The iShares S&P 500 ETF (ASX: IVV) has been a very strong performer in the past 12 months and the last few years. Just look at the chart below; in just one year, the exchange-traded fund (ETF) has risen nearly 28%.
The US share market has been one of the top-returning markets over the last 10 to 15 years, thanks to the performance of many of the largest businesses listed in the United States of America.
The S&P 500 Index (SP: .INX) is an index of 500 of the largest and most profitable businesses in the US. It's a long-running index that is widely respected as one of the leading indices of the world. Warren Buffett himself is a fan of funds that track the S&P 500.
Despite its hefty rise in recent times, I still think the iShares S&P 500 ETF is an attractive investment.
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Winners keep winning
Great businesses don't typically turn rubbish overnight – they tend to keep producing strong profits and unlock further growth as they reinvest their generated profits.
In my opinion, many of the companies in the IVV ETF's portfolio are some of the world's most successful businesses. We're talking about names like Apple, Nvidia, Microsoft, Amazon, Meta Platforms, Alphabet, Berkshire Hathaway, Visa, Costco, Mastercard, Netflix, and Walmart, which are among the largest holdings of the fund.
The above companies, and many more holdings, have demonstrated their long-term ability to expand geographically and create new products/services to ensure their growth runways remain healthy.
If I had to pick a group of blue chip businesses to own from a particular country, these are the sorts of businesses that I'd choose. They're more compelling than the ASX's biggest companies, in my eyes.
The US companies generally have a high return on equity (ROE), which shows both their quality and their ability to make strong additional profits on reinvested profit. The Vanguard U.S. Total Market Shares Index ETF (ASX: VTS), which has a similar portfolio to the IVV ETF and which I think we can use for financial statistics, states its portfolio has a ROE of 24%.
IVV ETF Higher valuation can be justified
Some might say that the IVV ETF is trading at a high valuation, but I think the higher price-earnings (P/E) ratio is partly due to the fact that the largest businesses in the S&P 500 are globally growing companies with a stronger growth profile and make up a larger portion of the portfolio than they used to.
Businesses like Microsoft, Berkshire Hathaway, Costco, and Alphabet have impressively delivered consistent long-term profit growth.
We've seen plenty of ASX growth shares that have traded on a high valuation and continued delivering investment returns, such as Pro Medicus Ltd (ASX: PME) and WiseTech Global Ltd (ASX: WTC).
I'd suggest that the businesses within the IVV ETF are as strong as they've ever been. They could continue to deliver pleasing profit growth, which could justify the current valuation and unlock further gains over time.
IVV ETF Low fees
One of the best reasons to like this ETF is its incredibly low management fee of 0.04%, which means almost all of the returns stay in the investor's hands. It's cheaper than many of the most popular ETFs on the ASX, such as the Vanguard Australian Shares Index ETF (ASX: VAS) and the BetaShares Australia 200 ETF (ASX: A200). This helps the IVV ETF produce very appealing net returns.
