Are you an investor at heart who has a thirst for knowledge?
If you are, then it is great time to start investing in international companies. Don’t be put off by the fear that investing overseas is investing in the unknown. Chances are you know a lot more about international companies than local companies.
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.
Let’s go through the top 5 reasons why we think it is a great time to start investing in listed international companies.
1. It can be highly profitable
You’ve probably come across the S&P/ASX 200 which is an index of the largest 200 listed companies in Australia. There is a similar index for international shares called the MSCI World Index. This contains the largest listed international companies from 23 different share markets around the world.
If you had invested $10,000 in the MSCI World Index at the end of February 2013, three years later that would be worth over approximately $16,700 in February 2016. That is an average annual return of nearly 19% per year (measured in Australian dollars). Of course, past returns are no guarantee of future returns but the fact is investing internationally has been highly profitable in the last few years.
2. You already know a lot about international companies
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 or Woolworths, a lot of your time and money is probably spent being a customer of international companies. Just to name a few, your mobile phone, medicine, computer and car are most likely products of large listed international companies. Let’s not forget when you are online, you probably spend quite a bit of time on the sites of US listed companies such as Facebook and Google.
Being a repeat customer of all these international companies means you are already quite familiar with how they operate. For example, do you know more about the US listed company Facebook or the Australian listed mining company Rio Tinto?
3. It is now much easier to start investing overseas
Investing in international companies has become a lot easier in the past few years. Many of the popular online stockbrokers such as CommSec and nabtrade offer international share trading services.
If you would rather not trade international shares directly, you can always put your money into managed funds that invest in international listed companies. These managed funds are operated by professional fund managers who have a lot of experience investing internationally.
4. You can diversify your investments to long term global trends
There are a lot of exciting and innovative global trends happening right now. For example, the growth in online shopping has really taken off with global e-commerce sales forecast to reach US$1 trillion this year. Since Australia’s share market is dominated by the banks and resources companies, it is unusual to find many large listed domestic companies that will benefit significantly from long term global trends like the surge in online shopping or the trend towards healthy living.
Investing in the right international shares will most likely help diversify your investment portfolio. It will also help you get exposure to a number of proven long term global trends.
5. It is a great way to learn
Investing is serious business. However, it should also be interesting and engaging.
For example, did you know that baby boomers are the fast growing segment of Facebook’s user base? How about the fact that an Italian company called Luxottica is a big reason why many people around the world pay hundreds of dollars for sunglasses (which seemingly cost so little to manufacture)?
If you are curious by nature, investing in large listed international companies also provides a great way to keep learning about the world.