Investing in international shares: getting started is easier than ever

Many of the biggest investment winners are global stocks such as Apple, Amazon and Google. Here’s how to buy into them easily.

Australia’s sharemarket has been surging to record highs but even bigger gains have flowed to people who invest in overseas markets.

While Aussie stocks climbed 26 per cent in the 2020-21 financial year, US stocks jumped 39 per cent and Japan 29 per cent and it’s not a short-term trend.

The good news for local investors is that it’s easier than ever to buy slices of overseas companies through full-service stockbrokers, online brokers or fast-growing investment platforms.

In the past decade the value of Australia’s largest 500 public companies has climbed 81 per cent, while the US top 500 rose 297 per cent largely thanks to booming tech giants such as Apple, Amazon and Google.

Most Australians already own overseas stocks through their superannuation funds, which put about a quarter of members’ money into international equities.

“It’s certainly much easier for investors to access global markets now, compared to a decade ago,” says Josh Gilbert, a market analyst at investment platform eToro. So how do you tackle it?

Investor Mimi Ho uses international shares for diversification and growth opportunities.

NEW CHOICES

Investment platforms offer people fractions of individual shares – so they don’t have to stump up the $US3500 needed for just one share in Amazon, for example – while exchange traded funds (ETFs) are listed on the ASX spread investors’ money across many offshore indices or themes.

“This makes investing attainable to those with less capital,” Gilbert says.

Investor Mimi Ho, 36, owns assets in global markets such as the US and China to tap into growth and innovation opportunities and “diversify my portfolio and reduce my overall risk”.

She holds stocks including Amazon, Chinese e-commerce giant Alibaba and cryptocurrency company Coinbase, and suggests would-be investors do their own research into the global companies that interest them.

“If you are new to investing it’s a good idea to stick to mature companies … ensure you understand what you are investing in, rather than rely on word of mouth,” Ho says.

She also suggests investing in global ETFs, of which there are more than 75 listed on the ASX. They trade just like ordinary shares, are generally low-cost, and some focus on specific themes such as cybersecurity or renewable energy.

HOW TO SET UP

Investors with plenty of cash will often use a full-service stockbroker, while others prefer a DIY approach through online stockbrokers such as CommSec – which offers access to 25 global markets – or choose apps and platforms such as eToro and Stake.com.au that enable investments into direct shares, ETFs and other assets.

Check you understand all the set-up and trading costs. Several platforms offer commission-free trading but contain currency conversion fees when transferring money.

Baker Young managed portfolio analyst Toby Grimm says ETFs are “the most cost-effective way you can get overseas exposure in a diversified way”.

“It does make sense in a large diversified portfolio to have some international exposure,” he says.

TODAY’S TARGETS

Grimm says investors commonly seek household names “that we’ve grown to love – established successful companies” such as Apple or Google’s parent company, Alphabet. Others are more active.

“We see traders following speculative shares in the US or Toronto markets – they are people who are often up overnight and are reading a lot of online chats,” Grimm says.

Gilbert says many investors are looking towards European shares.

“European equities are relatively cheap when compared to US equities, which signals an opportunity for investors,” he says.

Baker Young managed portfolio analyst Toby Grimm says ETFs are cost-effective

“Europe’s cyclic indices make the region more sensitive to the reopening rebound, and therefore, it is expected that European equities will outperform the market moving into 2022.

“To gain exposure, investors can look at ETFs such as iShares Core MSCI Europe and Vanguard FTSE Europe ETF.”

POTENTIAL PITFALLS

• Diving in deep to quickly – start small and do the necessary research.

• Investing in a stock or sector you don’t understand.

• Currency conversion fees or buying-selling price discrepancies can eat into your profits.

• Movements in currencies affect returns. For example, a rising Aussie dollar reduces your gains on overseas investments.

• While ETFs are generally low cost, thematic options can charge higher management fees than typical index funds.