The principals behind investing internationally have always stacked up. The Australian sharemarket is small in global terms; the ASX is dominated by a handful of sectors; and wholeindustries like IT, are under-represented or not available at all.
An international view has always made sense – now it's possible to make money.
The principals behind investing internationally have always stacked up. The Australian sharemarket is small in global terms; the ASX is dominated by a handful of sectors; and whole industries like IT, are under-represented or not available at all.
Good expectations for growth
United Nations figures show global economic growth is expected to reach 3.0% this year and 3.3% in 2015 . Ron Hodge, Managing Director, InvestSMART.com.au says, "That's good for businesses – and for sharemarkets".
Adding to the appeal of investing offshore, the available options have broadened.
Many online brokers offer direct access to global markets though brokerage on international shares can be around $US50-65 per trade, still well above brokerage on local shares.
Funds offer instant diversity
Hodge notes, "For instant diversity and/or with limited capital to invest, an international managed fund is worth considering".
For sheer value, it can be hard to go past exchange traded funds (ETFs). The ASX offers a wide selection of international ETFs, and just like unlisted funds, they give investors the ability to match product with personal goals.
There's a reasonable Asian flavour among ETFs with funds focusing on Japan, Singapore, Taiwan, China and Hong Kong. For the more adventurous, iShares provides emerging markets options including an MSCI BRIC ETF (focusing on Brazil, Russia, India and China).
Investors can even pursue particular themes with ETFs focusing on US small caps, health care or telecommunications.
As Hodge notes, "The downside of ETFs is that, as index funds, they offer a passive approach to investing."
The flipside is low running costs. Management fees (MERs) on global ETFs are generally in the order of 0.70% to about 0.07%. That compares favourably to MERs of around 1.0% on unlisted funds. However Hodge notes, "The key is to consider why you are investing internationally, and to check the mechanism – fund or direct holdings, matches your needs."