InvestSMART

How to buy into some of the world's biggest companies

Apple, Amazon, even Berkshire Hathaway - it is possible to get a slice of the corporate action without breaking the bank.
By · 30 Aug 2022
By ·
30 Aug 2022 · 5 min read
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Electric car and battery maker Tesla recently announced a 3 for 1 share split. It means existing shareholders each received two additional shares for every share they owned prior to the split. It’s not a get rich quick scheme. Each share is valued at one-third of the price of an investor's original share.

Part of the motivation for the share split was reportedly to make Tesla shares more affordable – and therefore more attractive to retail investors. Tesla shares were certainly not at the ‘cheap’ end of the scale. They were trading for around $US900 ($A1,300) pre-split, and are now priced at about $US300 ($A429). That makes sense given the 3-for1 split.

Other big-name companies that have previously split their shares include Alphabet, which owns Google, and Amazon.

A share split is not always a bad thing for investors. A NASDAQ study found that simply announcing a share split can see a stock’s value rise by 2.5%. One year after the split, the share can still be valued 5% above the pre-split price.

Of course, some companies – like Warren Buffet’s Berkshire Hathaway, would need a lot more than a share split to make the stock affordable to ordinary investors.  Berkshire Hathaway is trading at an extraordinary $US437,500 per share, equal to about $A633,000. Owning just two shares would make you a millionaire!

Fortunately, Berkshire Hathaway B-class shares became available in the 1990s, and these are trading for a more modest $US290 ($A420).

Shares listed on the Aussie market tend to be relatively affordable. Among the more expensive stocks are CSL ($288) and Cochlear ($214), with Macquarie Group ($173) rounding out the top three.

These values can make shares in our biggest companies more accessible to individual investors – certainly in comparison to some of the corporate giants we see on overseas markets. However, it can still take a solid chunk of capital to build a diverse portfolio – money that some investors just don’t have.

The good news is that investors don’t have to wait for their favourite company to flag a share split to be able to buy in.

Exchange traded funds (ETFs) offer an easy and affordable entry point.  As a guide, Vanguard’s International Shares ETF has holdings in Tesla, Apple, Alphabet, and yes, Berkshire Hathaway. Better still, it trades for around $94. So for the price of dinner-for-two, you can gain exposure to a vast selection of some of the world’s biggest companies.

The diversification of ETFs is often touted as one of their primary advantages. And this is definitely a plus of ETFs. However, ETFs have also become a great leveller in the world of investing. You no longer need to be a millionaire to indirectly own a stake in leading companies whose shares can be priced well beyond the reach of the average Aussie investor – and that’s a plus for all of us.

 

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.

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Frequently Asked Questions about this Article…

A share split, like Tesla's recent 3-for-1 split, means existing shareholders receive additional shares, making each share worth a fraction of the original price. This can make shares more affordable and attractive to retail investors without changing the overall value of your investment.

Companies like Tesla and Alphabet split their shares to make them more affordable for everyday investors. This can increase the stock's attractiveness and potentially boost its market value, as seen in studies showing a rise in stock value after a split announcement.

Yes, investors can consider purchasing B-class shares of Berkshire Hathaway, which are more affordable. Additionally, exchange traded funds (ETFs) offer exposure to expensive stocks at a lower price point, providing a diversified investment option.

You can invest in big companies through exchange traded funds (ETFs), which allow you to own a stake in a variety of large companies at a lower cost. For example, Vanguard’s International Shares ETF includes holdings in Tesla, Apple, and Alphabet, and trades for around $94.

ETFs offer diversification, making them a great option for everyday investors. They provide exposure to a wide range of companies, including those with high-priced shares, without needing a large capital investment, leveling the playing field for all investors.

No, you don't have to wait for a share split to invest in your favorite company. ETFs offer an affordable way to gain exposure to high-priced stocks without waiting for a split, allowing you to invest in a diverse portfolio of leading companies.

Australian shares tend to be more affordable compared to some international stocks. However, shares in major Australian companies like CSL and Cochlear can still be expensive, making ETFs a viable option for building a diverse portfolio.

ETFs play a crucial role in making high-priced stocks accessible by allowing investors to buy into a diversified portfolio of large companies at a fraction of the cost of individual shares, thus democratizing access to the stock market.