Australian investors could be missing out......
Investors who continue to ignore global stocks may be missing out on the benefits of diversification, as well as value and growth not available from ASX listed companies warns an Australian fund manager.
The big-four banks plus BHP, RIO, News Corp, Telstra, Wesfarmers and Woolworths, for instance, account for around $900 billion (or a whopping 60%) of the local bourse, according to Monik Kotecha, CIO, Insync Funds Management.
“Diversifying a portfolio beyond Australia can offer a broader range of class-leading businesses. Notably absent from the local stock market are leading global technology stocks, leading global healthcare stocks, global consumer brands or Asian exposed high growth industrial stocks just to name a few,” he said.
Kotecha believes that Australian investors have a window of opportunity to buy into global companies thanks to the relatively strong Australian dollar.
As for choosing suitable global investments, Kotecha advises investors to seek out companies benefiting from innovation, or who are on the right side of structural change.
“Other opportunities globally will include powerful forces such as the ageing demographics and the healthcare spend and also the rising consumption of the developing world,” said Kotecha.
Investing offshore can deliver strong returns according to leading financial commentator, Paul Clitheroe. In the year to May, global shares achieved gains of almost 23% compared to 16% on Australian shares.[i]
Clitheroe adds that a hassle-free way to invest internationally is via an exchange traded fund, or “ETF”.
“These are managed funds listed on the [ASX] and they allow investors to buy into a diversified portfolio of global shares for a fraction of the cost of investing directly or using a traditional managed fund,” said Clitheroe.
“The ASX features ETFs that follow indices of particular countries like Japan, or regions like Europe, or even broader areas like emerging markets. Or you can choose to follow a theme like small US companies.”
Visit the Australian Securities Exchange website for more information.
[i] MSCI ex Australia Index returned 22.7% compared to the S&P ASX 300 Index return of 16.1% for the 12 months ended May 2014
Frequently Asked Questions about this Article…
Australian investors should consider global stocks to benefit from diversification, value, and growth opportunities not available from ASX-listed companies. By investing globally, they can access leading technology, healthcare, and consumer brands that are absent from the local market.
Not diversifying beyond Australian stocks can limit your investment portfolio to a few dominant local companies, missing out on the potential growth and innovation offered by global markets. This lack of diversification can also increase vulnerability to local economic downturns.
A strong Australian dollar provides a window of opportunity for investors to buy into global companies at a relatively lower cost, potentially enhancing returns when the currency weakens in the future.
Investors should look for global companies that benefit from innovation and are on the right side of structural changes, such as those involved in ageing demographics, healthcare spending, and rising consumption in developing countries.
In the year to May, global shares achieved gains of almost 23%, outperforming Australian shares, which gained 16%. This highlights the potential for higher returns when investing internationally.
A hassle-free way to invest internationally is through exchange-traded funds (ETFs) listed on the ASX. ETFs allow investors to buy into a diversified portfolio of global shares at a fraction of the cost of direct investment or traditional managed funds.
The ASX offers ETFs that follow indices of specific countries like Japan, regions like Europe, or broader areas like emerging markets. Investors can also choose ETFs that follow themes, such as small US companies.
For more information about investing in global ETFs, you can visit the Australian Securities Exchange website, which provides resources and details on available ETFs and how to invest in them.
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