How investors can benefit from the vision of Amazon boss
PUBLISHED: 11:47 30 April 2018 | UPDATED: 11:47 30 April 2018
, holds a large, stuffed Pokemon doll as he addresses a New York news conference, Tuesday Nov. 9, 1999. Amazon.com, trying to bu
I read recently that Amazon’s founder Jeff Bezos plans to send tourists into space in one of his Blue Origin spaceships next year.
It doesn’t sound as though the 11-minute voyage will be one for those of a queasy nature as passengers will be thrust upwards, travelling faster than the speed of sound, while on the way down they could encounter high-altitude crosswinds in excess of 120mph.
Last week, a book called The Space Barons, written by Christian Davenport, was published, which examines the role of the three highest-profile billionaires (Bezos, Elon Musk and Richard Branson) involved in the space tourism industry. Bezos was the first of the trio to establish a space travel company (in 2000) and it would take a brave person to bet against him. Look what he’s done with Amazon.
Following a comparatively short spell on Wall Street, in 1994 Bezos founded Amazon in a Seattle garage. Initially, he sold books online but soon branched into, well, everything, successfully competing with established retailers. Today, Amazon is worth $740 billion and last year Bezos became the first person ever to have a net worth of $100 billion.
Wouldn’t it be great to own part of such an exciting, trailblazing corporation? Of course, you can buy shares in Amazon. As I write, they’re trading at around $1,560 apiece, having trebled in value over the last three years, but it’s also possible to buy shares in a company that already owns a slice of Amazon, Microsoft, Netflix, Paypal and a number of other technological giants. Shares in the Allianz Technology Investment Trust would cost around £13 each, but clearly, it offers exposure to a number of other companies besides Mr Bezos’s baby.
Traditionally, investment trusts have been an excellent form of investing over the longer term – the period most millennials should be considering as they begin their investment journey.
First introduced in the UK in 1868 by Foreign and Colonial as a means of enabling smaller investors to enjoy easy, low-cost access to shares, investment trusts are considered the original form of collective investment. Often referred to as closed-end funds, trusts issue a limited number of shares which are then traded on the stock market in exactly the same way as those of any other listed company.
Yet the investment trust structure effectively permits the fund manager to take a longer-term view of the market. By having a fixed number of shares, managers are not forced to sell holdings to raise funds to pay cash to investors when demand falls, which can be the case with open-ended funds, aka unit trusts.
Investment trusts enjoy another advantage over open-ended funds: they may retain up to 15% of the income they receive to build up cash reserves. This ensures the trust will have funds available to distribute dividends to investors during difficult times, perhaps when the companies the trust has invested in have cut dividends.
This benefit, known as ‘smoothing dividends’ is unique to investment trusts, which partly explains their popularity. It’s worth noting, however, that not all trusts create cash reserves, though most do.
Of course, a number of other investment trusts appreciate the benefit of investing a proportion of their clients’ cash in Amazon. Foreign and Colonial, for example, has significant positions in Amazon, Alphabet, parent company of Google and Facebook.
Perhaps the nation’s most popular investment trust is the often confusingly-named Scottish Mortgage Investment Trust, which has an enviable reputation among investors after becoming an early investor not just in Amazon, but also in Facebook, Alphabet and Chinese internet giants Alibaba and Baidu.
The trust is significantly less focused on mortgages for Scottish folks and much more on technology; moreover, it offers exposure to assets UK-based investors would be unable to access without opening a US dollar investment account.
I suspect a number of people sneered when Jeff Bezos said he planned to sell books via this new-fangled internet thingy. Today’s millennial investor may receive a similar response when she advises her friends that she intends putting some savings into crusty-sounding investment vehicles first introduced in 1868, but the fact that investment trusts have been around for 150 years – and look as strong as ever – offers the perfect riposte.
The Week in Numbers
Number of long-haired Kashmiri goats living on the cliffs outside Llandudno in North Wales. Ordinarily, the goats are content to remain on the higher ground, but bad weather has driven herds of them into town where they are now to be seen munching away on flowers, privets and anything else that takes their fancy.
Maximum number of animals that dog walkers will be allowed to handle in public parks in Richmond, London. The High Court confirmed the local council could impose the limit.
Amount won on Euro Millions lottery by Colin and Chris Weir in 2011. That’s £38.7 million more than last week’s £121.3 million won on the same lottery.
Sum RBS was fined following an online banking system ‘outage’ in 2014. After TSB’s botched system upgrade last week when its online/ mobile banking services repeatedly went down, the bank is likely to have to stump up a similar amount.
Streaming subscriptions through services such as Tidal, co-owned by Beyoncé, are now the biggest source of revenue for the music industry. Last year, they accounted for 38.4% of the industry’s income – a cool $6.64 billion (around £4.7 billion).
The first tranche of a €13 billion (£11 billion) tax bill imposed by the EU on Apple to be handed to the Irish government next week. Two years ago, the EU calculated that the tax paid by Apple on its operations in Ireland was so low that it was tantamount to illegal state aid. The Irish government say they’re reluctant to take Apple’s money, but the EU says they must.
Peter Sharkey read economics at the University of Bristol. He worked as an accountant on three continents and has been a company director and investor for more than 30 years, building and selling three different companies.