The iShares S&P 500 ETF (ASX: IVV) has steadily risen 14% in 2023 to today, it’s also up over the last year and five years.
The exchange-traded fund (ETF)
has performed for investors, and it could be a good time to consider investing for the long-term.
After all of the inflation and interest rate increases, the ETF is getting close to its all-time high.
The performance can be put down to a few key businesses: Apple, Alphabet, Amazon.com, Nvidia, Meta Platforms
(Facebook) and Microsoft.
There are a few reasons why it could be a good time to invest.
US Federal Reserve pauses
After a year of regular interest rate increases
, the US Federal Reserve decided not to increase the interest rate.
Interest rates are integral for valuations because it affects how much to pull down, or push up, valuations.
I think interest rate cuts are still a long way off, but it’s the first step towards that. We’ll have to see how long it takes.
Investors have been expecting rates to be paused for some time, but this could be a helpful step to start building economic confidence for US households and businesses.
There may well be another rate rise or two, but we’re nearly at the end.
Very low management fee
Regular investors like you and me should always be interested in finding good investment options for a cheap management fee. The IVV ETF’s annual management fee is just 0.04%, which is one of the lowest-costing ETFs that Aussies can buy.
That means that almost all of the growth produced by the iShares S&P 500 ETF stays in investor hands, rather than going to Blackrock, the fund provider.
While I’d rather the fees were 0%, the closer to zero the better. It’s many multiples cheaper than most active fund managers.
Good quality holdings
The US share market is not just US businesses, I’d like to think of them as global businesses. I’d guess most countries in the world have some sort Apple or Microsoft product or service available for use.
I’d say that many of the larger companies in the IVV ETF are some of the strongest in the world. I don’t think they will be displaced for many years to come, if ever. For a competitor to come along and beat them, they’d need an incredibly good product and lots of capital.
Even if the leaders of the US economy do change, I think the IVV ETF will be able to give investors that exposure because the holdings regularly change, as long as they are listed businesses that the ETF can invest in.
I’d bet this ETF is able to produce more capital growth than the ASX share market because of the underlying nature of the companies in the two ETFs. I think the US businesses companies will keep growing earnings more, driving shareholders higher.
