Investing in United States-listed shares is something that more and more Aussie investors want to do. Whilst our own S&P/ASX 200 Index (ASX: XJO) is a top place to invest your money, there are simply companies over in the US that are a cut above our banks and miners. The two largest companies on the ASX 200 are CSL Limited (ASX: CSL) and Commonwealth Bank of Australia (ASX: CBA). These are both proud companies with long and prosperous histories (both used to be government-owned businesses, coincidentally).
But they pale in comparison with the two largest companies in the US – Apple Inc. (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT). The US simply has a far larger range of global companies than the ASX, and also a far larger capital base. There’s a reason our home-grown Atlassian Corporation (NASDAQ: TEAM) isn’t Atlassian Limited. It’s because it lists on the Nasdaq, rather than the ASX.
SPY vs SPY
So, if you want to invest in the US, what are your options? US focused exchange-traded funds (ETFs) are a great place to start. These funds hold baskets of US shares and are normally very cheap, even compared with our own ASX ETFs.
By far, the most popular US index is the S&P 500 Index (SP: .INX). This index holds 500 companies (shocker) that are selected on a range of factors including liquidity, size and profitability. You can invest in this index on the ASX through the iShares S&P 500 ETF (ASX: IVV), which charges a management fee of 0.04% per annum.
You could also try the BetaShares Nasdaq 100 ETF (ASX: NDQ). Rather than tracking the 500 largest companies, NDQ instead only holds 100 of the largest companies listed on the tech-heavy Nasdaq by aiming to track the NASDAQ-100 (NASDAQ: NDX). As such, this ETF has a far heavier focus on tech stocks, which some investors might like. But it also charges a higher management fee of 0.48% per annum.
The best US shares ETF?
My personal favourite US ETF is the Vanguard US Total Market Shares Index ETF (ASX: VTS). Unlike the S&P 500, this ETF holds more than 3,500 US companies, which means it has more exposure to the smaller side of the market. It also holds the shares that don’t make the cut for the S&P 500, including the popular electric car maker Tesla Inc (NASDAQ: TSLA). VTS is marginally cheaper than IVV as well, charging a paltry 0.03% management fee per annum.
Whilst I think any of these US-based ETFs would make a good choice for an Aussie investor, VTS is my favourite pick of the bunch with NDQ a close second. Low fees, exposure to some of the best companies in the world, and massive diversification, all in one fund. What more could you want?
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Atlassian, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and CSL Ltd and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon, Apple, and BETANASDAQ ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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