Blackrock iShares 500 ETF review (ASX:IVV)

Blackrock is an American global investment management corporation based out of New York and is one of the worlds largest investment asset managers, with over (USD) $6.84 Trillion in assets under management as of 2019. They operate globally in over 100 countries, and their largest division is iShares – a group of over 800 exchange traded funds, which is the largest ETF provider in the world, beating Vanguard for the top spot.

IVV is one of iShares most popular ETFs – which tracks the total US market. IVV seeks to track the investment results of large-cap US stocks against the S&P US 500 index. This particular fund is domiciled in Australia (ASX:IVV), and has over (AUS) $3.2 Billion under management in it. Because its domiciled in Australia (switched from a cross-listing to a dedicated local australian ETF in 2018), Australians wont have to submit any foreign tax forms to the US (like you need to with Vanguard total US market ASX:VTS )

The details

The Top ten holdings of IVV are Microsoft, Apple, Amazon, Facebook, Berkshire hathaway, Alphabet (google), JPMorgan Chase, Johnson and Johnson and Visa, which combined account for 21.57% of the total portfolio. This demonstrates the portfolio diversification, despite the naysayers which coo the absolute opposite. The Management fee is a ‘black’Rock bottom at .04%, matching the Vanguard fund VTS.

The S&P 500 index incorporates approximately 77% of all publicly traded US securities (companies). IVV aims to fully replicate the index, which has a minimum market cap of around $5B. This means IVV might do slightly better if small caps are struggling such as in a bear market, or otherwise, it should go down less, compared to managed funds or ETFs that hold more smaller capital securities.

Performance

As of October 2019, over the past year IVV has returned 10%, over 5 years 17.43% and since inception (20 years – including GFC) the return was 4.78%. The dividend yield on IVV is currently at 1.66%, so its clear that the IVV ETF is more suited for a Boglehead style investor looking for capital gains, than a Thornhill style dividend investor looking for increasing dividend income. To fully live off this stock, you would need to sell down portions of it in retirement (and if you held this over 12 months, you would receive a 50% CGT reduction)

Why I own IVV

IVV gives me exposure to the US S&P 500 at an incredibly low price. It has very good liquidity with approximately 800M+ shares trading hands each day. Whilst I don’t get the same juicy dividends or franking credits that Aussie shares gives me, IVV gives me get global exposure to some of the biggest US giants which provide long term passive capital gains. I plan to cash in on this later, and potentially sell off these shares for future spending money in retirement.

BlackRock iShares IVV versus Vanguard VTS

IVV and VTS are essentially the same thing – they both track the US S&P 500 index. There are a few slight differences between the two (explained in the video below), but they are both very high quality products. I have no problems whatsoever holding both funds, and I figure if they are essentially the same thing. This means if I have decided to buy US stocks (because Aussie stocks are too expensive), I will just buy which ever one has dropped in value the most lately and therefore I’ll pick up slightly better value. What do you think? Have you made the choice between VTS or IVV?

IVV vs VTS: Which US ETF to choose?

Summary

To wrap up, IVV is an incredibly simple fund. Its just a straightforward S&P500 index tracker, with an incredibly low MER of .04% and a large amount of money under its management. It automatically buys or sells companies based on market cap, and keeps doing so slowly ticking away in the background. For peace of mind and international diversification, IVV will be staying in my portfolio. What do you think?

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CaptainFI

CaptainFI

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2 thoughts on “Blackrock iShares 500 ETF review (ASX:IVV)

  1. Hi CaptainFi thanks for the article. I actually prefer VTS due to the lower management fee and since they are the pretty much the same thing I’m going to go for the lower cost fund any day of the week.

    1. G’day @StartingFIRE, thats kind of what I was thinking too – at the end of the day we can’t control the market – only the fees we pay along the way. I think both VTS and IVV are fantastic products though, so I don’t have any issues owning both. I kind of like that I have each of the two dominant players in the financial game.

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