How to invest in overseas shares as tech stocks surge higher

Investing in overseas stocks has delivered windfall gains since last year’s COVID crash, but buyers should take care right now.

Apple, Amazon, Netflix and Tesla are technology giants well-known to most Australians and are capturing the imaginations of millions of new investors.

Their shares have multiplied many times in value in recent years, and while it’s easier than ever to buy a slice of tech success stories, a rising number of investment specialists recommend being cautious.

US stocks reached a record high this week, and nabtrade director of investor behaviour Gemma Dale says “I think there’s merit in taking a prudent approach”.

“Think very seriously about the quality of the business you are buying and its long-term prospects,” she says.

nabtrade’s director of investor behaviour Gemma Dale. Picture: Supplied.

“We all wish we’d bought in March and April 2020.” That was when the COVID crash sent many tech stocks sinking 20 per cent or more, but they have since recovered those losses and powered ahead.

Analysts value shares based on projected profits and on this basis many overseas tech companies appear overvalued.

But great businesses should still have a place in people’s portfolios, and most Australian workers already own some overseas investments through their super fund accounts.

Dale says investors have had a TINA mentality – There Is No Alternative – because record low interest rates have slashed returns on assets such as shares and bonds.

With another share market correction looming at some point, it can be a good idea to spread your share purchases over several months to reduce risk.

Buying overseas stocks can be done through full-service stockbrokers, online stockbrokers and a new breed of online platforms where you can buy fractions of shares. That’s helpful when one Amazon share currently costs more than $US3000 ($A3900).

Online stockbroking fees can be $15 to $50 per trade, and platforms that don’t charge trading fees may hit investors harder with foreign exchange transaction costs, so check before you sign up.

Catapult Wealth director Tony Catt

Dale says some online stockbrokers charge the same fees on international trades as they do for Australian shares.

“It used to be ten times more expensive to buy international shares,” she says.

Catapult Wealth director Tony Catt says people investing overseas should do it “very, very carefully” in the current market.

“The market through COVID is like a river through a one-inch pipe – everyone has funnelled money into the same stocks,” he says.

“It’s a time to be cautious about what you buy, but the whole thematic of buying overseas is good.”

Just be sure to diversify across companies and countries rather than focus on a handful of stocks.

Mr Catt is currently focusing on themes and is buying collections of companies using exchange traded funds in sectors such as cybersecurity, robotics and artificial intelligence.

Using ETFs is a well-diversified and relatively cheap way to buy into overseas shares, he says.

@keanemoney