How to navigate the record-breaking US stockmarket
LED by global giants such as Tesla, Apple and Microsoft, the US stockmarket reached record highs this week putting international shares in the spotlight for local investors and raising questions about whether it has climbed too far too fast.
Investment specialists say it’s great for Aussies to own some international shares – and most of us already do through our super funds – and many believe US stocks may still have further to rise.
Portfolio manager Chris Conway, from investment newsletter Marcus Today, says US stocks are heading into a “seasonally strong period” after surviving recent scares.
“Everything’s being thrown at it, and it just keeps coming,” he says.
“It’s the tech names that are really driving it, and it’s worth diversifying into the US because of that tech exposure.”
Investors can buy offshore stocks directly through fullservice or online brokers, or indirectly through managed funds, investment platforms such as Stake.com.au or exchange traded funds that spread money across many stocks and sectors.
“If you are a stock picker and love researching companies, you can pick the stocks and throw some money at them, but an easier way is to buy an ETF or managed fund,” says Conway.
Online investment service Six Park’s CEO, Pat Garrett, says Australians have typically had a “home country bias” and the best buy for investors is strong diversification.
“The US is just one market – an important one – and putting all your eggs in one basket is one of the cardinal sins of investing,” he says.
Garrett says ETFs have become popular because they provide instant, low-cost diversification, and there are now more than 220 ETFs in Australia with $123bn of funds under management.
“As an example, Vanguard’s global ex-Australia shares ETF provides broad global investment exposure, with about 65 per cent exposure to the US, but also exposure to countries such as Japan and the UK,” Garrett says.
ETF Securities head of distribution Kanish Chugh says investors can also invest in ETFs focusing on other locations or sectors such as cybersecurity.
“Investors build their portfolios with either a home lens or a US lens – what they don’t know, they don’t invest in.”