Investing in Australian tech stocks
Over the past six months, the majority of the workforce has worked from home. Many supported with a significant number of Job Keeper payments.According to a report from ASIC, this has resulted in a large influx of new investors and traders into the stock market.
When we look at what these new entrants have been buying, it has largely been technology stocks with a big uptake in US tech stocks. But is this a wise choice or are many investors simply following the herd?
When talking about technology stocks, invariably most people think of Facebook, Apple, Amazon, Netflix and Google, which are known as FAANG stocks, with many investors holding one or more of these companies. So how do Australian technology companies stack up in comparison to their US counterparts?
In Australia, the technology stocks comprise WiseTech Global, Appen, Altium, Afterpay Touch and Xero, which are otherwise known as WAAAX stocks.
You may be surprised to learn that since 1 January to 30 September 2020, FAANG stocks have returned a gross capital gain of 220.21 per cent, while WAAAX stocks have achieved a return of 264.81 per cent or around 20 per cent better.
While this is only a snapshot in time and is in no way conclusive evidence of one market performing better than the other, what it does highlight is the myth that investing in offshore markets can make you more money. Those new to the market are led to believe that investing in US tech stocks is better than investing in Australian tech stocks, but unfortunately, none of this is true.
The ASX is well regulated and lists some of the world’s best companies: so, while some world markets may outperform our market for short periods, over the long term it not only holds its weight but outperforms nearly all other world markets in terms of return.
As the book, Triumph of the Optimists : 1 01 Years of Global Investment Returns released by Princeton University Press nearly 20 years ago and updated in 2018 reveals, the Australian stock market is in the top three best performing markets in the world with the US market much further down the list.
Based on these facts, you have to question why anyone would want to increase their risk to sacrifice better returns by investing in Australia.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au
Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au.
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