How To Buy International Shares From Australia

Investing internationally allows Australians to diversify their investment portfolios beyond the local market. Diversification is a critical strategy in managing risk, as it spreads investments across different markets and sectors, potentially reducing the impact of regional economic downturns. International markets, such as the US, Europe, and Asia, provide access to global giants and sectors not well-represented in the Australian market, such as technology and healthcare. This opens up growth opportunities that may not be available domestically.

Moreover, international investing allows Australians to benefit from global economic trends and currency movements. When the Australian dollar is strong, investors can buy more foreign assets, and when these assets appreciate or the foreign currency strengthens against the AUD, the investment’s value in AUD terms can increase. Additionally, by investing in international markets, Australians can gain exposure to emerging markets with high growth potential, offering higher returns than mature domestic markets.

US Markets

The United States is home to the world’s largest and most well-known stock exchanges, offering many investment opportunities in international equities. The New York Stock Exchange (NYSE) and the Nasdaq are two primary markets where investors can find companies ranging from technology giants to traditional industrial firms.

• New York Stock Exchange (NYSE): Home to established companies like Coca-Cola, Disney, and IBM.
• Nasdaq: Focused on technology and innovation, hosting companies like Apple, Google’s parent company Alphabet, and Amazon.

These markets provide Australians access to a diverse range of sectors, including technology, consumer goods, healthcare, and financial services.

Europe and UK

Europe and the UK offer a variety of markets with companies known for their global presence in a range of industries. The London Stock Exchange (LSE) and the Frankfurt Stock Exchange are among the key markets, along with Euronext, which spans several European countries.

• FTSE 100 (LSE): The Financial Times Stock Exchange (FTSE) 100 index features the top 100 companies on the London Stock Exchange such as GlaxoSmithKline and HSBC.
• DAX (Frankfurt Stock Exchange): A market index that hosts leading German companies, including BMW, Siemens, and Volkswagen.
• Euronext: Encompasses stocks like LVMH from France and ASML from the Netherlands, representing luxury goods and technology sectors, respectively.

These markets are known for robust financial services, automotive, pharmaceutical, and luxury goods companies.

Asia

Asian markets are renowned for their dynamic growth, with the Tokyo Stock Exchange (TSE) and the Hong Kong Stock Exchange (HKSE) leading the way. They offer access to various sectors, from technology and manufacturing to financial services.

• Nikkei 225 (TSE): A stock market index for the Tokyo Stock Exchange that includes prominent Japanese companies such as Toyota, Sony, and SoftBank.
• Shanghai Stock Exchange (SSE): Offers opportunities with large Chinese companies, such as PetroChina and China Mobile.

Investing in Asian markets allows Australians to tap into the region’s rapid growth of technology, e-commerce, and manufacturing sectors.

1. Research and select a broker or trading platform
Begin by researching brokers that offer international trading facilities. Look for brokers or trading platforms with low fees, a wide range of global markets, and robust trading platforms. It’s also crucial to check the broker’s regulatory compliance in Australia, ensuring they are licensed to operate and offer investment services.

2. Open and fund an account
Once you’ve selected a broker or trading platform, the next step is to open an account. This process typically involves providing personal identification documents and completing a KYC (Know Your Customer) process. After your account is approved, you’ll need to fund it, either through a bank transfer or other funding methods, such as a debit card.

3. Research international shares
Before investing, conduct thorough research on the international shares you’re interested in. Consider factors like the company’s financial health, market position, and growth potential. Also, keep an eye on global economic trends and currency exchange rates, as they can affect the value of your investment.

4. Place an order
With your account funded and your target shares identified, you’re ready to place an order. You can typically choose from various order types, such as market or limit orders. Ensure you understand the fees associated with international transactions, including currency conversion fees.

5. Monitor your investment
After purchasing international shares, it’s important to monitor your investment regularly. This includes tracking the performance of the shares, staying updated on company and market news, and being aware of currency fluctuations that might impact the value of your investment. Adjust your investment strategy as needed based on performance and changing market conditions.

There are a number of indirect methods investors can use to gain exposure to stocks:

Invest in Funds

Investing in international funds is an attractive option for those seeking diversification without the complexity of selecting individual stocks. These can be index funds or exchange-traded funds (ETFs) that invest in a basket of international stocks. This method offers exposure to overseas markets and is managed by professionals, making it suitable for investors who prefer a more passive investment strategy. Funds can focus on specific regions, sectors, or investment themes, providing flexibility in how Australians can gain international exposure.

Derivatives

Investing in international shares through derivatives, such as options and futures, provides a sophisticated strategy for those looking to hedge against market volatility, leverage positions, or speculate on price movements without owning the actual stocks. These financial instruments allow investors to gain exposure to global equities with potentially lower upfront investment. However, the complexity and high risk associated with derivatives trading make it more suited for experienced investors who are knowledgeable about the risks and potential for significant financial outcomes, both positive and negative.

Robo-Advisors

Robo-advisors offer a modern approach to investing in international equities. These digital platforms automatically allocate funds across various international ETFs and other investment vehicles using algorithms based on the investor’s risk profile and investment goals. Robo-advisors are known for their low fees, ease of use, and automated portfolio management, making them suitable for new investors or those looking to invest internationally without the need to actively manage their portfolios.

Investing in international shares is a significant step that can diversify your portfolio and potentially enhance its performance. It offers exposure to global economic growth, access to industries and companies unavailable in Australia, and the opportunity to benefit from different market cycles.

However, weighing the risks, such as currency fluctuations and geopolitical uncertainties, is essential against the potential rewards. Understanding your investment goals, risk tolerance, and the level of involvement you wish to have in managing your investments is crucial. If done thoughtfully, incorporating international shares into your investment strategy can be valuable in achieving long-term financial goals, bringing a world of opportunities right to your doorstep.