While most people in Australia are familiar with our own ASX and the shares that are commonly available for public purchase, far fewer investors bother to look beyond our shores to prop up their investing portfolios.
In fact, a 2017 ASX-sponsored study into investing trends has shown that on average, about 31% of Australians own shares, but only 8% own shares issued by a foreign stock exchange.
While I admire our patriotic bias and faith in our own ASX companies, I also think that more investors would be better off expanding their portfolios and holding more overseas investments.
After all, we are a small country and the ASX represents about 2% of the total global share market. Our biggest ASX companies like Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW) are all very focused on our own domestic markets and have little influence outside our country.
But if you compare this to say the biggest companies over in the US or even the UK, you are getting names like Microsoft, Apple, Facebook, Amazon.com and Unilever, Diageo and Royal Dutch Shell – companies that continue to shape the world around us.
International diversification also brings other benefits such as hedging against geographic calamities or currency fluctuations. Thus, I think that we should be asking ourselves if we want stock ownership in these kinds of names as well.
How can you buy international shares?
Most major brokers now offer Australians this service, including banking brokers like CommBank’s CommSec or National Australia Bank Ltd (ASX: NAB)’s NABtrade. Although this might be the most straightforward option for anyone wishing to buy Apple shares, the fee’s and brokerage are often higher than normal ASX trades if you want to go down this route.
Another option is going for ASX-listed ETFs like the iShares Asia 50 ETF (ASX: IAA) or the Vanguard MSCI Index International Shares ETF (ASX: VGS) for some broad exposure. Alternatively, you could go down the actively managed road with something like the Magellan Global Trust (ASX: MGG) or WAM Global Ltd (ASX: WGB). This is a far cheaper option than buying the shares yourself, but these vehicles also charge a fee for their services.
I think in today’s globalised world, exposure to international companies is a must for investors. I myself have used all of the above options and sleep better at night as a consequence. While Australia is a great place to invest, it’s not the only place you should (in my view), and adding some international spice can beef up your returns nicely.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sebastian Bowen owns shares of Facebook, Ishares Asia 50 Etf, National Australia Bank Limited, and WAMGLOBAL FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Facebook and Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.