iShares S&P 500 ETF (ASX: IVV) is an awesome exchange-traded fund (ETF) to consider for a few different reasons.
It’s actually one of the largest ETF funds on the ASX with a fund size in the billions. There are a few different factors why it’s so popular for investors:
Extremely low fees
One of the most important things when it comes to ETF investing is understanding what the fees are.
A higher fee on investments can lead to the investment value being tens or thousands if not hundreds of thousands of dollars lower than what it could have been over a lifetime.
The iShares S&P 500 ETF actually has an annual management fee of just 0.04%. Some investment funds out there cost more than 1% per year.
The fee is so close to 0% that investors are almost just getting the entire benchmark return, which is great.
Good diversification
I like the sectors that iShares S&P 500 ETF is focused on.
It gives double digit allocation to sectors like IT (27.9%), healthcare (13.4%), consumer discretionary (11.9%), communication (11.4%) – this includes names like Facebook and Alphabet and financials (11.1%).
I’d prefer to have this allocation, with a tech focus, because that’s where the growth seemingly is with the highest profit margins. Meanwhile, the ASX is focused on banks and miners.
I also like that the underlying earnings of many of the businesses in the portfolio come from many countries. The ASX is quite heavily domestically focused.
Strong business holdings
An ETF simply follows the holdings and movements of the underlying index of shares. In this case, the S&P 500.
I think it’s a very high quality index because of the businesses in the portfolio.
Whilst all of these businesses are listed in the US, many of them are market leaders in America or indeed globally.
In the portfolio are names like Microsoft, Apple, Facebook, Amazon, Alphabet (Google), PayPal, McDonald’s, Costco, Coca Cola, Broadcom, Texas Instruments and so on.
I’d be happy to individually own most of those names in my portfolio, so collectively it’s a strong group.
I think iShares S&P 500 ETF’s returns are being driven by these great businesses with strong market share and continuing growth potential.
Over the last decade, the ETF has delivered an average return per year of 20.7%. However, past performance is not an indicator of future performance.
