Did you know: If we combined Apple, Microsoft and Alphabet (formally Google Inc) together, they’d be worth 36% more than the entire ASX?
Think about it, just three companies, whose services we all know and use every day, are worth 36% more than all of the 2,221 companies listed on the Australian sharemarket.
The key takeaway here is that those who do not invest in foreign shares are missing out – big time. And there’s a lot of us missing out.
According to the most recent ASX share ownership study, just 5% of the Australian public invest in overseas shares.
To make matters worse, one media outlet today described the local sharemarket’s performance over the past decade as the “perennial loser” among global sharemarkets. Overexposed to an underperforming market
As the following chart shows, the USA’s Dow Jones Industrial Average and NASDAQ indices have outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) six-to-one and 12-to-one, respectively, over the past decade.
Excluding dividends, fees, currency movements and taxes, the value of $10,000 invested in the three exchanges on 30 December 2005 would today look like this:
Of course, past performance is not a reliable indicator of future performance. And if we included dividends, the Australian sharemarket’s performance would look a lot better. Nonetheless, the undeniable fact is that it’s imperative for local investors to get international exposure, for a variety of reasons.
3 ways to get global exposure
The ideal strategy for getting international sharemarket exposure is through a global share broker. This is by no means an endorsement of their services; however, Commsec, optionsXpress and Interactive Brokers are some popular choices for buying, holding and selling international securities.
Alternatively, for those who find it a little daunting, confusing or simply lack the interest in doing so, there are two other viable ways to get international exposure, including:
- Using Exchange Traded Funds (ETFs), which simply track global markets. The Betashares NASDAQ ETF (ASX: NDQ) tracks the NASDAQ; the iShares S&P 500 (ASX: IVV) tracks the S&P 500.
- Buying local shares with overseas exposure. Companies such as Computershare Limited (ASX: CPU), Westfield Corp Ltd (ASX: WFD) and Cochlear Ltd (ASX: COH) have significant amounts of overseas exposure and even report their results in US dollars.
The Australian sharemarket pales in comparison to US and some European and Asian stock markets. While the ASX’s underwhelming performance over the past decade is no guarantee of future performance, taking a couple of hours to set up a foreign brokerage account literally affords you a world of opportunity.
And with the Australian dollar, commodities and the broader economy expected to remain under pressure in 2016, making a financial resolution to open a foreign brokerage account early in the new year could prove a very rewarding goal.