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For generations of ASX investors, putting money into US shares has felt like a given. The US market's remarkable run over the last couple of decades has been hard to ignore, consistently outperforming many other global markets. But with recent volatility and shifting economic landscapes, is the case for US share investment still as strong as it once was? Let's take a fresh look, and see if it’s still worth considering for your portfolio.

The Historical Performance – A Golden Era

Let's be clear: the historical performance of US shares has been exceptional. Driven by technological innovation (think FAANG stocks – Facebook, Apple, Amazon, Netflix, and Google), a strong corporate culture, and a relatively stable political environment, the US market has delivered impressive returns. This has led many Australian investors to allocate a significant portion of their portfolios to US equities, often through ETFs or managed funds.

Why the Recent Concerns?

However, things have changed. We've seen rising inflation, interest rate hikes by the Federal Reserve, and concerns about a potential recession. The US dollar has also been strong, which can impact returns for Australian investors when converting back to AUD. Furthermore, the dominance of large technology companies has raised questions about concentration risk – what happens if these giants stumble?

The Bull Case Remains Strong

Despite these concerns, there are compelling reasons to remain optimistic about US shares. Firstly, the US economy remains the largest and most innovative in the world. The US is a leader in emerging technologies like artificial intelligence, renewable energy, and biotechnology – sectors with significant growth potential. Secondly, US companies are generally more profitable and have stronger balance sheets than their counterparts in many other countries. Thirdly, the US market offers a wider range of investment opportunities than the ASX, allowing for greater diversification.

Diversification is Key

It's crucial to remember that diversification is a cornerstone of sound investment strategy. While the US market may face short-term headwinds, it's unlikely to cease being a global economic powerhouse. A well-diversified portfolio should include exposure to a range of asset classes and geographies, and US shares often play a vital role in that mix.

How to Invest in US Shares from Australia

Australian investors have several options for gaining exposure to US shares:

• Exchange Traded Funds (ETFs): These offer a convenient and cost-effective way to invest in a broad basket of US stocks.
• Managed Funds: Professionally managed funds can provide access to US equities with expert stock selection.
• Direct Investing: Platforms like Interactive Brokers allow you to directly purchase US shares, but this requires more research and active management.

The Verdict: A Measured Approach

The case for investing in US shares isn’t as straightforward as it once was. While the historical returns have been impressive, current market conditions warrant a more cautious and considered approach. However, the long-term potential remains significant, particularly for investors with a diversified portfolio and a long-term investment horizon. Do your own research, consider your risk tolerance, and seek professional advice before making any investment decisions.