Investing legend Warren Buffett has an illustrious history of making great stock picks within his company, Berkshire Hathaway.
Many of Buffett's investments are included in the S&P 500 Index (SP: .INX) — an index of 500 of the largest companies in the United States. The biggest names in that portfolio are companies such as Microsoft, Amazon, Alphabet, Apple, Nvidia and Meta Platforms. Other recognisable names include McDonald's, Costco, Adobe, Walmart and Netflix.
Exchange-traded funds (ETFs) are very effective at giving us exposure to a whole group of businesses with a single investment. Would one of the world's greatest stockpickers be interested in a leading ETF like the iShares S&P 500 ETF (ASX: IVV)?
I think there's plenty of evidence to suggest he would.
Warren Buffett appreciates the S&P 500
Buffett has previously indicated he's a big fan of S&P 500 index funds. In a 2017 podcast, he had this to say:
Consistently buy an S&P 500 low-cost index fund. I think it's the thing that makes the most sense practically all of the time. Keep buying it through thick and thin, and especially through thin.
The temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something. Just keep buying.
American business is going to do fine over time, so you know the investment universe is going to do very well.
The Berkshire Hathaway leader has also instructed that upon his death, the trustee should invest 10% of the money in short-term government bonds and 90% in a "very low-cost S&P 500 index fund."
Low costs
One of the main advantages of investing in a leading S&P 500 fund is that it can come with very low costs.
On the importance of costs, Buffett once said:
Costs really matter in investments. If returns are going to be seven or eight per cent and you're paying one per cent for fees, that makes an enormous difference in how much money you're going to have in retirement.
The IVV ETF has an annual management fee of just 0.04%, making it one of the cheapest ASX ETFs around.
Foolish takeaway
Past performance is not a guarantee of future performance, but over the past five years, the iShares S&P 500 ETF has returned an average of 15.9% per annum. That's very impressive in my eyes.
The fund owns a group of wonderful businesses that generate earnings worldwide. With extremely low costs, there's a lot to like about the fund. I think Warren Buffett would be very happy to own IVV ETF units for the long term.
