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As a British investor, it’s the first place I think of when buying shares London Stock Exchange. Five years ago, the flagship FTSE 100 The index rose 12%. It’s not bad. Then again, not that good.
Well across the pond, S&P 500 The index went up 91% at the same time. Indeed, that index has benefited from strong performance by some specific technology stocks. But I mean The Dow Jones Industrial Average – which is almost like Footsie in terms of corporate mix – is high 57% at that time.
That gives me time to think. As a Blighty investor, should I be buying more stocks in the S&P 500? I think there are some good reasons for considering it – but there are also arguments.
Here’s one expert and one scam I see when it comes to buying S&P 500 stocks.
Going there has huge growth opportunities
This week saw strong results from the UK software group Sagesending its share price soaring. But it also got me thinking about how few options there are as an investor looking to buy into the big tech companies in the London market.
Sage is a technology company – but not exactly on the edge of market growth. Provides accounting software for small and medium-sized businesses. Even after its strong performance this week, the company’s market capitalization is less than £13bn.
Even so, an investor who bought into Sage over the past five years would be sitting on a 74% return.
But compare that to the technical share I own from the S&P 500, ie Alphabets (NASDAQ: GOOG) (NASDAQ: GOOGL).
Its market-cap is over $2trn (about £1.6trn). Over five years, Alphabet’s operations have evolved with Sage’s. Alphabet’s share price has risen 159% at that time.
These are just two examples, but I think they point to a larger conclusion. The S&P 500 is full of technology stocks that I think are on the cutting edge of innovation.
Alphabet has a cash cow in the form of its search business, although I see the risk of losing market share to platforms like TikTok and legal concerns, perhaps ultimately forcing the group to break up.
But it is also involved in many other areas, from its short video rival TikTok (on YouTube) on self-driving cars and balloon-based Internet connectivity.
Such a breadth of technological innovation from a large, established business is much easier to find among members of the S&P 500 than in the London market.
Investing like Warren Buffett
But since the British merchants Tesco to Marks and Spencer have found their costs, the US can be a difficult market to crack.
Firms like Alphabet are multinational companies based in the US. So I think investing in them is beneficial in understanding the US market, from its regulatory environment to Stateside accounting principles.
Like Warren Buffett, I like to stick with what I understand when buying stocks. So while I’m willing to invest in some S&P 500 companies, my comfort zone is hunting for bargains in the market I understand best.
Fortunately, at the moment, I think most UK stocks are worth more than their US counterparts!
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