Is the iShares S&P 500 ETF a good long-term investment?

Is the iShares S&P 500 ETF (ASX:IVV) one of the best long-term investment options?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is the iShares S&P 500 ETF (ASX: IVV) one of the best long-term investment options?

Past performance is not a guarantee of future performance, but I think you'll find that it's hard for most people to outperform the S&P 500 over the long-term (even before fees). Not because it's just an index fund necessarily, but because it's such a high-quality one.

One of the key rules to get into the S&P 500 is that the company generally must be profitable, which I think already rules out some of the bad shares and lifts the quality of the index.

The S&P 500 also has a high weighting to some of the best businesses in the world like Alphabet, Apple, Berkshire Hathaway, Visa and MasterCard. These great businesses are global giants that keep growing and have strong economic moats, they aren't just 'American' businesses like how many large Australian businesses can be described.

When you also add in the fact that you can access the S&P 500 for extremely low fees, it looks like an attractive option compared to most other managed investment ideas. The iShares S&P 500 ETF has a management fee of only 0.04% and has returned an average of 16.2% per annum over the past decade.

But things may not always be so good for the US economy – so don't expect the next decade to show mid-teen annual returns. The various bits of stimulus that the US Fed and government have given recently will wear off, economies are meant to have leaner years sometimes – that's how cycles work. It gets very economically unhealthy if an economy isn't allowed to feel a slowdown sometimes.  

US stock exchanges might not be the place where the best businesses are listed in the coming decades, which wouldn't be great the S&P 500's future returns. It could be Europe, London, Canada, Israel, Australia or Asia that house the best businesses of the future. It's quite possible that economic or political shifts could cause some companies to reassess if the US is the right place to be.

Foolish takeaway

I think there's a lot to like about this ETF and I would be perfectly happy to just own that as my share portfolio and nothing else. Warren Buffett himself has said he wants his wife to invest in the S&P 500 when he has gone.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Index investing

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Index investing

ASX 200 or ASX 300? Here's the index fund that comes out on top

Do those extra 100 stocks really make a difference?

Read more »

Woman on her laptop thinking to herself.
Index investing

Here's my big problem with the ASX's Vanguard International Shares ETF (VGS)

This popular ETF has one major caveat that investors should know about.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Index investing

$1 in every $11 for CBA: Should you still buy the Vanguard Australian Shares ETF (VAS)?

CBA's influence in VAS is at unprecedented levels.

Read more »

Two parents and two children happily eat pizza in their kitchen.
Index investing

The ASX 200 returned 13.4% in FY25. Here's how you could have got a slice

ASX shares handily beat having cash in the bank this financial year.

Read more »

a business person in a suit and tie directs a pointed finger upwards with a graphic of a rising bar graph and an arrow heading upwards in line with the person's finger.
Index investing

BetaShares Nasdaq 100 ETF (NDQ) surges 7%: a reminder not to delay a good buying opportunity

Waiting for a bigger dip could cost you...

Read more »

ETF written on wooden blocks with a magnifying glass.
Index investing

Australian equities ASX ETFs set for record quarter

International turmoil has caused a surge in popularity for domestic equities ASX ETFs this quarter.

Read more »

Cubes placed on a Notebook with the letters "ETF" which stands for "Exchange traded funds".
ETFs

If I could only buy 1 ASX ETF, it would be this one

This ETF simply covers all bases...

Read more »

ETF written on wooden blocks with a magnifying glass.
ETFs

VAS vs VHY: Which is the better Vanguard ETF?

A higher yield isn't always the best choice.

Read more »