The exchange-traded fund (ETF) iShares S&P 500 ETF (ASX: IVV) is one of the largest funds in Australia, with $10.3 billion in funds under management on 8 May 2025. After all of the volatility with the US share market, it's worth asking if the fund is a buy or not in May.
As the chart above shows, the IVV ETF has risen 10% since the April 2025 low, but it's still down more than 9% from 31 January 2025.
Before getting to the positives and negatives, I'll note what this ASX ETF does. The fund gives investors exposure to 500 of the largest businesses that are listed in the US, which incudes companies on the New York Stock Exchange and the NASDAQ.
Positives
As I just mentioned, there are hundreds of businesses in the portfolio, which is excellent diversification. That helps reduce the risks of being exposed to a particular business or sector too much.
It's invested in many of the world's leading businesses such as Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, Berkshire Hathaway, Broadcom and many more.
These are great businesses, with products with very strong market positions, large research and development budgets, excellent balance sheets, impressive profit margins and the solid investment returns.
Historically, I think great businesses are likely to continue winning over time. Many of the names in the IVV ETF portfolio have global operations, giving them compelling growth runways. The global earnings base reduces those companies' reliance on the US economy, which may be useful if the US goes through a difficult period in the next few years.
Its holdings are great and the fund's administration costs are also particularly appealing. It has an annual management fee of just 0.04%. That means almost all of the returns stay with the investor rather than being lost to fees.
Finally, while past performance is not a guarantee of future performance, the returns have been excellent. According to BlackRock, in the five years to April 2025, the average return per annum was 15.9%.
Negatives on the IVV ETF
As a US shares fund, it's obviously only invested in US stocks. Some investors may like that, but I'd suggest that Aussie investors would benefit from diversification, through gaining exposure to other global markets. An option like Vanguard All-World ex-US Shares Index ETF (ASX: VEU) could be an effective option to pair with the IVV ETF.
Investors may also be wary on changes by the new US administration, particularly tariffs. That could have a negative effect on some company earnings for the foreseeable future. It's possible there could be an economic slowdown, but I don't believe it will be a permanent hit forever.
Ultimately, uncertainty may be higher, but I still believe in the long-term collective future of the businesses in this portfolio. Therefore, I'd be happy to invest in the IVV ETF in the long term, but I'm aware that volatility could occur. Lower valuations make this fund even more attractive, not less attractive, in my view.
