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Is it time to buy the iShares S&P 500 ETF?

The S&P 500 has suffered from volatility in 2022. Is it time to buy the ETF for US exposure?

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Tristan Harrison
Tristan Harrison is one of the longest-serving writers at The Motley Fool Australia. Tristan has been contributing ASX news and stock analysis articles since 2016. His aim is to help Australians learn about great ASX shares, with a focus on ASX dividend shares and undervalued ASX growth shares. He holds an advanced diploma from the Association of Accounting Technicians and is enrolled in the Chartered Institute Management Accountant (CIMA) qualification program.
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Key points
  • The iShares S&P 500 ETF has fallen 10% in 2022
  • Could it be time to buy this ETF?
  • It has many global leaders in the portfolio, including Microsoft and Alphabet

It has been a tricky time for the iShares S&P 500 ETF (ASX: IVV). It has fallen by 10.3% in 2022 to date. But could it be time to invest in the exchange-traded fund (ETF)?

One of the useful things about an ETF is the diversification that it can provide in a single investment.

What's so good about an S&P 500 fund?

Legendary investor Warren Buffett once said about S&P 500 funds: "I recommend the S&P 500 index fund and have for a long, long time to people."

He has also said: "For most people, the best thing to do is to own the S&P 500 index fund."

Let's have a look at what is in the ETF.

Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.

Image source: Getty Images

Sector diversification

The ASX is dominated by two sectors: resources and financials.

But the iShares S&P 500 ETF has different weightings, with those exposures to sectors that generally demonstrate more long-term growth.

Looking at the weightings as of 13 April 2022: IT had a 26.9% weighting, healthcare had a 14.1% weighting, consumer discretionary had an 11.9% weighting, and financials had an 11% weighting. Those are the sectors that had a double-digit weighting.

iShares S&P 500 ETF holdings

As the name suggests, there are meant to be 500 different businesses in the portfolio.

All of them are listed in the US. However, there are plenty of them that have international sources of earnings.

For example, Alphabet (NASDAQ: GOOG), (NASDAQ: GOOGL)'s YouTube and Google are available in most countries worldwide. Microsoft (NASDAQ: MSFT)'s office tools and software are used across the world.

There are plenty of world leaders in the portfolio.

Aside from Alphabet and Microsoft, there are names like these in the portfolio: Apple (NASDAQ: AAPL), Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: FB), Tesla (NASDAQ: TSLA), Nvidia Corporation (NASDAQ: NVDA), Berkshire Hathaway, Unitedhealth, Johnson & Johnson, JPMorgan Chase, Procter & Gamble, Exxon Mobil, Visa, Home Depot, Mastercard, Pfizer, Costco, Coca Cola, Broadcom, Walt Disney and McDonald's.

Annual management fee

Another advantage the iShares S&P 500 ETF can provide is its extremely low management fee.

The lower the fees, the more of the returns that stay in the hands of the investor.

Blackrock provides this ETF with an annual management fee of 0.04%. This is one of the cheapest ETFs on the ASX.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. 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. owns and has recommended Alphabet (A shares), Amazon, Apple, Berkshire Hathaway (B shares), Costco Wholesale, Mastercard, Meta Platforms, Inc., Microsoft, Nvidia, Tesla, Visa, and Walt Disney. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Alphabet (C shares) and Johnson & Johnson and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Mastercard, Meta Platforms, Inc., Nvidia, Walt Disney, and 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.

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