This article was written in collaboration with UOB Kay Hian. All views expressed in this article are the independent opinion of DollarsAndSense.sg
When it comes to investing, there are many ways we can identify the stocks that we want to invest in. Ideally, the stocks we invest in should follow the investment objectives that we have. If we are investing for income, then we should look at stocks that are able to consistently generate free cash flow because that would enable the companies we invest in to pay out regular dividends to us, its shareholders.
If we are investing for capital gain, then we should look for growth stocks which are leading companies in sectors that have huge potential to increase its profitability in the future.
While there are many full-time investment experts whose job is to find the best investment opportunities in different sectors and stocks, it doesn’t mean that retail investors like you and I cannot pick for ourselves the right stocks to invest in, if we pay close attention to the companies that we engage with regularly.
Retail Isn’t Dying, It’s Evolving
When people see empty malls around them, many simply think that the retail industry is dying. However, that’s not really the case. Sure, major U.S. retailers in the past such as JCPenny, Sears and Macy’s are no longer the massive companies they used to be. However, the reason for this isn’t because the retail industry is shrinking.
In fact, if you define retail as the process of selling goods and services to consumers, then the retail industry isn’t just surviving today, it’s actually thriving!
You don’t have to look too far to realise that retail is thriving. In recent years, there have been a proliferation of ‘shopping days’ such as Black Friday (29 November 2019, the first Friday after Thanksgiving in the U.S.) and Cyber Monday (2 December 2019, the first Monday after Thanksgiving in the U.S.). Not to be outdone, Singles’ Day (11 November every year) gave singles (and many other non-singles as well) a excuse chance to spend on themselves.
While Black Friday and Cyber Monday originated from the U.S and Singles’ Day started from China, they are already worldwide shopping phenomena that retailers all around the world are capitalising on to offer great deals to customers, with the ultimate intention to drive up their sales. For example, Singles’ Day in China last year saw e-commerce giant Alibaba net a record US$30 billion.
As an investor, if we want to invest in online retail growth, then we ought to ask ourselves which are the companies in pole positions to best capture the growth in this area, and to invest in the stocks of these companies.
Buying On Singles’ Day, Black Friday Or Cyber Monday? Why Not Invest On That Day As Well?
While many of us are hoping to score for ourselves great deals on Singles’ Day, Black Friday and Cyber Monday, the irony is that we may actually be missing out on the best deals when we spend money to buy products from these e-commerce giants, rather than invest into their stocks instead.
With annual sales records being announced by the likes of Amazon and Alibaba each year, it’s fair to say that these companies are definitely the biggest beneficiaries of the evolvement of the retail industry.
The investment thesis here is simple. If we are already spending money with some of these companies and contributing to their revenue, why not ‘spend’ some money to also invest in their stocks instead, and be part of their future growth as a shareholder.
For example, if instead of buying the first iPod in 2001 for US$399, you invested the money into Apple stocks, your US$399 investment would now be worth US$58,000 today. That’s an insane return of more than 145 times your original investment – over a period of just 18 years. Similarly, if you invested US$1,000 in Amazon when it first IPO in 1997, your shares will be worth about US$1.1 million today.
The point we are making here is that if there are companies that you are already happy to spend money with on a regular basis, such as the e-commerce giants that are offering great deals on Singles’ Day, Black Friday and Cyber Monday, then you should also consider investing in them, as opposed to just spending on their products.
Even if you are not looking to shop on Singles’ Day, Black Friday or Cyber Monday, you can also ask yourself what are some other large technology providers that you have been spending money with regularly. This would include subscription services that are offered by the likes of Netflix and Spotify.
Here are some examples of companies that you could have invested in – and the returns they would have given you since IPO:
How To Invest In Overseas Stocks Today?
If you want to invest in some of the biggest companies in the world, you will need a brokerage account that gives you access to overseas markets such as NYSE and NASDAQ. It’s on these two U.S. exchanges, which are also the largest in the world, that you can find many of the biggest and most exciting e-commerce giants such as Alibaba & Spotify (NYSE) or Amazon and Netflix (NASDAQ).
Instead of opening an overseas stock brokerage account, Singapore investors can choose to invest in overseas markets through a local brokerage account such as UOB Kay Hian. The benefit of doing so is that such an account will allow us to invest and trade in both local and overseas markets, using a single account.
Besides offering access to overseas stock markets, UOB Kay Hian also offers an extensive range of products such as equities, bonds, Contracts For Difference (CFD), CFD 10 – which is a unique short-term CFD that provides interest-free financing of up to 10 times leverage for the first 10 days, Leveraged Foreign Exchange, DLCs, ETFs, Unit Trusts and more.
To encourage investors to start investing in stocks which they have been spending money on Singles’ Day, Black Friday and Cyber Monday, UOB Kay Hian is running a special U.S. stock trading promotion during this end-of-year shopping fest, where investors who buy U.S. stocks through UOB Kay Hian’s UTRADE platform from 11 November to 13 December will stand a chance to win up to 5 Alibaba shares (worth about US$933), which would be credited directly to their accounts on UTRADE platform.
If you trade on Black Friday (29 November 2019) and Cyber Monday (2 December 2019) itself, you can double your chances of winning the free Alibaba shares. In total, there will be 1 Grand Price of 5 Alibaba shares and 2 Runners-up of 2 Alibaba Shares each. Think of this as a lucky draw, with the only significant difference being that your prize will also have the potential to grow in value over time as well!