When people talk about the US stock market, they’re more than likely referring to the S&P500. This major index tracks the prices of the 500 largest publicly listed companies in the U.S.A. and represents 80% of the entire U.S. stock market capitalization (the total value of all a company’s shares of stock). Established in 1957 as the first U.S. market-cap-weighted index, it has produced an annualized dollar return of 10,26% since then.
Importantly, one can invest in an exchange-traded fund (ETF) that tracks the performance of the S&PP500, giving them instant access to participate in the returns of the US stock market, alongside diversification across various sectors and industries encompassing the 500 most significant US-listed corporations. Additionally, many large S&P500 ETFs pay dividends, albeit on the low end (around 1.50%), and the iShares Core S&P500 ETF is no different.
One of the primary advantages of ETFs is their cost efficiency, and the iShares Core S&P 500 ETF stands out with an exceedingly low expense ratio of just 0.03% per annum. While it is a widely acknowledged fact that historical performance is not a reliable indicator of future outcomes, this ETF has yielded an annualized dollar return of 6.92% since its inception in May 2000, which is around 11,76% in ZAR. For many South African investors, this type of allocation has become a popular inclusion in their investment strategies as it gives them a cheap opportunity to generate stable hard currency returns and hedge against ZAR volatility.
As always, caution of such an allocation must be considered in parallel with your overall financial circumstances as it may not suit every investor. I further point out that risk-averse investors may look to pair this ETF with a lower-risk allocation, such as bonds and cash. In contrast, risk-seeking investors may seek riskier investments, and consulting with a professionally qualified financial advisor is always advisable.
In conclusion, irrespective of your investment approach, the S&P 500 has demonstrated its ability to deliver favorable results. Through the iShares Core S&P 500 ETF, you can avail yourself of a highly cost-effective means to join the ranks of successful investors in this renowned index.
