looking for investment options, you can email me (email@example.com) or use the chat function below.
1. What kind of funds do BlackRock offer?
BlackRock offer all kinds of funds. The main kinds are:
- Managed funds – these funds try to beat the market. For example, a BlackRock technology fund might try to beat the Nasdaq or S&P500. Likewise, a BlackRock energy fund, will try to beat the average return of energy stocks on the indexes. However, some of their funds will simply try to lower the volatility to investors, as well, rather than simply beat the benchmark.
- Index funds and index-linked ETFs – these funds track the index. The BlackRock S&P500 fund, or indeed iShares S&P500 index fund, simply tracks the performance of the market.
- Socially responsible investing funds – these investments are of course still trying to get the investor a good return, but they are taking a specific moral stance. It is common for such funds to avoid oil companies as an example. BlackRock also have a range of Shariah and other religious funds.
- Managed ETFs – these types of index funds are similar to the traditional ETFs but try to be a bit “smarter”, by managing and tilting the index slightly. For example, the fund manager might try to tilt the index towards small caps, to beat the S&P500. We will speak about these funds more below.
2. What is the cost of these funds?
It depends on the funds in question. Their index funds cost around 0.1% per year.
Some of their managed funds cost 1%-2.5% per year, with the managed indexes costing about 0.5% per year.
3. What has the performance been like?
The performance has dependent on many things. The main aspects has been the market they have been focused on, and whether they are active or passive funds.
For example, Blackrock’s S&P500 index fund, has performed well, long-term, compared to the BlackRock Emerging Markets Index Fund.
That could change in the future though, if emerging markets start to perform better.
Most of BlackRock’s index funds have performed well long-term, but of course suffer during periods of market falls.
A lot of BlackRock’s managed funds underperform their vanilla indexes, even if they have a few years of over-performance.
The performance also depends on investor behaviour. Countless people panic during periods like 2020 and 2008, and get too excited during moments when the market is increasing.
So a buy and hold investor in BlackRock’s funds, will of course outperform somebody who tries to time the market.
4. How about the managed indexes?
Blackrock have countless funds which are similar to traditional index funds, but try to be a bit smarter.
An example is the BlackRock Managed Index Portfolios Growth Fund.
This fund aims to get both capital growth and dividend yields. However, included in the fund is commodities, cash and many other things.
So even though it is relatively low-cost, it takes a more active approach to the traditional index funds, and haven’t performed quite as well long-term.
The only exception has been during periods of market turmoil, such as what we are seeing these days in 2020.
Many of these “smart beta” ETFs still use a fund manager and this can cause human nature.
5. How does BlackRock compare to Vanguard?
Most of BlackRock’s index funds are just as good as any other index provider, including Vanguard.
It is a misconnection that Vanguard only does index investing. Like BlackRock, they also have managed and passive funds.
Vanguard were the first company to offer index funds, so have more of a “brand name” in their niche, but that doesn’t make them better.
These days, they both offer almost identical funds, and that is the same when it comes to Blackrock’s mymap funds.
These are very similar to Vanguard LifeStrategy funds in terms of costs and performance.
The only difference is how the assets are allocated between bonds and stocks.
The biggest differences is that MyMap is “actively managed” even though they use low-cost funds.
So the asset manager decides how to change the asset allocation, as conditions change.
It is too soon to tell which fund will perform better long-term.
6. How can you buy BlackRock funds?
There are two ways you can buy BlackRock’s funds; on a DIY platform investing yourself, or through an advisor.
The statistics show that the average investor putting money in themselves, are likely to lose by at least 2% per year to the actual index.
In other words, if the S&P500 does an average of 8% in the next 20 years, the average investor might get 5%-6% at most as the statistics from Morningstar show:
It is obvious to see why. During periods like the coronavirus and 2008-009, many investors panic sell and take a “wait and see approach”.
They only get back in once the dust has settled, and markets have recovered, and love to buy during periods like 1999, when markets are increasing in value.
Or in other words, too many people buy high and sell low.
7. Is now a good time to buy funds like Blackrock?
Now is always the right time to invest if:
- You are long-term orientated.
- You own both stocks and bonds. Bonds tend to go up, as stocks go down, and vice versa. So as an example, in recent times, short-term government treasury notes, have outperformed intermediate and long-term bonds and stock markets. That won’t be the case forever though.
- You rebalance and reinvest dividends. In other words, as one asset does well relative to the other, you adjust your allocations accordingly.
- You never panic when markets fall.
8. What are the biggest mistakes people make when buying BlackRock Funds.
The biggest mistake investors tend to make in general (and not just related to these funds) are:
- Being reassured by past performance. Emerging markets, as an example, have had a very bad period, compared to US markets. That will change though. Just as emerging markets outperformed in the early-mid 2000s, they will once again have their period in the sun someday
- Only being in your home country’s index. This is called “home country bias”.
- Only investing in things you are familiar with. So this is linked to point 2, but goes further. For example, numerous studies show people are more likely to buy a technology stock if they work at Facebook, or invest in Amazon if they live near the warehouse.
- Only investing in funds like BlackRock through “well known” DIY brokerages. In reality, well-known often means “one size fits all” and not in a specific niche like ultra-high-net-worth or the expat niche.
- Not being long-term orientated. The longer you invest usually equals the lower the risk, and the better the returns due to compound interest. Time is one of the only free lunches in investing.
- Trying to time the best opportunity to enter markets (market timing) and stock picking with a majority of your portfolio. Having 10% in individual stocks won’t hurt but anything else is very risky as the airlines are currently showing. The banks never recovered from 2008, even though the indexes did.
- Not taking the media with a pinch of salt. The financial and general media exists to make fortune tellers look good with their forecasts, to paraphrase Warren Buffett. They exist to fear monger and sensationalise.
9. Are BlackRock funds available in the expat market?
Yes they are on many expat-related platforms. In fact, most platforms, including some of the expensive options I have reviewed before, have access to BlackRock Funds.
Their more expensive “actively managed index funds” are also on Platform Securities International in Jersey and countless other private banking platforms.
Some of BlackRock funds are excellent. Most of their index funds are just as good as Vanguard, iShares or any of the competitors.
Their managed index funds aren’t bad per see, but cost 5x more than the basic index funds.
With that being said, investor behaviour is far more important than the actual funds you invest in, for total returns.
Investor A could invest in BlackRock Funds short-term, and get much lower returns than the second investor in the same funds, that is very disciplined and long-term.
The article below reviews some funds which have been getting a lot of press in recent times.
Are they better as a fund provider and asset manager compared to Vanguard and BlackRock?