InvestSMART

Investing in the World Around You

Think about the products and services you use everyday without even thinking.
By · 16 Sep 2019
By ·
16 Sep 2019
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Maybe you catch an Uber to work while listening to Spotify and checking Instagram on your iPhone. Arriving at work, you open up Google and start researching your next holiday (at least the stats say we do). Feeling inspired, you head to Kathmandu on your break and use Afterpay to purchase the perfect holiday jacket. That may seem like an unrealistic scenario to you, but when it comes to investing, it often helps to think about the products and services you use on a daily basis. Who is really benefiting from your purchases?

I once read an anecdote about a father explaining to his son, while eating at McDonald's, the difference between consumers and owners. While they had paid for and enjoyed their meal, it wasn’t the staff or management that ultimately benefited from their purchase, but the shareholders of the company which anyone can buy on the New York Stock Exchange (NYSE). That started to reframe the way I looked at the products and services I use everyday; was I happy simply consuming them or did I want to benefit financially from their growth and success?

The great thing is that you don’t even need to make the decision to buy Netflix or Facebook. By simply investing in an Exchange Traded Fund (ETF), such as IVV, you get instant exposure to the top 500 US listed companies. Think Microsoft, Visa, Walmart, Disney, Boeing, Starbucks and Nike. If you want to invest in Asia there’s an ETF for that – IAA, we’re talking Tencent, Samsung and Bank of China. Thinking about Europe? You’re covered as well; Nestle, Allianz and L’Oreal can all be found within VEQ.

Investors have more places to invest their money than ever before. There's something for everyone; the NYSE even saw its first vegan ETF launch a few weeks ago. It can often be overwhelming when you’re getting started with investing, however it’s important not to overcomplicate your approach. Warren Buffett claims you should only invest in 'simple businesses' that you understand. Analysts will often point out that to be a successful investor you need to invest within your circle of competence, or as Safal Niveshak puts it, "the businesses that you understand fall within the circle, and the ones you don’t understand fall outside it".

Many investors I speak to are purely focused on Australia and the different options available within our borders, and it has been well documented that we are biased to our home country when we invest. Here at InvestSMART we advocate having a diversified portfolio across not just a range of asset classes but within those asset classes as well. If you’re interested in gaining instant exposure to great global companies through the low-cost ETFs that I’ve mentioned here, check out our International Equities Portfolio. The portfolio is overseen by our investment committee which includes Alan Kohler and InvestSMART's chairman, Paul Clitheroe.

 

Click here to learn more about the InvestSMART International Equities Portfolio, part of InvestSMART's capped fee range.

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Kate Campbell
Kate Campbell
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Frequently Asked Questions about this Article…

Everyday purchases can guide your investment decisions by highlighting companies you frequently interact with. For example, using services like Uber, Spotify, or Instagram can lead you to consider investing in these companies or related ETFs, allowing you to benefit financially from their growth.

Being a consumer means you use and pay for products or services, while being an owner means you invest in the companies providing those products or services. As an owner, you can benefit financially from the company's success, such as through stock ownership.

ETFs are investment funds that trade on stock exchanges, offering exposure to a wide range of companies. They benefit investors by providing diversification, as you can invest in multiple companies across different sectors and regions with a single purchase.

Diversification is crucial because it spreads your investment risk across various asset classes and regions. This approach can help protect your portfolio from significant losses if one sector or market underperforms.

The 'circle of competence' refers to investing in businesses you understand well. By focusing on familiar industries or companies, you can make more informed investment decisions and potentially achieve better returns.

You can gain exposure to international companies by investing in ETFs that focus on specific regions or global markets. For example, ETFs like IVV, IAA, and VEQ provide access to top companies in the US, Asia, and Europe, respectively.

The InvestSMART International Equities Portfolio is a diversified investment option that provides exposure to global companies through low-cost ETFs. It is managed by an experienced investment committee, including Alan Kohler and Paul Clitheroe.

Investors often have a home country bias due to familiarity and comfort with local markets. To overcome this, they can diversify their portfolios by investing in international ETFs, gaining exposure to global companies and reducing reliance on domestic markets.