If I told you there was a simple ASX exchange-traded fund (ETF) out there, one that charges a paltry fee and has returned 15% per annum for the past decade, would you rush out to buy it without a second thought? I wouldn’t blame anyone who was tempted.
That’s exactly what the iShares S&P 500 ETF (ASX: IVV) seems to be offering investors right now.
This ETF and index fund is indeed a simple one. It holds the largest 500 companies listed on the American markets, weighted by market capitalisation. In this way, it can be thought of as an American equivalent to the uber-popular Vanguard Australian Shares Index ETF (ASX: VAS).
Buying the world’s best stocks with this ASX ETF
But instead of investing in the likes of Commonwealth Bank of Australia (ASX: CBA) and Telstra Group Ltd (ASX: TLS), IVV is far more impressive in terms of scope and scale. The ASX is home to some fine companies. But very few are heavyweights beyond our shores. Not so with IVV. This ASX ETF literally contains dozens, if not hundreds, of companies that sell goods and services right around the world.
These companies include many names you might be familiar with. General Motors, Coca-Cola, Deere & Co, PepsiCo, Walmart, Procter & Gamble, Netflix, Colgate-Palmolive, IBM, Mastercard, Texas Instruments, Costco… the list goes on. And we haven’t even got to this ASX ETE’s heavyweights. Like most US-based index funds, the iShares S&P 500 ETF is dominated by tech stocks. Its top holdings are also the most powerful companies in the world right now. They include NVIDIA, Apple, Amazon, Microsoft, Alphabet, and Tesla.
It’s these companies that investors largely have to thank for IVV’s incredible performance over the past decade. As we mentioned earlier, this ASXE TF has delivered a 15% return every year for the past ten years. Specifically, it is 15.72% per annum over the ten years to 31 July 2026.
That’s real wealth-building stuff. Helped in no small part by IVV’s minuscule management fee of 0.04% per annum. That’s $4 a year for every $10,000 invested.
So is IVV a no-brainer buy?
Given that the US is home to the vast majority of the world’s best companies, I think it is prudent for most ASX investors to have some exposure to US stocks in their portfolios. They are just a cut above what the ASX has to offer, at least in my view. IVV is a great way to get that US exposure. It is a simple, cheap ETF that provides a lot of diversification. What more could one want?
Saying that, I do think investors need to temper their expectations, though. I would be shocked if the iShares S&P 500 ETF kept returning 15% per annum over the coming ten years. Many of its holdings have reached critical mass, and, at multi-trillion-dollar valuations, will find it difficult to keep growing at the rates they have enjoyed in the past.
Saying that, there is plenty of innovation still happening within IVV’s portfolio. Either way, I think this ASX ETF is indeed a no-brainer buy for any ASX investor with a long time horizon.
The post 15% for 10 years: Is this ASX ETF a no-brainer buy? appeared first on The Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has positions in Alphabet, Amazon, Apple, Coca-Cola, Costco Wholesale, Mastercard, Microsoft, Netflix, PepsiCo, Procter & Gamble, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Colgate-Palmolive, Costco Wholesale, Deere & Company , International Business Machines, Mastercard, Microsoft, Netflix, Nvidia, Tesla, Texas Instruments, Walmart, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended General Motors. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Mastercard, Microsoft, Netflix, Nvidia, 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.