iShares S&P 500 ETF (ASX: IVV) might be a really good investment to think about for the long-term.
It’s an exchange-traded fund (ETF) which is focused on the American share market, with businesses from both the New York Stock Exchange and the NASDAQ.
There a few different reasons why it could be an interesting idea to consider:
iShares S&P 500 ETF has very low fees
Out of all of the options that ASX investors can choose from, the iShares S&P 500 ETF is one of the lowest costing ETFs out there.
Management fees can detract a substantial amount away from an investor’s long-term returns cumulatively after a few years. The higher the fees, the more investors are handing over to the investment manager and losing from their portfolio value each year.
It has an annual management fee of 0.04% per annum. Compared to a fund manager that charges 1% per annum (or more), iShares S&P 500 ETF charges next to nothing for this investment.
That means that almost all of the fund’s returns stay in the investor’s hands as net returns.
Diversification can be an important part of lowering risk over time from shares, or any investment.
iShares S&P 500 ETF ticks the diversification box in several ways.
It has an underlying total of 500 holdings, if you hadn’t guessed already.
Those businesses are spread across a number of different economic sectors. The following industries had a weighting of more than 5% at 30 June 2021: information technology (27.45%), healthcare (12.99%), consumer discretionary (12.28%), financials (11.22%), communication (11.16%), industrials (8.47%) and consumer staples (5.81%).
iShares S&P 500 ETF has more than 27% invested in nine businesses in its portfolio: Apple Inc (5.90%), Microsoft Corp (5.60%), Amazon.com Inc (4.05%), Alphabet (3.98%), Facebook Inc (2.29%), Berkshire Hathaway Inc (1.45%), Tesla Inc (1.44%), Nvidia Corp (1.37%), JPMorgan Chase & Co (1.29%).
Whilst all of these businesses are listed in the US, many of the businesses in the S&P 500 generate earnings from across the world. For example, Apple smartphones are sold in a lot of countries around the world. Microsoft’s office products are used all over the world. And so on.
Past performance is not a reliable indicator of future performance, as the disclosure goes.
The iShares S&P 500 ETF has been producing double digit returns over the longer-term. Over the last three years, it has made returns of 17.6% per annum. In the last five years it has made an average of 17.2% per annum.
Even in the COVID-19-affected calendar year of 2020, the fund saw a net return of 7.5% over the 12 months.