How to buy US technology shares
Many think that it’s difficult and expensive to invest in overseas shares. This is the reason why many Australians settle on trading the ASX, limiting their capacity to venture into international markets.
What if you want to put your money into US technology stocks? The ASX is heavily skewed in favour of the mining sector and there are only a few listed companies that venture in the infotech industry. On the other hand, the U.S. market, i.e. the Nasdaq stock exchange, has more than 60% of the listed companies in the tech sector.
Buying U.S. tech stocks
Some Australians think that the only way to get hold of U.S. tech stocks is by exposing their capital to a managed fund. A managed fund, though, can be expensive because of the fees and other expenses associated with handling the account.
There are three ways to access international tech shares listed in the Nasdaq. One is by using an online broker platform that targets international markets. Another is to invest in a managed fund for a fee. The last and the most accessible is to trade ETFs.
Exchange-traded funds (ETFs) expose Australians to asset classes available in the international market. There are many kinds of ETFs and each has their own sector or group of stocks to track.
ETFs are like ordinary stocks that can be bought and sold on the ASX. Here are the most popular ETFs you can trade on the ASX.
1) BetaShares NASDAQ 100 ETF (ASX:NDQ)
The NDQ provides access to a portfolio containing the biggest tech companies listed in the Nasdaq stock exchange. It tracks the NASDAQ-100 index and includes companies like Amazon, Alphabet, Microsoft, Facebook, Netfilx, Apple, and Tesla.
Management cost is around 0.48% p.a. which is lower than what traditional US-focused fund managers charge. The NDQ also has recorded an average of 20% return rate, year-on-year, since the fund’s inception in 2015.
2) ROBO Global Robotics and Automation ETF (ASX:ROBO)
The ROBO provides access to global companies that deal with robotics and artificial intelligence (AI). More than 75% of their assets are invested in Japanese, US, and German tech companies.
The fund is considered a high-risk one because the majority of the stocks under it are small and mid-sized companies unknown to many Australians. The management cost is around 0.69% which is a little expensive when compared with other international ETFs.
3) Morningstar Global Technology ETF (ASX:TECH)
TECH tracks the Morningstar Developed Markets Technology Moat Focus Index and is invested in technology giants like Microsoft and Apple.
TECH uses a different index computation compared to other ETFs. Instead of putting more weight on a stock that has a bigger market capitalization, TECH puts equal weight to each stock it tracks, regardless of their size. This resolves the issue other ETFs encounter when investing in overvalued stocks.
The cost of managing the ETF is around 0.45% p.a. which is a competitive rate in the industry.
4) BetaShares Global Cybersecurity ETF (ASX:HACK)
HACK focuses on companies that delve in the development of cybersecurity measures. It tracks the Nasdaq Consumer Technology Association Cybersecurity Index.
The index tracks only 33 companies, around 75% of which are comprised of software companies that are small to mid-sized in capacity. This helps improve liquidity but also raises the risk because of the limited number of stocks it monitors. Despite that possibility, HACK is doing well with a 20% average return per year since its establishment in 2016.
Australian residents are required to declare income from their overseas investments for tax purposes. This includes the buying and selling of international shares. Getting a tax offset is possible, though, if you’ve already paid foreign taxes on your overseas investments.
Technology stocks are the hottest items in the US market. You can participate in investing in these assets using several methods. You can do it through an online brokerage platform, a special managed fund, or through an ETF that has assets invested in international markets.
Investing in ETFs like HACK, ROBO, NDQ, and TECH can help you profit from the technology revolution happening in the U.S. and around the world. Just don’t forget to check the management expense ratio and stock liquidity to make sure trading these ETFs are to your advantage.