Why the iShares S&P 500 ETF could be a perfect buy and hold investment

If your goal is to build wealth steadily over decades without constantly adjusting your portfolio, the iShares S&P 500 ETF (ASX: IVV) could be close to the ideal buy and hold investment.

Let’s dig into the reasons why this could be the case.

The iShares S&P 500 ETF is home to the world’s best

As its name implies, the iShares S&P 500 ETF is an exchange traded fund (ETF) that tracks the S&P 500 index, which includes 500 of the largest listed companies in the United States.

That means exposure to global leaders such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Berkshire Hathaway (NYSE: BRK.B). These businesses dominate industries ranging from technology to healthcare to consumer goods.

Rather than trying to identify which single company will win, this ETF gives you broad exposure to the entire ecosystem of American corporate strength.

Over time, the S&P 500 index has proven to be one of the most reliable engines of wealth creation in modern markets.

Built-in diversification

One of the biggest risks for individual investors is concentration.

Buying a single stock can produce strong returns, but it also exposes you to company-specific risks. The iShares S&P 500 ETF spreads your investment across hundreds of stocks and multiple sectors.

Technology, healthcare, financials, industrials, and consumer brands all sit within the portfolio. If one sector struggles, others can offset the weakness.

That diversification makes it easier to stay invested during volatile periods.

Long-term compounding power

The S&P 500 has historically delivered average annual returns close to 10% over the long run, though this is never guaranteed.

At that rate, $10,000 invested and left untouched for 20 years could grow to roughly $67,000. Stretch that to 30 years and the power of compounding becomes even more dramatic.

This fund does not try to beat the market. It simply aims to track it. For many investors, matching long-term market returns is more than enough.

Simplicity that works

One of the most powerful aspects of this ASX ETF is its simplicity.

There are no active managers making subjective calls. The fund passively tracks an index that has stood the test of time.

That simplicity reduces decision fatigue and helps investors avoid the temptation to constantly trade.

Foolish takeaway

The iShares S&P 500 ETF offers exposure to leading global companies, built-in diversification, and a long track record of strong returns.

For investors who want a straightforward buy and hold strategy, it could be a simple way to back the long-term growth of the world’s largest economy.

The post Why the iShares S&P 500 ETF could be a perfect buy and hold investment appeared first on The Motley Fool Australia.

More reading

• How to make $25,000 of passive income a year
• 3 excellent ASX ETFs to buy for an SMSF in March
• 5 amazing ASX ETFs to buy and hold for 20 years
• How to build serious wealth with ASX shares
• 3 ASX ETFs for beginner investors to buy in March

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, Microsoft, and iShares S&P 500 ETF. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, Microsoft, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.