The iShares S&P 500 ETF (ASX: IVV) is one of the most popular exchange-traded funds (ETFs) on the ASX. However, it's understandable if investors are feeling nervous about investing today.
Being able to invest in 500 of the strongest companies in the US is certainly an attractive investment.
These US companies are global winners that have significantly changed what we do in certain aspects of our lives for work, connection, or entertainment. I'm talking about names like Microsoft, Alphabet, Amazon, Apple, Nvidia, and Meta Platforms. Of course, there are a lot more businesses in the portfolio.
There are a few positives to consider whether the IVV ETF is attractive or not right now.
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Uncertainties are high
There are always things to worry about, but this period seems to have seen uncertainty tick up.
Inflation and tariffs continue to cast a cloud over the local and global economies. Who knows what President Trump will do next?
Valuations of AI businesses have soared, and now that seems like a risk too. How are they going to generate earnings to justify the huge investment figures we're now seeing? Ever-increasing AI improvements could lead to rising unemployment. But failure of AI to meet expectations could lead to a correction of valuations.
On the fund itself, the IVV ETF is not quite as diversified as it used to be; the long-term performance of the big tech companies means it's increasingly exposed to just a few giants.
It can be challenging to advance an investment when there are multiple things to worry about. We'd need a crystal ball to know how things play out. But that doesn't mean we shouldn't invest.
Qualities remain
The IVV ETF undoubtedly provides investors with exposure to many of the world's strongest and best businesses.
I don't know how President Trump's term or the AI boom will progress, but I'd back many of the businesses in the IVV ETF portfolio to continue succeeding like they have for a long time.
The management of these businesses is not silly – they want to make profits for their shareholders, and they also can't let a competitor get ahead in terms of AI.
We're not living through a movie where everything is necessarily going to go wrong – there could be positive outcomes, or unexpected outcomes, that aren't as bad as feared.
The IVV ETF portfolio companies continue growing profits, which I think bodes well for future capital gains and dividend payments.
The US businesses have proven very skilled at growing profits over the long term, and I don't think that's going to change any time soon. Plus, the IVV ETF is still one of the cheapest funds (in terms of management funds) available to Australians.
These days, the IVV ETF is not the first ETF I'd buy. But, I'm still strongly backing the fund to deliver good returns over five years and ten years. I'm prepared for volatility, but that's part of investing.
