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