How to choose which US companies and funds to invest in
The process you might go through to choose a US investment is really similar to choosing an NZ investment—you’ve just got more options to choose from!
You can access thousands of US companies and exchange-traded funds (ETFs) across the Nasdaq, New York Stock Exchange (NYSE), and Chicago Board Options Exchange (CBOE) on Sharesies.
Compare that to the New Zealand Stock Exchange (NZX), which has 165+ companies and ETFs. That’s a small proportion of the number of investments available on the US exchanges!
So it can get a bit overwhelming. But don’t worry. In reality, the process you might go through to choose a US investment is really similar to when you choose an NZ investment. There are just more options to choose from.
And that’s a good thing! Because the more investments you have to choose from, the easier it is to fine-tune your portfolio to your exact goals, risk profile, and values. This is especially true if you continue to invest in NZ shares, because adding US shares gives you more diversification.
Start with the basics
There are a few key differences between the NZ and US share markets—like the different opening hours, and the impact that currency movements can have on your investments.
Your risk tolerance: are you comfortable and able to take more risk in exchange for a shot at a higher return?
Your time horizon: how long do you expect to leave your money invested for?
The type of return you want: do you want to sell your shares for more than you paid for them, or do you want to earn income through dividends?
The rest of your portfolio: how does a new investment fit in?
The company’s values: do they line up with yours? Is this important to you?
The company’s impact on the future: are you happy with the direction it’s moving in?
Consider these questions, and put together a rough “wish list” of things you want in an investment. You should have a few different criteria to help narrow things down.
Start narrowing down
Once you’ve figured out some broad criteria, you can start narrowing things down.
We’ve created filters in Sharesies to help you with this, including “companies”, “ETFs”, and the different exchanges. Investments are also categorised by things like the sector they’re in (“Food and drink”, “Energy and utilities”, etc.) or if they’re an index fund, among other things.
Once you filter the investments, you can narrow down even further. For example, if you choose the “Healthcare” category, you’ll find pharmaceutical companies, medical device companies, networks of doctors, and more. You can then sort the results by things like market cap, highest annual returns, or highest annual dividends.
Combine the information with the personal wishlist you came up with before to shortlist a few promising investments. Then, it’s time for due diligence!
Do your due diligence
We’ve talked about due diligence before—it’s just a fancy term for doing your homework.
Fundamentally, due diligence is pretty much the same when you’re investing in US shares as it is when you’re investing in NZ shares. You need to have a clear understanding of what’s important to you, and what you’re looking for in an investment. Then, you can start looking for information to give you an idea of how well a particular investment will deliver on whatever it is you’re looking for.
For example, if you’re really passionate about investing in things that align with your values, you might want to search news stories about the investments on your shortlist. Then you can ask yourself if those companies and ETFs are doing things that line up with your values.
Or if you’re particularly interested in digging into the details of a company, you could have a read of their annual report or financial results—you can find these on the relevant company or stock exchange’s website.
The big difference is in scale. Since there are a lot more companies and ETFs in the US, there’s a lot more information to find! This is a good thing, because there’s more sources of specialised business information and analysis for you to take a look at.
One great place to start is to set up a Google Alert for any companies or sectors you’re interested in. You’ll get an email every time they get mentioned in the news, which helps to paint a picture over time.
There are also a bunch of places you can go to find financial news and analysis, such as:
Once you’re invested, make a habit of checking these every now and again, because not all the news in the US makes it to New Zealand.
Remember, due diligence is a personal choice—what you research and how you research it is up to you!
It’s time to get into it! You’ve made your shortlist, you’ve done your due diligence, and now it’s time to invest.
The great thing about having so many investments available is that there’s so much choice. This means that you can approach investing with very narrow criteria, and still find a handful of companies and ETFs that meet those criteria.
So don’t be overwhelmed by all the options. Rather, use them as an opportunity to find the perfect investment for your goals, risk tolerance, and values. Then get involved!
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.