The iShares S&P 500 ETF (ASX: IVV) is one of the most popular ways for investors to gain access to a diversified portfolio of shares through an exchange-traded fund (ETF). Impressively, the IVV ETF is now $11.8 billion in value after the IVV ETF share price rose over 100% in the last five years, as the chart below shows. So, it's worthwhile asking if it's appealing to buy today.
For investors that haven't heard of this fund, it allows Aussies to invest in a portfolio of 500 of the largest and most profitable businesses in the US. We're talking about names like Microsoft, Apple and Nvidia as well as Campbells Soup, MGM Resorts, Hasbro and Ralph Lauren.
While all of these businesses are listed in the US, many of them generate earnings from multiple countries, with some being truly global. I like that global earnings diversification.
Here's my view on whether I'd call the fund a buy today.
Is the iShares S&P 500 ETF (IVV) share price a buy?
It has proven to be one of the most effective investments in the last decade, with the fund delivering an average return per year of 14.9%. Not many funds can point to that level of performance over such a long time period.
The IVV ETF has been powered by names like Nvidia, Microsoft, Apple, Amazon, Meta Platforms, Broadcom, Alphabet, Tesla, Netflix and Berkshire Hathaway.
Indeed, the US share market has been the best place to be, largely thanks to the strong performance of the US tech giants. Even Berkshire Hathaway can point to Apple being a big contributor to its overall performance because of the investment in the smartphone company.
Of course, past performance is not a guarantee of future performance with the iShares S&P 500 ETF. As these huge businesses become larger and larger, it should become more difficult for them to grow at a fast enough pace to justify a high price/earnings (P/E) ratio, in my opinion.
However, at the same time, winners have a tendency to continue winning, which drives a significant portion of the overall market value. That's why the big businesses within the IVV ETF are so impressive. They could have run out of steam at $1 trillion market capitalisation, but they have continued growing, showing their greatness.
It's certainly possible that the unpredictability of President Trump's decisions could unsettle things, but the IVV ETF companies generally have very strong economic moats and balance sheets that could allow them to continue expanding their global presence and achieving higher profit margins, in my view.
My verdict on the IVV ETF share price
If I were regularly investing in the iShares S&P 500 ETF, I would continue with that strategy because of how effective dollar cost averaging in a fund like this can be (and has been), with its low management fee of 0.04% and high-quality holdings.
I'm not expecting the next ten years to be a good as the last ten, but I believe it's one of the highest-quality funds on the ASX. It wouldn't be my first pick right now, there are other ASX share investments I'd rather buy, but I still think this will be a solid long-term pick for the foreseeable future.
