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SHARES & CRYPTO

"These are the three reasons I might invest in the US"

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By Kurt Walkom

2023-03-212 min read

Kurt from Pearler shares three light-hearted reasons he'd consider investing directly in US shares.

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I'm all about long term, passive investing. Having said that, sometimes it can be fun to stray outside the lines of automated investing in ASX-listed ETFs.

Looking at the current data on our platform, 26% of Pearler ETF investors also own direct shares. This isn't that surprising, as it is common for ETF investors to have a core ETF portfolio (80% - 99% ETFs) and invest the remainder (1% - 20%) in direct shares. They call this the [core/satellite approach](https://pearler.com/explore/learn/blog/what-is-a-core-satellite-approach).

On one hand, the data clearly shows the best long term returns come from a simple, passive and automated investing approach. On the other, investing doesn't need to be an absolute optimisation of long term returns for everyone, all the time.

Here are three reasons I could be tempted to invest in US shares:

  1. Love the company's mission
  2. Love the company's products
  3. Participate in a short squeeze

Below I run through a few US-listed companies that sell products or services I admire or use in my day-to-day life. They aren't recommendations and I don't directly own shares in any of them...I leave that to the indexes ;-)

1. Love the company's mission

Is the company is working on solving a problem that is very important to me? If so, I could rationalise investing a small percentage of my portfolio to support them.

Two themes that fit these criteria for me personally are financial wellness and sustainability. Sadly, I do not know of any US-listed companies that are having a significant positive impact on financial wellness. On the sustainability front, however, there are a few!

  1. Tesla Inc. (TSLA) – A leading electric vehicle (EV) company, working towards a sustainable transportation future with their battery and solar energy technology.
  2. NextEra Energy Inc. (NEE) – A clean energy company that builds and operates renewable energy sources, particularly wind and solar power.
  3. Xylem Inc. (XYL) – They provide water solutions that promote sustainability, such as water reuse and conservation techniques.

2. Love the company's products

Does the company make products that improve my daily life? If so, being an owner gives me more than just financial benefits. In this case, I could also rationalise investing a small percentage of my portfolio.

For me, these companies are all about impact in my life. Three that come to mind are:

  1. Apple Inc (APPL) - A leading designer and manufacturer of consumer electronics, computer software, and online services. I've recently converted from a Windows laptop to a MacBook and the integration of the Apple-verse has had such a huge benefit on my day-to-day efficiency and effectiveness.
  2. Spotify Technology S.A. (SPOT) - A leading music streaming platform that allows users to access millions of songs and podcasts from around the world. I'm a bit of a Spotify addict - I listened to 41,000 minutes last year. Music is a core part of my life and Spotify has always made it a great experience, and it continues to get better.
  3. Lululemon Athletica Inc. (LULU) - A leading athletic wear company for yoga, running, training and other fitness activities. I've fallen in love with yoga over the past few years, and while I've recently found an even better mat, I'm yet to find any activewear that compares. I also love their trackies for travelling.

3. Participate in a short squeeze

This one's a bit cheeky and relates to #1.

I care deeply about financial wellness, but there are very few companies focused on improving people's financial lives. On the other side of the coin, there are a number of financial institutions that develop and market products in a way that harms people's financial wellness.

If an unethical financial institution was on the receiving end of a short squeeze, I'd be tempted to support the effort.

Two famous retail investor-driven short squeezes in 2021 were:

  1. GameStop (GME) : retail investors on Reddit coordinated a buying frenzy, driving up the stock price from less than $20 to nearly $500 in a matter of weeks. The stock price had been heavily shorted by large institutional investors, and the short squeeze caused significant losses for those investors.
  2. AMC Entertainment (AMC) : Similar to GameStop, retail investors on Reddit coordinated an investing frenzy, driving up the stock price of the theatre chain from around $5 to over $70 at its peak. Short sellers who had bet against the stock were forced to cover their positions, leading to significant losses.

Summary

Right now, investing is chiefly about optimising long term returns for me right now. However, there is a potential future where I invest a small percentage of my portfolio into US shares because of one or more of the reasons mentioned above.

What is a "small percentage"? For me, 1% - 5%. It's enough to be meaningful emotionally, but not enough to significantly impair the growth of my investments.

If you've been keen to invest in a company for reasons other than absolute investment returns, I hope this article has helped normalise that option for you.

Happy investing! 💸

Disclaimer: the above-mentioned companies are merely examples of US-listed companies that sell products or services Kurt uses or admires, and should not be construed as recommendations or advice. Kurt does not own individual shares in any of the companies mentioned.

WRITTEN BY
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Kurt Walkom

Kurt is one of Pearler's co-founders. After reading the Barefoot Investor at the age of 14, Kurt got started on his Financial Independence journey early. He invested his $15,000 in "life savings" in 3 stocks based on a stockbroker's recommendation – right before the Global Financial Crisis. Seeing his share portfolio plummet in value (and never bounce back), Kurt resolved to learn all he could about investing, and why retail investment advice gets it so wrong, so often. In 2018, Kurt co-founded Pearler with his two friends, Hayden and Nick, to make it easier for everyday Aussies to invest in shares the right way - incremental amounts in diversified portfolios, for the long-term.

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