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Investment Profile

Investment Profile: Match the Market

Holdings

Apple, Microsoft, Amazon, Facebook, Berkshire Hathaway Inc., and others

Managed by

iShares
Ticker: IVV

Risk Level

Conservative

Risk Level

Conservative

It’s one of the most important and widely viewed indexes in the world, representing $2.2 trillion of company equities, and 80% of the entire stock market.

We’re talking about the S&P 500, an index representing the stocks of the largest public companies in the U.S.

These businesses, often referred to as large caps, are generally older businesses with a record of profits, and established streams of revenue. They’re also generally considered more stable than younger and smaller competitors, because of their scale and the length of time they’ve been around.

Apple is on the index, but so too is steel giant Alcoa, aerospace titan Boeing, and tire manufacturer Goodyear, not to mention drugmaker Merck, and the footwear giant Nike.

Now you can invest in the index through Match the Market, which is based on the iShares Core S&P 500 ETF, from BlackRock Fund Advisors. (Ticker: IVV).

More about the S&P

Over the last 80 years, S&P 500 stocks have returned on average an annualized rate of 9.5%. Going forward, the expectation is closer to 5.9%.

But don’t take it from us. Warren Buffett, one of the world’s wealthiest investors, has often said the best long-term strategy is to put your cash in a broad basket of S&P 500 stocks and leave it there. In fact, Buffett believes in the index so much, he wagered $1 million that it would outperform the picks of hedge fund managers over the course of a decade, and he won.

“Consistently buy an S&P 500 low-cost index fund,” Buffett told CNBC recently. “I think it’s the thing that makes the most sense practically all of the time.”

The S&P 500 index is one of numerous indexes, including the Dow Jones Industrial Average, the tech-centered Nasdaq, and the Russell 2000, which focuses on small stocks. The S&P 500 is considered a broad basket of stocks compared to the DJIA, which only contains large cap stocks, often called blue chips.

What’s inside the fund

Match the Market offers exposure to some of the best-known names in the business world. These include Amazon, Apple, IBM and Microsoft. Not to mention plenty of non-tech industry names such as Home Depot, Procter & Gamble, and Verizon.

Though its based on the S&P 500, it actually contains 505 holdings. That’s because five of the companies offer two classes of share to potential investors.

Several other funds also attempt to track the S&P 500. These include SPDR S&P 500® ETF (SPY), from State Street Global Advisors, and Vanguard’s S&P 500 ETF (Ticker: VOO)

Exposure Breakdowns

Performance

Match the Market has a total return of -0.84 as of March 31, 2018, according to Morningstar. That compares to -1.00 for State Street Global Advisors’ SPDR S&P 500 ETF, and.-0.87 for Vanguard’s S&P 500 ETF.

In 2017, Match the Market had a total return of 21.76%.  State Street’s and Vanguard’s funds had returns of 21.70% and 21.77%, respectively, according to Morningstar.

Expenses

Match the Market has an annual expense ratio of 0.04%, which is significantly lower than the  industry average of about 0.23%.

Potential risks

The fund concentrates its investments in stocks that are only in the U.S. While it’s a diversified grouping of stocks within the category, not limited to any one industry sector, it invests only in large cap stocks.

Risks to large cap companies include potentially not being able to adapt to changing market conditions as quickly as small cap companies, according to the fund prospectus. Similarly, larger companies may grow more slowly, since the markets they’ve developed are generally mature.

Top takeaways

By Stash Team

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