Australians Invest A Record AU$5 Billion In US Stocks: What's Driving The Trend?

Recent data from investment firm Global X has revealed that Australians have invested a record AU$5 billion into Wall Street stocks in 2024, driven by the growing interest in tapping into America's booming economy.

The trend is especially appealing to the new generation of Australian investors, as technology and phone apps make it easier than ever to trade U.S. stocks online.

"Net flows into Australian ETFs exceeded AU$30 billion in 2024, breaking the previous calendar year record of AU$23.6 billion set in 2021," Global X's product and investment strategist Marc Jocum told the ABC.

The U.S. stock market, particularly the exchange-traded funds (ETF) market, is growing rapidly, with a 10-year compound annual growth rate of 33%.

As the U.S. stock market offers significant returns, many Australians are eager to benefit from this trend.

Like Ed Freeman, a dedicated investor who holds hundreds of thousands of dollars in Wall Street stocks, including shares in Warren Buffett's Berkshire Hathaway.

"I started building from 2015," Freeman shared. "If you're holding long term, you'll be fine."

U.S. market outperforms Australian shares

According to Saul Eslake, Bank of America's chief economist, the Australian stock market has lagged behind its U.S. counterparts. Since 2019, the Australian share market, All Ords, has grown by just 25%, while the main index in the U.S. S&P 500 has surged 84%, and the NASDAQ has seen an impressive 119% increase.

For instance, investing in NASDAQ shares would have earned investors nearly five times more than the same amount invested in Australian shares, Eslake said.

Additionally, the weaker Australian dollar against the U.S. dollar further enhances the appeal of U.S. investments. Eslake pointed out that not only do investors gain from the stronger U.S. market, but they also benefit from more Australian dollars when converting earnings from U.S. dollars.

Lure of future industries

With major tech companies and innovative industries dominating the U.S. market, the attraction is clear: a chance to get in on the ground floor of the next big thing, from cutting-edge technologies to high-growth sectors that aren't as prevalent in Australia's own markets.

While the Australian stock market is dominated by miners and banks, it offers limited exposure to technology stocks. In contrast, the U.S. stock market -- especially the NASDAQ -- has a wealth of opportunities in tech companies and industries of the future.

Eslake believes that many Australians are turning to the U.S. market to get involved in these growing sectors.

New generation of investors embrace U.S. stocks

Technology has made it easier than ever for Australians to invest in U.S. stocks, especially for the new generation of investors, who are increasingly turning to online platforms and phone apps for their trades.

"Almost all of the new generation of investors are trading online themselves," Michael McCarthy, Chief Commercial Officer at MooMoo Australia, said. "Many of them on the phone app. That seems to be the way of the future."

Potential risks for Australian investors

Both McCarthy and Eslake warn against the temptation of "easy money" in investing.

Eslake recalls the tech bubble of the late 1990s, which ended in disaster for many who stayed in the market after it collapsed in 2000. Today, some experts worry that similar risks are building in the U.S. market.

Freeman shares a similar concern, fearing that many Australians may lose money due to a lack of research and preparation.

"It's almost too easy to set up an online brokerage account and get started," Freeman said. "That's probably part of the problem. They don't do enough research or due diligence before they make some of their investments."

What to expect in 2025?

As for 2025, analysts remain optimistic about the U.S. economy, though much will depend on the decisions of the incoming U.S. president, Donald Trump, and the direction of interest rates both in the U.S. and Australia.