Jessica Amir, Market Strategist, moomoo Australia
24 June 2024
Investing is crucial for financial growth and security. And for Australians, expanding their investment horizons beyond local markets can be an exponential step toward this goal.Â
There are particularly compelling reasons Aussie investors should consider Nasdaq stocks. So let’s explore the what, why and how of the Nasdaq to reveal just what a goldmine it is for investors.
Overcoming home bias in investment
Aussie investors often exhibit a home bias, preferring to invest in local equities. The 2023 ASX investor study showed that only 16% of Australian investors have direct exposure to US shares. However, this trend is gradually changing, and for good reason. Moomoo’s clients, representing a diverse Australian demographic, are increasingly looking overseas, particularly towards the US market. This shift is driven by the pursuit of higher earnings growth and the opportunity to invest in some of the world’s largest and most innovative companies.
The power of Nasdaq: three key reasons to invest
Access to the biggest and fastest-growing companies
The Nasdaq is home to major technology giants including Microsoft, Apple and Nvidia. These companies are renowned for their impressive earnings growth rates, unmatched anywhere else in the world.
Consistent earnings and profit growth drive long-term share-price growth. This is why US stocks, particularly those listed on the Nasdaq, have historically outperformed and delivered better returns than Aussie stocks.
The composition of the Australian market, dominated by mining companies and banks, limits growth potential. Banks, in particular, are not known for innovation, and their net interest margin has been declining for more than a decade. In contrast, tech companies on the Nasdaq are at the forefront of innovation, driving substantial and sustained growth.
Innovators supported by global demand and investment
Nasdaq-listed companies are often innovators with a growing global customer base. Many operate on subscription models, ensuring a steady stream of revenue. These companies have sticky clients and are backed by the biggest businesses in the world, creating a robust ecosystem of growth and innovation.
For example, Nvidia, a leading chipmaker, plays a crucial role in the growth of other major companies in the Nasdaq 100. Around 40% of Nvidia’s revenue comes from the largest companies globally, showcasing the interconnected nature of these tech giants. Moreover, global government spending, particularly in areas including artificial intelligence and semiconductors, further boosts the growth prospects of these companies.
Institutional backing steadies the tech giants
The world’s biggest tech stocks receive substantial backing from major investment funds such as Vanguard, BlackRock, and State Street. These funds consistently invest in these companies, providing a stable support system for their stock prices. This institutional backing is a significant reason why these companies continue to grow and recover from market downturns.
Consistent buying from large investment managers not only supports stock prices but also contributes to the resilience of these companies during market volatility. For instance, during the Nasdaq pullback in March 2023, savvy investors and managers saw an opportunity to buy the dip, resulting in a strong rebound in stock prices.
Ways for Aussies to invest in the Nasdaq
There are several ways for Australian investors to gain exposure to the Nasdaq.
- One popular method is through the world’s largest tech ETF, the QQQ, which tracks the performance of the Nasdaq 100 Index.
- Investors can also consider ETFs tracking the S&P 500, such as State Street’s SPY ETF or the iShares S&P 500 ETF (IVV). These ETFs offer exposure to the largest companies listed on US stock exchanges, providing instant diversification of an investment portfolio.
- For those interested in individual stocks, direct investments in companies including Microsoft, Apple, or Nvidia can be highly rewarding. Apple, for instance, is the world’s largest company, as of June 13, 2024, known for its strong earnings growth, innovation, and expansive global reach.
Thinking long-term with Nasdaq investments
I want to emphasise the importance of a long-term approach when investing in the Nasdaq.
Investing differs from trading, where the focus is typically on short-term gains. Investment allows for growth and recovery through market cycles, making it a prudent strategy for building wealth long term.
During periods of market pullbacks, such as those witnessed during the COVID-19 pandemic, astute investors see opportunities to buy quality stocks at lower prices. This strategy, known as buying the dip, can lead to significant gains when the market rebounds.
Moomoo tools and features for informed investing
Moomoo offers a range of tools loved by Australian investment managers, professional investors and retail investors alike to help them make informed decisions.
We know earnings and earnings upgrades drive share-price growth, making our earnings per share (EPS) and revenue estimates and other financial indicators some of the most sought after data by investors using moomoo.
We also know they love visualised company financials, analyst ratings, and 24-hour weekday trading for US stocks. Additionally, moomoo provides constant financial news to keep investors informed of the latest market developments.
Lastly, one of Moomoo’s standout features is fractional share trading, enabling investors to buy a percentage of a share rather than the whole share. This allows investors to start small and gradually build their portfolios, making high-growth stocks like Nvidia accessible even with limited capital.
Sponsored Content: This article is brought to you by moomoo
