With the global stock market bouncing back from a pandemic-related economic cash crunch, many around the world are putting their money into domestic and international stocks, with the intention to earn a return on their investment. International markets can offer Aussie investors many positives, however, there are also some downsides that need to be considered. Vision Property and Finance weighs in below in Why Invest In International Stocks?
Overseas markets provide stock options that are protected from domestic shocks. Australia’s S&P/ASX 200 has grown in a relatively safe manner, as shown below.
However, all shares, even in safer markets, carry a level of risk. Australia has recently been experiencing volatility in its markets due to recent trade tensions with China. Investment in international markets allows for these domestic shocks to be avoided.
New Technologies, Companies and Industries
Investment into overseas markets allows for access to growth in different industries and technologies outside of the domestic economy. Australia’s S&P/ASX is mostly comprised of raw materials, financials and services. Global investing gives Aussie investors exposure to other industries, technologies and companies. Australian investors can capitalise on international opportunities such as the growth and market dominance of U.S technology companies such as Google or Apple.
Limited Access to Information
Within Australia, the Australian Securities and Investment Commission (ASIC) enforces free access of information to investors looking to invest in publicly traded companies. This means that investors can make informed decisions about where they invest. This isn’t the same around the world, where information may not be easy to access, or it may be unreliable due to more relaxed reporting standards.
Reduced Government Economic Protection
Australia’s responses to global economic crises such as the GFC and the COVID-19 pandemic have been recognised as the best responses to these types of crises in the world. These economic responses are not the same in other countries, where companies may not experience the same protections.
Currency conversions, brokerage costs, transaction costs and taxes on foreign investment can add up to be a significant expense associated with international investing.
Why invest in international stocks? Hopefully these pros and cons can help you guide your decision making. Remember that all investing carries some form of risk, and only put in what you are willing to lose. Our finance experts have provided hundreds of clients with award winning service. If you’re looking for help, get in touch with us here.