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In today’s stock market, the three largest ETFs by assets under management are all S&P 500 (
SPX
) ETFs. The massive
SPDR S&P 500 ETF Trust (
NYSEARCA:SPY
) comes in first at nearly $410 billion.
The iShares Core S&P 500 ETF (
NYSEARCA:IVV)
comes in second with over $328 billion in assets under management, while the
Vanguard S&P 500 ETF (
NYSEARCA:VOO
) is close behind in third place with $313 billion in AUM. Combined, these three S&P 500 giants have over $1 trillion in assets under management between them.
Why are S&P 500 ETFs Appealing to Investors?
Why invest in the S&P 500? While it may not sound like the most exciting or exotic investing strategy, it is an effective one. While past performance is no guarantee of future results, the S&P 500 index itself has been a pretty good performer for a really long time. Going back to 1957, when the S&P 500 as we know it was made, the index has posted an average annualized return of 10.15%.
Harnessing the Power of the U.S.'s Top Companies
Adding to this appeal, an investment in an S&P 500 ETF gives investors exposure to over 500 of the strongest companies in the United States. An investment in an S&P 500 ETF also gives you instant diversification across sectors and industries.
SPY, the world’s largest ETF, holds 503 stocks, and its top 10 holdings account for 30.3% of the fund. Below, you can take a look at
SPY’s top 10 holdings.
Because the S&P 500 is the underlying index for all of these funds, differences between their portfolios are negligible. Also, because mega-cap tech stocks have come to dominate today's market as the largest stocks in the S&P 500, all three of these ETFs give investors significant exposure to these tech leaders, including Apple (
NASDAQ:AAPL
), Microsoft (
NASDAQ:MSFT
), Amazon (
NASDAQ:AMZN
), Nvidia (
NASDAQ:NVDA
), Tesla (
NASDAQ:TSLA
), Alphabet (
NASDAQ:GOOG
) (
NASDAQ:GOOGL
) and Meta Platforms (
NASDAQ:META
).
IVV holds 502 stocks, and its top 10 holdings also make up 30.3% of its holdings. Take a look at
IVV’s top 10 holdings below.
Lastly, VOO is unsurprisingly similar, with 504 holdings, and its
top 10 holdings make up 30.4% of the fund.
As you can see, the funds are largely the same, although there are some minor differences based on when the funds rebalance.
Dividends
SPY, IVV, and VOO all pay dividends, and they currently all yield roughly 1.5%. Because of the S&P 500's strong performance in 2023 (it's up about 14% year-to-date), this yield is a bit low for dividend investors to get excited about, but holders will not be complaining.
Long-Term Performance of S&P 500 ETFs
Unsurprisingly, because these funds all invest in the S&P 500, there is a high degree of correlation in their long-term performances. However, most importantly, all three have delivered strong long-term returns for investors.
As of the end of May, SPY had a three-year annualized total return of 12.8%, a five-year annualized total return of 10.9%, and a 10-year annualized total return of 11.9%. Meanwhile, IVV provided annualized total returns of 12.9% over three years, 11% over five years, and 12% over the last 10 years. Lastly, VOO posted annualized total returns of 12.8%, 11%, and 11.9% over the same time frames, respectively, so all three funds provided investors with very similar double-digit annualized returns over the course of the past decade.
Expense Ratios
One area where there is some difference is when it comes to the fees they charge. IVV and VOO
both have expense ratios of just 0.03%. Meanwhile, SPY comes in at 0.09%.
While 0.09% is a fantastic expense ratio in the overall ETF landscape, it is quite a bit higher than that of IVV and VOO in this comparison. Investors in SPY are paying three times as much in fees as investors in IVV and VOO.
See below for
a comparison of SPY, IVV, and VOO based on their fees as well as other criteria using TipRanks' ETF Comparison Tool, which lets you compare up to 20 ETFs at a time based on a variety of customizable factors.
Hard to Go Wrong
Investing in the S&P 500 has historically delivered strong results for investors for a long time, and investing in an S&P 500 ETF allows you to add the power and future growth of 500+ of the U.S.’s top companies to your portfolio with one investment vehicle.
As you can see in the comparison above, SPY, IVV, and VOO all feature identical ETF Smart Scores of 8. The
Smart Score is TipRanks’ proprietary quantitative stock scoring system. It gives stocks a score from 1 to 10 based on eight market key factors. The score is data-driven and does not involve any human intervention. A Smart Score of 8 or above is equivalent to an Outperform rating.
It's hard to go wrong with any of these ETFs, and picking between the three is a good problem to have. All three look like great choices for investors. Also, for investors just starting out, these ETFs are nice for instantly diversifying portfolios.
With similar portfolios and long-term track records over the past decade, the key difference between these ETFs is their fees. While all have favorable expense ratios, SPY’s comes in three times higher than that of IVV and VOO, making those the best buys.
SPY has the longest track record (it launched in 1993, long predating IVV and VOO, which launched in 2000 and 2010, respectively), the most assets under management, and incredible liquidity (it accounts for 20% of ETF trading volume on a daily basis), so there’s certainly nothing wrong with choosing it over its counterparts. Nonetheless, the fees will be a bit higher over time.
Disclosure
With technology stocks surging this year, the
iShares Global Tech ETF (
NYSEARCA:IXN)
is up nearly 40% year-to-date. What is this red-hot ETF's invest investment strategy, and how does it stack up to the competition? Let’s take a closer look and see if it could be a worthy addition to investor portfolios.
What Does the IXN ETF Do?
IXN is a $3.6 billion ETF from BlackRock’s (
NYSE:BLK
) iShares that invests in stocks in the S&P Global 1200 Information Technology 4.5/22.5/45 Capped Index, an index of global equities in the technology sector.
Portfolio Composition
IXN sports 115 positions, but investors should be aware that its top 10 holdings make up nearly two-thirds of its portfolio, so this is a fairly concentrated fund. Check out the chart below for a breakdown of
IXN's top 10 holdings.
Top holding Apple (
NASDAQ:AAPL
) makes up a whopping 21.9% of assets, while Microsoft (
NASDAQ:MSFT
) isn’t far behind at 19.9%. Semiconductor names Nvidia (
NASDAQ:NVDA
), Broadcom (
NASDAQ:AVGO
), and Taiwan Semiconductor (
NYSE:TSM
) round out the top five holdings.
Where the fund differs from other popular tech ETFs like the
Invesco QQQ Trust (
NASDAQ:QQQ)
and the
Technology Select Sector SPDR Fund (
NYSEARCA:XLK)
is that it invests globally, not just in companies listed on U.S. exchanges like the Nasdaq (
NDX
), in the case of QQQ, or the S&P 500 (
SPX
), in the case of XLK, so it also owns international tech stocks like ASML Holding (
NASDAQ:ASML
) and Samsung Electronics.
While 81% of the fund’s investment is in U.S. companies (as of the end of Q1), mostly thanks to the massive market caps of the U.S. tech giants, it also invests in companies from Taiwan, Japan, South Korea, the Netherlands, Germany, and beyond.
By subsector within technology, IXN currently invests 38.6% of its assets in software and services, 33.7% in tech hardware and equipment, and 27.3% in semiconductors and semiconductor equipment. The rest gets allocated to "cash and/or derivatives."
Is IXN Stock a Buy, According to Analysts?
Turning to Wall Street, IXN has a Moderate Buy consensus rating from analysts, as 62.6% of analyst ratings are Buys, 32.3% are Holds, and 5.1% are Sells. At $63.70, the
average IXN stock price target implies 5.3% upside potential.
IXN's Long-Term Performance
IXN has posted some really strong returns over time. As of the end of May, it has generated a three-year annualized total return of 18%. Going out to five years, it has an annualized total return of 17.2%, and over the past decade, it has an annualized total return of 18.2%. As you can see, IXN has been remarkably consistent in providing its investors with outstanding total returns for a very long time. Now, let’s see how IXN stacks up against the competition.
These results make IXN one of the rare investment products that can say it "beats the market" over time. As of the end of May, the
Vanguard S&P 500 ETF (
NYSEARCA:VOO)
, a good proxy for the S&P 500 as a whole, put up annualized total returns of 12.8%, 11%, and 11.9% over the past three, five, and 10 years, respectively.
But let’s also compare IXN specifically to the two other aforementioned major technology ETFs, QQQ and XLK. Over the same time horizon, as of the end of May, QQQ has posted annualized total returns of 14.8%, 16.2%, and 17.9% over the past three, five, and ten years, respectively.
Using the same parameters, XLK has posted annualized total returns of 19.9%, 20%, and 19.6% over the past three, five, and 10 years respectively. So, IXN actually slightly outperforms the more well-known QQQ over various time frames over the past decade, albeit by a narrow margin at the 10-year mark, and has slightly underperformed XLK.
IXN's Fees -- Are They High?
As you can see, IXN is an ETF with a worldwide portfolio of tech stocks that is beating both the S&P 500 and edging out the Nasdaq over time. The only two negatives to point out are the aforementioned reliance on Apple and Microsoft and the second concern, which is its expense ratio.
While a 0.4% expense ratio isn’t anything out of the ordinary in the ETF market, it is quite a bit higher than QQQ, which has an expense ratio of just 0.2%, or XLK, which charges just 0.1%.
Assuming current expense ratios remain the same, and the funds all return 5% a year, an investor allocating $10,000 into IXN will have paid $505 in fees over 10 years versus $255 in fees for QQQ and just $128 for XLK.
Below, you can take a look at
a comparison between IXN, QQQ, and XLK using TipRanks' ETF comparison tool, which enables users to compare up to 20 ETFs at once using a customizable array of parameters.
Investor Takeaway
As you can see above, all three of these ETFs are up big year-to-date (around 35-40%), and all three have ETF Smart Scores of 8 out of 10, an Outperform rating. The
Smart Score is TipRank’s proprietary quantitative stock scoring system. It gives stocks a score from 1 to 10 based on eight key market factors.
IXN’s fees are higher than those of peers like QQQ or XLK, and the fund has quite a bit of exposure to Apple and Microsoft (which, combined, make up over 40% of assets), but with the types of returns it has provided, these may be facts that investors are willing to overlook (Note that XLK also has similar exposure to Apple and Microsoft).
Keep in mind that an investor who put $10,000 into IXN 10 years ago would now have over $50,000 today, so this is clearly the type of ETF that can help investors build long-term wealth. I also like the fact that IXN offers a bit more geographic diversification than the average tech ETF, thanks to the fact that it invests globally and holds stocks like Samsung and ASML, which differentiates it from its peers.
At the end of the day, it's hard to go wrong with any of these three ETFs, as they all have been great investments over the long term, and they continue to look well-positioned for the future.
Disclosure
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