iShares S&P 500 ETF might be a really good idea to consider.
The post Why iShares S&P 500 ETF (ASX:IVV) could be a really smart investment appeared first on The Motley Fool Australia. –
iShares S&P 500 ETF (ASX: IVV) might be a smart investment to consider for the long-term.
The S&P 500 is an index that is created by Standard and Poors. The index includes 500 leading companies and covers approximately 80% of available market capitalisation in the US.
There are quite a reasons to think about this exchange-traded fund (ETF) which is offered by Blackrock.
Here are three of those reasons to think it’s a smart potential investment:
Very low costs
Costs, or a lack of costs, can have a big impact on the long-term returns for investors. Some investment managers charge well north of 1% per annum. With plenty charging performance fees on top of that.
Compare that to iShares S&P 500 ETF, which has an annual management fee of 0.04%.
That is very, very low and allows almost all of the gross returns to be turned into net returns for investors.
The businesses in the iShares S&P 500 ETF have had to be the cream of the crop to get to the size they are. Plenty of them are still growing, not just in the US but around the world.
Companies like Microsoft, Alphabet, Apple and so on make huge amounts of profit around the globe – not just in the US. They have extremely strong competitive positions.
But there are plenty of businesses beyond the world’s biggest tech names in the S&P 500 portfolio like Tesla, Berkshire Hathaway, Nvidia, JPMorgan Chase, Johnson & Johnson, Visa, UnitedHealth, Home Depot, Proctor & Gamble, PayPal, Mastercard, Walt Disney, Adobe, Bank of America, Pfizer, Salesforce, Netflix, Nike and so on.
As a group, the S&P 500 has performed strongly over the last decade. However, past performance does not guarantee future results. The iShares S&P 500 ETF has returned an average of 19.9% per annum over the past decade.
iShares S&P 500 ETF offers plenty of diversification. Geographically, the earnings come from across the world.
But the businesses also spread across various sectors as well. But tech gets the biggest weightings, which typically comes with higher margins and more profit growth.
iShares S&P 500 ETF, at 5 August 2021, had the following allocations of more than 5%: IT (27.85%), health care (13.4%), consumer discretionary (12.06%), communication (11.22%), financials (11%), industrials (8.31%) and consumer staples (5.76%).
But some of the businesses are classified in other sectors that could also count as tech like Facebook and Alphabet classified as communication, and Amazon and Tesla classified as consumer discretionary.
Should you invest $1,000 in right now?
Before you consider , you’ll want to hear this.
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*Returns as of May 24th 2021
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.