Diving into international shares can open up new possibilities for investors looking to grow their money beyond Australia’s borders and explore a variety of investment markets. It’s a step towards discovering what the global market has to offer, from household names in the US to fast-growing companies in Asia and Europe.
Investing overseas isn’t just about chasing higher returns: it’s also about building a well-rounded portfolio that can weather different economic climates. Whether it’s through buying stocks directly, investing in funds, or trying out derivatives, there’s a way for every type of investor to tap into foreign market shares. The aim here is straightforward: to give your investments a chance to benefit from the world’s economic diversity.
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Examples of International Equities
US Markets
The United States is home to the world’s largest and most well-known stock exchanges, offering many investment opportunities in international equities. The New York Stock Exchange (NYSE) and the Nasdaq are two primary markets where investors can find companies ranging from technology giants to traditional industrial firms.
- New York Stock Exchange (NYSE): Home to established companies like Coca-Cola, Disney, and IBM.
- Nasdaq: Focused on technology and innovation, hosting companies like Apple, Google’s parent company Alphabet, and Amazon.
These markets provide Australians access to a diverse range of sectors, including technology, consumer goods, healthcare, and financial services.
Europe and UK
Europe and the UK offer a variety of markets with companies known for their global presence in a range of industries. The London Stock Exchange (LSE) and the Frankfurt Stock Exchange are among the key markets, along with Euronext, which spans several European countries.
- FTSE 100 (LSE): The Financial Times Stock Exchange (FTSE) 100 index features the top 100 companies on the London Stock Exchange such as GlaxoSmithKline and HSBC.
- DAX (Frankfurt Stock Exchange): A market index that hosts leading German companies, including BMW, Siemens, and Volkswagen.
- Euronext: Encompasses stocks like LVMH from France and ASML from the Netherlands, representing luxury goods and technology sectors, respectively.
These markets are known for robust financial services, automotive, pharmaceutical, and luxury goods companies.
Asia
Asian markets are renowned for their dynamic growth, with the Tokyo Stock Exchange (TSE) and the Hong Kong Stock Exchange (HKSE) leading the way. They offer access to various sectors, from technology and manufacturing to financial services.
- Nikkei 225 (TSE): A stock market index for the Tokyo Stock Exchange that includes prominent Japanese companies such as Toyota, Sony, and SoftBank.
- Shanghai Stock Exchange (SSE): Offers opportunities with large Chinese companies, such as PetroChina and China Mobile.
Investing in Asian markets allows Australians to tap into the region’s rapid growth of technology, e-commerce, and manufacturing sectors.
Indirect Ways to Invest in Overseas Stocks
There are a number of indirect methods investors can use to gain exposure to stocks:
Invest in Funds
Investing in international funds is an attractive option for those seeking diversification without the complexity of selecting individual stocks. These can be index funds or exchange-traded funds (ETFs) that invest in a basket of international stocks. This method offers exposure to overseas markets and is managed by professionals, making it suitable for investors who prefer a more passive investment strategy. Funds can focus on specific regions, sectors, or investment themes, providing flexibility in how Australians can gain international exposure.
Derivatives
Investing in international shares through derivatives, such as options and futures, provides a sophisticated strategy for those looking to hedge against market volatility, leverage positions, or speculate on price movements without owning the actual stocks. These financial instruments allow investors to gain exposure to global equities with potentially lower upfront investment. However, the complexity and high risk associated with derivatives trading make it more suited for experienced investors who are knowledgeable about the risks and potential for significant financial outcomes, both positive and negative.
Robo-Advisors
Robo-advisors offer a modern approach to investing in international equities. These digital platforms automatically allocate funds across various international ETFs and other investment vehicles using algorithms based on the investor’s risk profile and investment goals. Robo-advisors are known for their low fees, ease of use, and automated portfolio management, making them suitable for new investors or those looking to invest internationally without the need to actively manage their portfolios.
Frequently Asked Questions (FAQs)
How do I buy international shares?
Here are the general steps required to start buying international shares:
- Choose a broker or trading platform: Make sure the broker or platform you choose offers access to international stock markets.
- Open an account: Complete the registration process, which includes providing identification and completing a KYC (Know Your Customer) procedure.
- Fund your account: Deposit funds into your account, usually through a bank transfer or other payment methods offered by the broker.
- Research shares: Investigate international companies or markets you’re interested in investing in.
- Place orders: Use your broker’s platform to buy shares. You can place different types of orders depending on your investment strategy.
- Monitor your investment: Stay up to date with the latest news and trends so you can be aware of how your stock is performing in relation to your overall portfolio.
Can I use CommSec to buy international shares?
Yes, you can use CommSec to buy international shares, but you’ll need to open an International Trading Account within CommSec. This account gives you access to over 13 global share markets, including the New York Stock Exchange, Nasdaq, and London Stock Exchange. Once your international account is activated and funded, you can trade international shares online or over the phone.
How to buy US shares in Australia?
As an Australian investor, you can follow these general steps to buy US shares:
- Select a broker or trading platform: Choose a broker or platform that provides access to US markets.
- Register and verify: Open a trading account with your chosen broker, providing necessary ID for verification.
- Add funds to your account: Deposit funds, making sure to account for currency exchange from AUD to USD.
- Research and review: Look into the US stocks you wish to buy, considering factors like company performance and potential growth.
- Trade: Place your buy order through the broker or platform, specifying the number of shares and your preferred order type.
- Check-in and monitor: Be sure to stay on top of news and trends related to your investment so you can track your investment’s performance.
