3 reasons I'd still buy the iShares S&P 500 ETF (IVV) after big gains

The US share market has been a very good place to be invested.

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The iShares S&P 500 ETF (ASX: IVV) has been a very strong performer in the past 12 months and the last few years. Just look at the chart below; in just one year, the exchange-traded fund (ETF) has risen nearly 28%.

Created with Highcharts 11.4.3iShares S&P 500 ETF PriceZoom1M3M6MYTD1Y5Y10YALL1 Jan 202019 Feb 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.com.au

The US share market has been one of the top-returning markets over the last 10 to 15 years, thanks to the performance of many of the largest businesses listed in the United States of America.

The S&P 500 Index (SP: .INX) is an index of 500 of the largest and most profitable businesses in the US. It's a long-running index that is widely respected as one of the leading indices of the world. Warren Buffett himself is a fan of funds that track the S&P 500.

Despite its hefty rise in recent times, I still think the iShares S&P 500 ETF is an attractive investment.

Winners keep winning

Great businesses don't typically turn rubbish overnight – they tend to keep producing strong profits and unlock further growth as they reinvest their generated profits.

In my opinion, many of the companies in the IVV ETF's portfolio are some of the world's most successful businesses. We're talking about names like AppleNvidiaMicrosoftAmazonMeta PlatformsAlphabetBerkshire HathawayVisaCostcoMastercardNetflix, and Walmartwhich are among the largest holdings of the fund.

The above companies, and many more holdings, have demonstrated their long-term ability to expand geographically and create new products/services to ensure their growth runways remain healthy.

If I had to pick a group of blue chip businesses to own from a particular country, these are the sorts of businesses that I'd choose. They're more compelling than the ASX's biggest companies, in my eyes.

The US companies generally have a high return on equity (ROE), which shows both their quality and their ability to make strong additional profits on reinvested profit. The Vanguard U.S. Total Market Shares Index ETF (ASX: VTS), which has a similar portfolio to the IVV ETF and which I think we can use for financial statistics, states its portfolio has a ROE of 24%.

IVV ETF Higher valuation can be justified

Some might say that the IVV ETF is trading at a high valuation, but I think the higher price-earnings (P/E) ratio is partly due to the fact that the largest businesses in the S&P 500 are globally growing companies with a stronger growth profile and make up a larger portion of the portfolio than they used to.

Businesses like Microsoft, Berkshire Hathaway, Costco, and Alphabet have impressively delivered consistent long-term profit growth.

We've seen plenty of ASX growth shares that have traded on a high valuation and continued delivering investment returns, such as Pro Medicus Ltd (ASX: PME) and WiseTech Global Ltd (ASX: WTC).

I'd suggest that the businesses within the IVV ETF are as strong as they've ever been. They could continue to deliver pleasing profit growth, which could justify the current valuation and unlock further gains over time.

IVV ETF Low fees

One of the best reasons to like this ETF is its incredibly low management fee of 0.04%, which means almost all of the returns stay in the investor's hands. It's cheaper than many of the most popular ETFs on the ASX, such as the Vanguard Australian Shares Index ETF (ASX: VAS) and the BetaShares Australia 200 ETF (ASX: A200). This helps the IVV ETF produce very appealing net returns.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. Suzanne Frey, an executive at Alphabet, 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. has positions in and has recommended Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Mastercard, Meta Platforms, Microsoft, Netflix, Nvidia, Visa, Walmart, WiseTech Global, and iShares S&P 500 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Pro Medicus and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended WiseTech Global. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Berkshire Hathaway, Mastercard, Meta Platforms, Microsoft, Netflix, Nvidia, Pro Medicus, Visa, 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.

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