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iShares S&P 500 ETF (ASX:IVV) is a very popular ETF, should you invest in it?
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Tristan Harrison
Tristan Harrison is one of the longest-serving writers at The Motley Fool Australia. Tristan has been contributing ASX news and stock analysis articles since 2016. His aim is to help Australians learn about great ASX shares, with a focus on ASX dividend shares and undervalued ASX growth shares. He holds an advanced diploma from the Association of Accounting Technicians and is enrolled in the Chartered Institute Management Accountant (CIMA) qualification program.
Latest posts by Tristan Harrison (see all)
- 2 ASX 200 shares to buy that are 'catalyst rich' - March 18, 2024
- 2 ASX growth stocks I'd buy for rapidly rising profit - March 18, 2024
- Why I think these 2 ASX shares are steals - March 18, 2024
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iShares S&P 500 ETF (ASX: IVV) is one of the most popular exchange-traded funds (ETFs) on the ASX, should you invest in it?
This ETF is offered by iShares of Blackrock – one of the biggest asset managers in the world. This particular Australian-based ETF is over $2.725 billion in size.
One of legendary investor Warren Buffett's most famous pieces of advice is that most people should just invest in a S&P 500 fund.
So, what is the S&P 500 ETF?
It gives us exposure to 500 of the biggest shares that are listed in the US. Actually, it has a few more than 500 holdings at the moment, but the idea is that it holds 500 shares.
The American economy has been a wonderful wealth creator over the past century. Many of the biggest changes we've experienced in our lives in the past decade have come about because of American companies.
Those businesses that have made the biggest impact on our lives are now among the biggest holdings of the S&P 500 such as Apple, Microsoft, Amazon, Facebook and Alphabet (Google). Other quality businesses also make up its top holdings including Berkshire Hathaway, Johnson & Johnson and JPMorgan Chase.
I like that the S&P 500 holdings continually change and reflects which businesses are generating the most growth.
The S&P 500 businesses may be listed in the US, but they generate earnings in many countries, they are truly global businesses. I think that provides most of the diversification we need.
The rest of the necessary diversification is supplied by the variety of industries that the S&P 500 is invested in. I think it offers a lot better diversification than Vanguard Australian Share ETF (ASX: VAS), which is mostly invested in banks and resource businesses.
A bonus with this ETF is that it comes with an ultra-low annual management fee of 0.04%.
Foolish takeaway
If I could only own one investment for the rest of my life, the S&P 500 would be one of my favourite choices. It may not offer franking credits or a big dividend yield, but it continue to offer excellent long-term capital growth and good compounding potential.
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