Have you considered investing some of your money internationally? Do you worry that investing internationally is too hard or too risky?
In this post we debunk some of the myths of investing internationally and show you why it is important to consider international investments for your portfolio.
The following information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.
Myth #1 – It is too risky
We hear this one a lot. All investments carry some risk and of course if you invest directly in a little unknown company in a small emerging country then chances are it is very risky.
However, there are thousands of large and well established listed international blue chip companies around the world. Many of these companies have excellent business models, provide very detailed reporting and are much less risky than a lot of large Australian listed companies.
Which company do you think may have a longer lifespan, Fortescue (the Australian listed iron ore producer) or Google (the US listed technology giant)?
Myth #2 – Don’t know anything about international companies
The fact is you know a lot more than you give yourself credit for.
On a daily basis, do you use more products and services from large Australian companies or large international companies?
Besides banking at an Australian bank or shopping at Coles / Woolworths, much of your time is probably spent being a customer of international companies. Just to name a few, your smartphone, computer, car, online shopping and even medicine are most likely all products of large international companies.
Chances are you know a lot more about the company that makes your smartphone (Apple, Samsung) than you do about the listed Australian bank that you have an account with.
Myth #3 – Too hard or expensive to setup for investing internationally
Unfortunately this myth used to be true. Many traditional firms charge customers a lot of fees to help them invest internationally.
Trading international shares directly can be expensive from a brokerage perspective. For a live example, visit the popular Australian bank run online broker sites to see the difference in costs between trading domestic versus international shares. For those who prefer to invest via international managed funds, these funds often have high minimum investments and do not provide much transparency on exactly what they have invested in.
However, with technology this is changing. There are now a number of new online services about to start that will make it much easier, cheaper and more transparent for everyone to invest internationally. We are one of them at AtlasTrend where our members have exclusive online access to some great content on international listed companies and also the ability to easily invest in their choice of world trends. Another service that may launch in Australia soon is Robinhood which is trying to bring free trading of US listed shares to Australia.
Myth #4 – Australia has great companies, I don’t need to invest internationally
Yes, Australia does have some great listed companies.
Unfortunately, what we also have in Australia is a very limited number of blue chip companies across different industries. Besides large banks, property and resources companies there isn’t a lot more to choose from.
Looking internationally, the number of innovative industries and companies available for investment is far larger. Industries such as online shopping, luxury car manufacturers, healthy living products provide a great way to invest in some long term growing trends that are simply not available for investment through Australian blue chip companies.
Which industry would you rather invest in now, iron ore producers in Australia or innovative big data companies in the US and Europe?
Myth #5 – The Australian dollar is going to appreciate soon and cause me to lose money
Yes, if you are invested internationally and the Australian dollar appreciates then you may suffer a currency loss.
However, given the state of the Australian economy relative to other large developed economies (particularly the US), we think the Australian dollar may actually depreciate further over the next few years. For our more detailed discussion on the Australian dollar, click here.
In addition, many blue chip international companies have global operations that earn revenue in many currencies. As a result, they are inherently diversified from a currency perspective which removes much of the single currency risk that investors might be concerned about.
Click here to learn more about how AtlasTrend’s members have exclusive access to simple, affordable and transparent international investing.