02 Jan Why you should invest in U.S. stocks?
The first question that comes to mind when thinking about investing in U.S. stocks is, why do it? To that question, I would reply, why not? As you’re about to discover, investing in U.S. stocks is much easier than you think and it offers opportunities unobtainable in Australia.
The Australian stock market consists of approximately 2200 companies, the vast majority of which operate in the mining sector. There’s also a very well-established financial sector listed on the ASX dominated by the big four major banks. Outside of the mining and banking sectors, the offerings become pretty thin. We have no truly multi-national listed companies, no real technology plays, very few biotechnology companies, and even the energy sector is pretty thin. How about automotive, defence, retail or entertainment?
By comparison, the U.S. is the largest equity market in the world with over 10,000 companies from all sectors and countries. For it’s not just U.S. companies you’ll find listed on the U.S. exchanges. As the world’s premier place to raise equity, the U.S. attracts companies from all over the world seeking access to funds. It’s not unusual to find companies from China, Europe, the Middle East and South America listed on the U.S. exchanges. Access to the U.S. gives you access to the world.
But it’s the two growth sectors, technology and biotechnology that really matter. No one can deny the impact technology has on our lives and the rate of change we have now come to expect from the industry. We all want the latest and greatest and there are many companies out there developing these products for us.
The second global theme driving growth is our ageing population. We all want to lead longer, healthier lives and as we live longer our need for healthcare grows. Biotechnology companies service these needs.
If you want to grow your capital you must invest in companies that are growing. With the mining boom over there’s not a lot of growth happening in Australia. At the time of writing (December 2018), the All Ordinaries Index is up 10% in the last 5 years. The Nasdaq U.S. index is up 76%. Where do you think it would have been easier to make profits?
This is an excerpt from the book ‘An Australian’s Guide To Investing In U.S. Stocks‘ by Matthew Jones.