Yesterday, we examined the pros and cons of buying the ASX's most popular exchange-traded fund (ETF) – the Vanguard Australian Shares Index ETF (ASX: VAS). Today, I thought we'd do the same with another popular fund amongst Australian investors, the iShares S&P 500 ETF (ASX: IVV).
This product is the only fund on the ASX that offers direct exposure to the S&P 500 Index (SP: .INX). This index, representing the largest 500 publicly traded American stocks, is the most widely tracked in the world. As such, this ASX-listed vehicle is a go-to choice for Australian investors seeking some exposure to the American economy.
Let's discuss two reasons why Australian investors might wish to buy into the iShares S&P 500 ETF in 2026, as well as two reasons they might wish to reconsider.
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Two reasons to buy the iShares S&P 500 ETF today
IVV has the best stocks in the world
Firstly, the S&P 500 is quite simply home to many, if not most, of the world's best businesses. The ASX is home to some great companies. But none can match the global dominance and scale of names like Coca-Cola, Visa, Costco, Apple, Microsoft, Nvidia, Netflix, and hundreds of other top stocks.
These companies are well-known around the world and have long histories of delivering monstrous profits to their investors. The ASX's IVV ETF is an easy way to gain exposure to all of them, as well as many more.
Warren Buffett recommends the S&P 500
Legendary investor Warren Buffett has recommended a simple S&P 500 index fund for most investors for years, calling it a 'slice of America'. Buffett has often argued that even most professional investors often struggle to outperform the S&P 500 over long time frames.
As such, he argues that investing in an S&P 500 ETF, such as the ASX's IVV, is a no-brainer for most ordinary investors like you and me. He once said that if an investor buys the fund and "invests through thick and thin, and especially through thin", they will build meaningful wealth.
Why might investors want to avoid IVV in 2026?
So if even Warren Buffett is telling us to buy the S&P 500, why might investors not want a slice of the ASX's IVV ETF in 2026?
Well, here are two reasons why investors may wish to reconsider the iShares S&P 500 ETF today.
Tech, tech and more tech
Despite holding 500 individual stocks within its portfolio, the iShares S&P 500 is not what you would call diversified. It's no secret that the 'Magnificent 7' tech stocks now dominate this index to an extent rarely seen in American history. Sure, these stocks have produced extraordinary returns over the past decade. But this has resulted in them occupying a huge role in the S&P 500 as it stands in early 2026. The Magnificent 7, together with the myriad of other leading tech companies that the US hosts, means that just over 34% of the S&P 500's weighted portfolio goes towards tech companies.
Coincidentally, 34.1% of the S&P 500 is also represented by the Magnificent 7 alone (Amazon, Alphabet, Tesla, and Meta Platforms aren't officially tech stocks).
If you aren't comfortable with this level of tech exposure, IVV might not be the right ASX ETF for you.
A bet on America
As we touched on earlier, Warren Buffett calls the S&P 500 a 'slice of America' and buying it a 'bet on America'. That might not sound too appealing to many investors right now. To be fair, Warren Buffett has long told the world not to bet against the United States, citing its 250 years of capitalistic innovation. He stands firm in that faith today.
But it may be hard for other investors to share that faith. The United States remains the largest and most dominant economy in the world. But it is not without its problems. Government debt is ballooning, with no sign of slowing. America is politically and socially riven with division. And the current administration is pursuing economic policies (tariffs in particular) that many economists argue are counterproductive.
If you aren't certain that the United States is on a prosperous path as it stands in early 2026, buying a 'bet on America' might not align with your own investing preferences.
