Australia’s share market is only a small drop in the ocean when it comes to international investing, but there is a common myth that investing overseas can be difficult. It’s actually the complete reverse. It can even be easier and cheaper than ever to invest overseas than it is in Australia.
Why invest in international shares?
Diversification is an important part of any portfolio so limiting yourself to a local market could be limiting your performance. Investing internationally can give your portfolio exposure to some of the largest companies in the world. Some major industries and sectors such as technology are not as well represented on the Australian stock market and are much more accessible overseas.
As we all know, the US market is the world’s stock market and is where the world trades. The dollars traded in Apple shares in one day is more than twice the total amount traded on the ASX. That’s right — Apple trades double as much as the entire Australian market on any given day. For those Australians who invest in stock markets overseas, approximately 85% of their investment dollars go to the US stock market, into stocks like Amazon, Microsoft, Netflix, Berkshire Hathaway and Alphabet (Google). If it’s not going into these household names, it’s typically invested in emerging companies that are growing on a global scale like Shopify, Nvidia, Square and Atlassian — these companies are all up in value more than 100% over the last year.
Related reading: How to buy US shares in Australia?
Some Aussies have been sold on the idea that to invest outside of Australia, you need to get into a managed fund for overseas exposure. This simply isn’t true either and when you do invest through a managed fund, you could be paying unnecessary management fees for something you can do yourself while being limited to what the manager buys.
Platforms like Stake make it easier to find and invest in overseas stocks for Australian consumers. When we consider the current hype around Bitcoin and cryptocurrencies — with a news article on crypto surfacing almost every day — it’s clear that many Australians don’t want to just put their money in local investments, they want global exposure too.
As technology continues to develop and impact our lives more and more, the next generation of companies like Airbnb, Dropbox and Uber are likely not going to be listed on the ASX.
International Share Trading Platforms September 2021
The table below displays some of our referral partners’ International Share Trading platforms. The display order does not reflect any ranking or rating by Canstar. The table does not include all providers in the market. Canstar will earn a fee from the providers displayed in the table. The fee levels determine placement in the table. Canstar may also earn a fee for referrals from the table, such fee may vary between providers.
This information is not an endorsement by Canstar of investments or any specific provider. Canstar is providing factual information supplied by providers. Investments are speculative, complex and involve risks. Canstar is not providing a recommendation for your individual circumstances or in relation to any particular product or provider.
How can Aussies invest in international shares?
There are three main ways to buy international shares:
- Investing in shares directly using an online broker
- Through an index fund or exchange traded fund
- Through a managed fund
It’s not only the world’s largest companies that can be traded on the US markets. There are also over 2,000 Exchange Traded Funds (ETFs) that allow investors to get exposure to asset classes not available in Australia — whether it be Artificial Intelligence, the Defence Sector or Corn, there is an ETF for the willing investor. Even if you are fearful and believe the market is going to fall, you could make money with the raft of inverse ETFs that make gains when stock markets fall.
What are the risks of investing in international shares?
Every investment option has a level of risk involved and investing internationally is no different. It is important that you understand the variance of the market you are investing in and how this may impact your investment.
When markets look shaky, Australians have two options — you either sell or hope. Yet at a global level, traders have access to returns when markets go up or down. For those who have access to the diverse range of products in the US markets, the ability to profit from a downturn is very real, in my opinion. Boiled down to raw figures, at the time of writing there are just three ETFs available to get short exposure to markets on the ASX, compared to more than 130 inverse ETFs on US markets. For those who stay focused on Australian shores, they could be missing a huge opportunity to make money when markets fall.
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