Exchange-traded funds (ETFs) can be a great wealth-building tool for ASX investors. Warren Buffett's Berkshire Hathaway is invested in ETFs too.
Warren Buffett is known as being one of the greatest stock pickers in the world, identifying businesses such as Coca Cola, American Express and Apple and making large investments in those companies. Strong investment gains followed.
However, Buffett has been finding it harder to find places to put Berkshire Hathaway's cash.
Interestingly, Berkshire Hathaway is invested in two different US-listed ETFs that track the S&P 500 Index (SP: .INX), one from Vanguard and one from State Street Global Advisors.
He has also suggested that after he dies, 10% of the remaining capital left to his wife should be put in short-term government bonds and 90% in a "very low-cost S&P 500 index fund".
What's appealing about the S&P 500?
The S&P 500 is an index of 500 of the largest and most profitable businesses that are listed in the US.
We can invest in a very cheap option on the ASX, the iShares S&P 500 ETF (ASX: IVV) which has an annual management fee of 0.04%.
It provides exposure to some of the most compelling US businesses, such as Apple, Microsoft, Nvidia, Amazon, Meta Platforms, Alphabet and Warren Buffett's Berkshire Hathaway.
I think it has a very high-quality portfolio, which is worth owning for the ultra-long term. If a business bursts onto the global scene, such as Nvidia has, then I think it's quite likely to be within the IVV ETF because many globally winning businesses are listed in the US.
Gains predicted
According to a Motley Fool colleague of mine, Anthony Di Pizio, Fundstrat Global Advisors managing partner Tom Lee is an analyst worth paying attention to.
Lee has made a number of accurate S&P 500 predictions in recent times, such as forecasting that it would reach 4,750 points in 2023 (it did) and 5,500 in June (it did).
The most recent forecast was that the S&P 500 would reach 5,700 points by the end of 2024. It hit that level earlier this month and is still above 5,700.
Tom Lee has also made a prediction that the S&P 500 could reach 15,000 points by 2030. From the current level, that would represent a rise of approximately 160%.
According to Lee, AI could be a big driver of this increase. By the end of the decade, 80 million workers could be undersupplied in the global workforce, and AI could help bridge this gap.
Lee also reportedly thinks there could be a demographic tailwind, thanks to millennials and Generation Z reaching their prime earning, investing, and spending periods.
While we can't know what future share price gains will be, businesses that make strong profits can keep winning if they have opportunities to deploy retained earnings on new, exciting products and services. In my view, that sounds like good news for ASX investors who invest in the IVV ETF.
