When it comes to investing, expert and author Danielle Ecuyer has one important piece of advice: companies don’t last forever.
While every investor will have a different approach, the author of 'Shareplicity 2: A guide to investing in US stock markets' believes it’s critical to remember that just because a company has performed well historically, and seems impervious to failure, doesn’t mean it won’t collapse in the future.
“The companies that are going to be successful in 10 years time are still probably smaller companies at this point in time, and that’s how you make the most amount of money,” she told Yahoo Finance.
The trick, of course, is being able to pick the winners from the duds.
“Whatever you buy, I always think that you want to go for the quality, best-in-class companies,” Ecuyer said.
She said a problem that a lot of young people fall into is that they tend to follow investment movements led by their older counterparts. This means they end up investing in safer, “old economy” companies, rather than picking up exposure to faster growing, newer stocks.
But, she added, it can go the other way, noting the uptick in cryptocurrency interest among younger investors.
When it comes to trends, there are a few she’s keeping an eye on, including clean energy, cybersecurity, digitalisation and ecommerce.
“Ecommerce is still at a very early stage, which I think a few people would find completely amazing, but ecommerce in the US is only 20 per cent of the total retail market,” she said.
“There’s still a trend that is going in that direction, that is showing no signs of diminishing.”
For example, she considers stocks like Shopify and Amazon in this bracket.
Ecuyer said she’s also monitoring the cyber-security sector, which she believes has a “huge, long runway”.
“There are some good exchange-traded funds (ETFs) out there that people can find, either in Australia or in the US, so that you can capture some of the new cyber-security software as-a-service companies.”
Those include companies like CrowdStrike and Zscaler.
In Australia, ETFs include the BetaShares global cyber-security HACK ETF.
The financial technology, or fintech, market has grown rapidly in recent years as products like Afterpay have taken off, Ecuyer said, while Square also has growth potential.
Ecuyer said she’s also watching the clean energy sector, although noted that it can be tricky to gain exposure to clean energy stocks in Australia.
“You can look at the likes of Tesla, or the more traditional car manufacturers like Ford and General Motors which are trying to transition [to cleaner methods],” she said.
“Alternatively, there are a suite of ETFs that can capture the likes of the solar energy and battery space, or the lithium space, or the clean energy technologies.”
Among these are the BetaShares new climate change innovation ERTH fund.
“There’s an ever growing suite of ETFs - you don’t have to move out of your lounge room to invest in the US. It’s not nearly as complex as it used to be, you don’t have to invest directly, you can do it here in Australia.”
However, Ecuyer said it’s critical that investors take the time to look under the bonnet before choosing to invest through ETFs.
Emphasising that her insights aren’t financial advice, she said investors need to do their own research every time.
“I really strongly recommend that people… try and understand that an ETF is a complex financial product,” she said.
They’re useful, but they’re not as simple as they may seem, she added.
“I really want people - when they buy these products - to understand what stocks they’re holding in there, because some of them would get a bit of a surprise,” she said.
“Let’s say you don’t want to own gaming, tobacco or fossil fuel stocks - a lot of people don’t realise that when you buy an index ETF, you’re picking up all of these things that may not meet your values.”
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