IVV vs VGS — Which Global ETF?
IVV (iShares Core S&P 500 ETF) and VGS (Vanguard MSCI Index International Shares ETF) are the two most popular global ETFs for Australians. Both are well-run, liquid, and cheap — but they track different benchmarks and suit slightly different strategies.
Side-by-Side Comparison
| IVV | VGS | |
|---|---|---|
| Benchmark | S&P 500 (US only) | MSCI World ex-AU (~1,500 stocks) |
| Countries | USA only | 23 developed markets |
| # Holdings | ~503 | ~1,500 |
| US weighting | 100% | ~70% |
| Mgmt fee (MER) | 0.03% | 0.18% |
| Currency | Unhedged (AUD/USD) | Unhedged |
| Distributions | Quarterly | Half-yearly |
| Franking credits | None (US companies) | Minimal |
| Fund size (AU) | $3B+ | $6B+ |
| Liquidity | Very high | Very high |
The Case for IVV
- Lowest fees. At 0.03% MER, IVV is one of the cheapest ETFs available on the ASX. On a $500k portfolio, you pay $150/year vs $900/year for VGS.
- S&P 500 performance has dominated. Over the last 15 years, the US market has significantly outperformed the rest of the world. IVV has tracked this closely.
- Maximum simplicity. The S&P 500 is the most analysed, widely-held benchmark in the world. You know exactly what you own.
- Better for US-heavy strategies. If you believe US technology will continue to dominate global returns, IVV is the more concentrated bet.
The Case for VGS
- True global diversification. VGS includes Japan (6%), UK (4%), Canada (3%), Europe, and more. Less concentrated in US tech risk.
- Historical mean reversion. US dominance over the last 15 years is historically unusual. Regimes shift — Japan led in the 1980s, emerging markets led in the 2000s. Diversification across markets hedges regime risk.
- Combined with VAS. VGS is the natural complement to VAS (Australian shares). Together they give you near-total global market exposure.
- More diversified sector exposure. VGS has more weight in healthcare, financials, and industrials across different regulatory environments.
Currency Risk: The Same for Both
Both IVV and VGS are unhedged — you bear AUD/USD (and AUD/other currency) risk. When the AUD falls, your returns in AUD terms improve. When AUD rises, they fall. Over the long run, currency effects tend to wash out. Hedged equivalents (IHVV for IVV, VGAD for VGS) eliminate currency risk but typically underperform unhedged versions over long periods due to hedging cost and Australian interest rate dynamics.
For most FIRE investors: The fee difference between IVV and VGS compounds meaningfully over 20–30 years. On $500k, the 0.15% MER difference = $750/year = $22,500 over 30 years (uninvested). If diversification matters to you, VGS. If fees matter more and you believe in US primacy, IVV. Most investors would do well with either — the decision matters far less than starting early and contributing consistently.
Combining Both
Some investors hold both: IVV for low-cost US exposure and VGS for broader developed market diversification. Given VGS is already ~70% US, this creates heavy US concentration (roughly 85%+ combined US weighting). If you want diversification away from the US, adding a small allocation to VGE (emerging markets) alongside VGS is more effective than VGS + IVV.