There has been a lot of volatility in 2022 so far. As such, I think it could prove to be a good time to invest in the iShares S&P 500 ETF (ASX: IVV).
For readers that haven't heard of this exchange-traded fund (ETF) before, it's an investment that gives exposure to the US share market. As the name may suggest, it's invested in 500 of the largest and most profitable companies in the US.
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Why I think iShares S&P 500 ETF is an opportunity today
The first five months of 2022 have been rough for plenty of shares. ASX shares and ETFs alike have seen declines.
The iShares S&P 500 ETF has fallen by around 15% since the start of the 2022 calendar year.
A lower price is attractive in my opinion, particularly for an ETF as diversified as this one.
I've already mentioned that it has 500 holdings. That reduces the individual company risk.
But it also has diversification across a number of sectors.
These are the weightings of the industries with an allocation of more than 5%:
- Information technology (27.3%)
- Healthcare (14.2%)
- Consumer discretionary (11.4%)
- Financials (10.9%)
- Communication (8.6%)
- Industrials (7.8%)
- Consumer staples (6.8%)
As you can see, IT and healthcare have the biggest weightings. But I think that's a good thing – I think they are two of the most promising sectors. IT is where a lot of growth is (or was) happening and healthcare is seen as a defensive sector.
Compared to the S&P/ASX 200 Index (ASX: XJO), I think the S&P 500 has a much more diversified and preferred spread of sector allocation.
Quality holdings
There are 500 businesses in the portfolio, but many of the largest holdings display a lot of quality characteristics.
I think names such as Apple, Microsoft, Amazon.com, Alphabet, and Berkshire Hathaway are some of the strongest businesses in the world.
Quality metrics don't necessarily lead to strong returns, but I think names like the above ones can do well over the long term.
Low fees
Another key reason why iShares S&P 500 ETF is an attractive option to me is that the management fees are extremely low.
The annual management fee is just 0.04%, which is almost zero. I like that because the fees aren't being taken by fund managers, instead, the money is being left in the hands of investors. It helps the net returns of the fund.
Final thoughts
While timing the market may not be the right long-term investment strategy for investing in the iShares S&P 500 ETF, I think it makes sense to buy (more) of the ETF at this lower price.
It's certainly possible that the share market could fall further and the ETF could become even better value, but my crystal ball isn't working at the moment to know what's going to happen next.
