Australian investors don’t need to venture too far to take advantage of offshore growth opportunities and benefit from foreign currency earnings. Home grown success stories that operate overseas like Goodman Group, CSL, Orica, Brambles, Worley, Sonic Healthcare, and Aristocrat Leisure offer a certain level of diversification, but there are many other names, sectors and opportunities that Australian investors simply cannot get exposure to by investing locally.
The Aussie market represents only 1.5 per cent of the total world share market and it is highly concentrated by industry, with Resources and Financials dominating over 50 per cent of the Index by value. Local stocks are also comparatively smaller in terms of market capitalisation and liquidity.
There are 80 major stock exchanges in the world and 55,205 active securities with a total value of ~US$111 trillion. The Australian share market is currently ranked 12th with a market capitalisation of A$2.5 trillion (US$1.6 trillion). While there are 2047 stocks listed on the ASX within 11 sectors, most of the value is made up of the top 200 stocks by market capitalisation (The S&P/ASX 200 Index).
Bell Potter’s Noosa branch manager and stockbroker Mark Winnell explains, “There are many names, products, sectors and opportunities that Australian investors simply cannot get exposure to within the ASX.”
“Quite frankly you miss out on the other 98.5 per cent if you only invest in the Aussie market.”
International investing exposes you to the businesses and brands that feature in your daily life. Think about your phone (e.g. Apple or Samsung), credit card (e.g. MasterCard or Visa) or shopping (e.g. Amazon, Nike, Gucci).
Global companies not only offer geographical and industrial diversification, but also tap into the next generation of technological advancements (e.g. NVIDIA, Microsoft, Google).
Financial services firm Morningstar recommends investors with a Conservative risk profile should allocate 7% of their portfolio to international equities, and up to 35 per cent for a Growth risk profile. So what’s stopping investors from diversifying their portfolios and owning a small part of these familiar brand names?
Mark suggests that it’s home country bias.
“Clients often want to invest in what they know. If you’ve been a Commonwealth Bank customer your whole life, you might not be thinking about how a global stock like Visa, for example, is disrupting digital payments.”
“We’ve also found that clients expect for the process to invest in international shares to be difficult – when it’s as easy as investing in local shares.”
Bell Potter client Lucy Thompson spoke with us about her recent experience venturing into international markets. “It was as simple as investing in Aussie shares. My adviser recommended some global tech stocks to invest in. There was no additional paperwork and I can see all my holdings online under the one account.”
“The global stocks have helped diversify my existing portfolio and are helping me get closer to financial freedom.”
To learn more about how international shares could compliment your portfolio, you can reach out to the Bell Potter Noosa team on (07) 5354 2000 or visit the team at Suite 8, 6-12 Bottlebrush Avenue, Noosa Heads.
