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The United States of Opportunity

The ASX200 has returned 43% since 2011 compared to the S&P500 increase of 214% over the same period. Why? It's what's on the inside that matters so let's scratch beneath the surface and uncover what's at play in the world's largest and most dynamic market.

The straightforward investment advice most new investors follow is to simply ‘buy the index’. A tried and tested method that has proved as one of the greatest wealth creating systems around.

So what does “buying the index” look like for Aussie investors? The ASX200 is an index of Australia’s 100 biggest stocks and has returned 39.7% since the start of 2010. Conversely, the S&P500 is an index of the USA’s 500 biggest stocks and is up 250% since 2010. The Nasdaq 100 holds some of the biggest technology stocks in the US and is up 623% over the same period.

Why? It’s what’s inside that matters so let’s scratch beneath the surface and uncover what’s at play in the world’s largest and most dynamic market.

On our own shores investors are pouring their money into banks and mining companies- all laggards compared to the market’s best performing sectors. Financials and materials account for 48.3% of the ASX200’s performance.

With major index leaders Commonwealth Bank up just 17% in the last 5 years, NAB up 2% and Westpac  down -16%, it’s easy to see why the index is being held back.

Led by the technology, healthcare and consumer discretionary sectors (53% of the index’s weighting combined), the S&P500’s exposure to the market’s leading sectors has been a big reason for its growth. Apple (+420% in last 5 years), Microsoft (+37.2%), Amazon (+472%), Facebook (+140%) and Google (+183%) are the index’s biggest longstanding components.

The home of tech & innovation… yesterday, today & tomorrow

The ASX200 is weighted heavily towards banks and mining stocks whereas the S&P500 largely comprises technology and consumer discretionary stocks. While sectors like financials and utilities are narrow in their offerings, tech and consumer sectors house a very broad range of companies. Software companies cater to all industries from paper printing to payment processing while the ‘consumer discretionary’ sector is the broadest sector on the exchange.

Not only is the US home to the tech companies shaping the way we live today (Apple, Microsoft, Facebook, Google, Amazon) as well as the disruptors shaping tomorrow (Tesla, Square, Shopify), it’s also home to the well-established companies that are foundational in our modern economy (Boeing, Coca-Cola, HP, IBM, Visa, the list goes on…).

Where the world trades

Overseas companies changing the game in their local markets also choose to list in the US with companies such as Alibaba, Mercado Libre (the Amazon of Latin America) and Atlassian all tapping the US for growth. The US market is home to companies from nearly 50 other countries; it’s not only the place the world trades, but it’s the place globally minded companies choose to seek growth capital.

Beyond the already established large caps, the US market offers a huge depth of up-and-coming companies that are on savvy investors watchlists.

Just look at one relatively niche industry such as the electric vehicle (EV) industry. Looking beyond Tesla you’ll find 3 stocks that are not available to investors in any other market. NIO, the Chinese version of Tesla is listed in the US as is Nikola, an EV company focusing on the trucking space, while SOLO (Electrameccanica Vehicles Corporation) is a Canadian EV company focusing on the recreational niche within the EV market. These companies have increased between 100-1,500% in the last 12 months and have provided savvy investors and traders opportunities unavailable elsewhere.

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