Moomoo says Aussie investors are missing out if they don’t invest in Nasdaq. Pic: Getty Images
Tech
Home to most of the world’s major technology giants, trading platform moomoo reckons Aussie retail investors could be missing out if they don’t invest in the US-based tech-heavy Nasdaq for three main reasons.
Market strategist for moomoo Jessica Amir suggests most Aussie investors have a home bias and prefer to invest in Aussie equities.
However, she says many of moomoo’s clients, representing a wide Australian demographic, prefer to invest overseas, particularly in the US.
“According to the 2023 ASX investor study most Aussies invest here in Australia and only 16% have exposure to direct shares in the US,” she says.
“However, that has come a long way and the reason our clients invest in the US so much is they are chasing earnings growth and are after the biggest companies in the world.”
She says younger generation of investors are aware you can’t get such good growth rates purely investing in Aussie shares.
Moomoo itself has close ties to the major US exchange with its parent company being Nasdaq Listed, backed by various renowned strategic and venture capital investors.
So, what are moomoo’s three main reasons for Aussies to invest on the Nasdaq?
“If you think about Microsoft, Apple and Nvidia their earnings growth rates haven’t and won’t be seen anywhere else in the world,” Amir says.
She says consistent earnings and profit growth in turn drives long-term share price growth.
“Earnings drives share price growth, which is why US stocks have outperformed and delivered better returns than Aussie stocks over time,” she says.
“The S&P/ASX 200 is a bit of an Aussie battler and that is because the makeup of our market is mostly mining companies and banks.
“Banks are not innovators and their net interest margin (NIM), which is a profitability metric we look at as analysts, has been declining for over 10 years.”
Amir says she expects the Aussie banks NIM to continue declining by virtue of their business.
5 Year return
| Company/ETF | Invested | Return | Profit | Total Profit |
|---|---|---|---|---|
| S&P/ASX 200 – Biggest 200 Australian Stocks | $10,000 | 23% | $2,300 | $12,300 |
| S&P 500 – Biggest 500 stocks in US | $10,000 | 86% | $8,600 | $18,600 |
| Nasdaq 100 – Biggest 100 Tech stocks in US | $10,000 | 151% | $15,100 | $25,100 |
Amir says Nasdaq companies tend to be innovators with growing global customer bases and many operating subscription models.
She says they have sticky clients and are backed by the biggest businesses in the world, which is very different to Aussie banks.
“Their products are used by people all over the world and are somewhat essential to our everyday lives such as our iPhones and computers,” she says.
Amir says many of the major Nasdaq companies are also very interconnected, in turn boosting each other’s growth.
“Without companies like chipmaker Nvidia, for example, the third biggest company in the Nasdaq 100, the Magnificent 7 stocks or indeed the 100 biggest companies in the US can’t grow and innovate,” she says.
“All these companies are heavily reliant on technology provided by companies such as Nvidia so 40% of its revenue comes from the biggest companies in the world.”
Amir says tech companies are also typically beneficiaries of global government spending, for example governments are investing billions into tech businesses such as artificial intelligence and chip companies.
“The US and EU funneled $81bn into the next generation of semiconductor companies, to reduce dependence on China’s chips,” she says.
Amir says the world’s biggest tech stocks are in turn somewhat backed by the world’s biggest investment funds, including Vanguard, Blackrock and State Street.
“The investment managers, ETF companies, are investing people’s superannuation,” she says.
“They are investing in these companies every quarter.”
Amir says that when you have consistent buying of a stock or a set of companies then naturally that is going to support the price.
“This is another major reason why these companies continue to grow over time and have consistently recovered from every single bear market,” she says.
Amir says there are various ways for Aussie investors to get access to the Nasdaq including buying the world’s biggest tech ETF, the QQQ.
The QQQ is designed to track to the share price performance of the Nasdaq 100 Index, which is made up of 100 of the largest non-financial companies listed on the Nasdaq.
Amir says alternatively you can invest in Australia’s version, the BetaShares NASDAQ 100 ETF (ASX:NDQ), with both providing exposure to growth of the Nasdaq 100.
She says you could can put your money in State Street’s SPY ETF, which tracks the performance of the S&P 500 Index, the biggest 500 of the largest companies listed on US stock exchanges.
US-listed SPY is the world’s largest ETF with more than US$500bn assets under management (AUM).
Amir says investors can buy the Aussie version of the S&P 500 of which there are many including iShares S&P 500 ETF (ASX:IVV) .
“It’s exactly the same S&P 500 index but you’re just buying it on the ASX as opposed to buying it from the US listed one,” She says.
Alternatively, investors may want to invest in individual stocks on the Nasdaq like Microsoft, Apple or Nvidia.
“If we think about Microsoft, it is the world’s biggest company and so if you wanted to play a set and forget game, investing in the biggest company in the world that is an innovator with wide moats makes it hard for others to compete,” she says.
“Microsoft is growing its earnings at such a strong rate, is continuing to innovate and expand its global customer reach every year and also grow its revenue which is causing its shares to gain so much.”
Amir says taking a long-term approach is best when investing on the likes of the Nasdaq.
“Investing is very different to trading so when we’re investing, you’re typically in the market for the long term,” she says.
Amir says what constitutes long-term is different for different people, but it may be for one year, five years or even longer.
“Markets don’t always go up in a straight line and we saw that through Covid and back in March this year,” she says.
Amir says for example savvy investors and investment managers may see pullbacks like on the Nasdaq in March this year as an opportunity to buy the dip.
The Nasdaq rose 44% in 2023 fuelled by investor excitement around artificial intelligence.
“When you see a pullback of about 10% in some of the world’s biggest companies you typically see investor managers aggressively buying,” Amir says.
“Nvidia fell 15% and it continued to fall and lost a total about 21% from late March to April this year, which meant its shares were in a bear market and so of course investment managers are going to buy into that, and they did with Nvidia shares starting to rebound.”
Moomoo is analysing potential returns and understanding a company’s health, in terms of revenues, that can guide investors toward making better investment decisions. Its features include:
Moomoo is offering free access to Nasdaq’s TotalView market data until July 31, 2024.
The company has also just launched US fraction share trading, enabling investors to buy any percent of a share, without needing to purchase the whole share.
“You don’t have to have US$900 or US$1000 to invest in Nvidia as there’s something called fractional shares so you can invest with as little as US$5,” Amir says.
“But you’re still getting the same exposure to the share price performance growth rate, so I would also encourage people to start small and invest often.
“We know consistently adding to our investment, otherwise known as dollar-cost averaging, is a valid strategy to build and grow an investment portfolio while reducing the impact from short term market volatility.”
At Stockhead, we tell it like it is. While Moomoo is a Stockhead advertiser, the company did not sponsor this article.
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