How to buy into some of the world's biggest companies

Electric car and battery maker Tesla recently announced a 3 for 1 share split. It means existing shareholders each received two additional shares for every share they owned prior to the split. It’s not a get rich quick scheme. Each share is valued at one-third of the price of an investor's original share.

Part of the motivation for the share split was reportedly to make Tesla shares more affordable – and therefore more attractive to retail investors. Tesla shares were certainly not at the ‘cheap’ end of the scale. They were trading for around $US900 ($A1,300) pre-split, and are now priced at about $US300 ($A429). That makes sense given the 3-for1 split.

Other big-name companies that have previously split their shares include Alphabet, which owns Google, and Amazon.

A share split is not always a bad thing for investors. A NASDAQ study found that simply announcing a share split can see a stock’s value rise by 2.5%. One year after the split, the share can still be valued 5% above the pre-split price.

Of course, some companies – like Warren Buffet’s Berkshire Hathaway, would need a lot more than a share split to make the stock affordable to ordinary investors.  Berkshire Hathaway is trading at an extraordinary $US437,500 per share, equal to about $A633,000. Owning just two shares would make you a millionaire!

Fortunately, Berkshire Hathaway B-class shares became available in the 1990s, and these are trading for a more modest $US290 ($A420).

Shares listed on the Aussie market tend to be relatively affordable. Among the more expensive stocks are CSL ($288) and Cochlear ($214), with Macquarie Group ($173) rounding out the top three.

These values can make shares in our biggest companies more accessible to individual investors – certainly in comparison to some of the corporate giants we see on overseas markets. However, it can still take a solid chunk of capital to build a diverse portfolio – money that some investors just don’t have.

The good news is that investors don’t have to wait for their favourite company to flag a share split to be able to buy in.

Exchange traded funds (ETFs) offer an easy and affordable entry point.  As a guide, Vanguard’s International Shares ETF has holdings in Tesla, Apple, Alphabet, and yes, Berkshire Hathaway. Better still, it trades for around $94. So for the price of dinner-for-two, you can gain exposure to a vast selection of some of the world’s biggest companies.

The diversification of ETFs is often touted as one of their primary advantages. And this is definitely a plus of ETFs. However, ETFs have also become a great leveller in the world of investing. You no longer need to be a millionaire to indirectly own a stake in leading companies whose shares can be priced well beyond the reach of the average Aussie investor – and that’s a plus for all of us.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.