The iShares S&P 500 ETF (symbol: IVV) is one of the largest exchange-traded funds (ETFs) in the market and widely used by both individual and institutional investors. IVV is a low-cost index fund, which tracks the S&P 500 Index. The fund seeks to provide exposure to the US stock market at a very low price. The fund is the core of many portfolios and the below review of IVV will evaluate why that is.
A quick reminder that this site does NOT provide investment recommendations. Fund reviews (such as this one) are for educational purposes only and are not advice or recommendations.
IVV Performance
The first thing most investors want to know about is performance, so we will start there. According to Bloomberg, since the fund’s inception 23 years ago, IVV has returned nearly 7% per year. Of course, this figure can go up or down and the returns in any single year are unlikely to be 7%. From 2001 through 2022 (22 years), IVV was up in 17 years and down in 5 years. The average return in the up years was 16.7%, while the average return in the down years was -18.6%.
IVV Risks
IVV owns stocks which are more volatile than cash or bonds. While the returns are higher than cash or bonds, investors need to be prepared to stomach volatility and be able to hold for the longer-term. IVV was down nearly 35% during the covid pandemic and down over 25% at one point in 2022. It was also down nearly 50% in the 2000-2003 recession and declined over 55% during the 2007-2009 recession. This is not necessarily worse than other similar funds, but it is a characteristic of stocks that investors need to be aware of.
IVV Portfolio
Fund performance is ultimately driven by a fund’s holdings and exposures, so our IVV review will examine these items.
IVV Holdings
IVV (and its underlying index) is incredibly diversified, holding over 500 stocks. This represents the large-cap segment of the US stock market.
| IVV | S&P 500 | |
| Number of Stocks | 503 | 503 |
IVV Country Exposures
IVV only owns US-based companies. Investors looking for international exposure may pair IVV with international ETFs or simply hold a global ETF.
IVV Market Cap Exposure
IVV is primarily a large-cap fund which seeks to represent the largest US stocks. Even though the fund holds some mid-caps, performance is primarily driven by the large-cap exposure.
| IVV | |
| Large-Cap | 83% |
| Mid-Cap | 17% |
| Small-Cap | 0% |
IVV Sector Exposures
IVV is extremely diversified across sectors and mirrors the approximate weights of the broad US stock market.
| IVV | |
| Basic Materials | 2.27% |
| Consumer Cyclical | 10.35% |
| Financial Services | 12.34% |
| Real Estate | 2.53% |
| Communication Services | 8.75% |
| Energy | 4.32% |
| Industrials | 8.13% |
| Technology | 27.42% |
| Consumer Defensive | 7.02% |
| Healthcare | 14.14% |
| Utilities | 2.73% |
Expenses
No review of IVV would be complete without an in-depth look at the explicit and implicit costs of trading and holding IVV.
IVV Expense Ratio
IVV’s expense ratio of .03% is among the lowest of any large-cap funds. Even if another fund is free, three basis points is not a material difference in my opinion.
IVV Transaction Costs
ETFs are free to trade at many brokers and custodians, so IVV should be free to trade in most cases. Additionally, it is among the largest ETFs and is very liquid. The bid-ask spread of IVV is about .01%, so individual investor trades will not generally be large enough to impact or move the market.
IVV Tax Efficiency
Like most index funds, IVV is very tax-efficient. Unlike actively-managed funds, passively-managed index funds typically have less trading and lower turnover. This results in fewer taxable events and higher tax efficiency.
ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). IVV has never made a capital gains distribution, so IVV is about as tax-efficient as any fund can be.
Investors in a high tax bracket with at least $250,000 may consider direct indexing rather than IVV, as direct indexing can potentially generate even more tax savings.
IVV Review: A Recap
The above review of IVV illustrates that IVV is a well-constructed, low-cost and tax-efficient index fund that provides diversified exposure to the US stock market. IVV is a great choice in many situations and a tool that I often use personally and professionally.
