In Australia we tend to invest mostly in Australian shares.
This is due to many reasons:
1. We know more about the companies we are investing in.
2. Information flow is timely as such we are able to act fast to a change in circumstances.
3. It is easier and more convenient without the time difference.
But, there are some drawbacks when you are investing in just the Australian market.
Our market is heavily concentrated in the financial and mining sectors.
The financial sector makes up 35% of our market and the mining sector 17%.
In overseas markets the Financial sector is around 17% of the market and the mining sector is around 5-6% of the market.
That means that in Australia the Financial Sector and the Mining sector make up over 50% of the market.
Which means that portfolios are heavily weighted to these sectors and underweight other sectors.
It also means that the Australian market has few companies to investor in these other sectors.
By investing in overseas markets we are able to get exposure to large worldwide companies. Companies focused in sectors such as Technology, Health Care, Consumer and Telecoms.
The problem is which companies, when to buy, how to buy and time differences.
New products are coming to the market. These allow investors to gain access to different sectors in overseas markets through a listed index approach fund.
These products solve the time differences, news flow and access issues.
Taking an index approach to overseas company investments means that you are able to get the exposure your portfolio needs. With less risk. And less costs then trying to buy the individual companies themselves.
The use of Exchange Traded Fund (EFT) has allowed the Australian share investor to build a better-diversified global portfolio with less cost and less risk.
Why should you invest overseas?
We need to take advantage of all markets in the world especially the developed markets such as America and Europe. Both of these markets have struggled to recover since the GFC. Which provides opportunity to invest in undervalued companies.
America and Europe provide exposure to some of the world’s largest and leading companies. And provide more diversification then available in Australia.
Be careful not to go over weight the overseas sector.
But it is important building a long-term investment portfolio to ensure that you have some exposure.
If you would like more information about investing in overseas markets please call us on (07) 4771 4577.