Australia’s Gen X and Gen Y investors are leading the charge to buy international stocks according to nabtrade.
Figures compiled by the online broker on trading patterns across the generations found that Baby Boomer investors, who have larger exposures to the Australian sharemarket, are also increasingly looking to invest offshore.
Gemma Dale, nabtrade director of SMSF and investor behaviour, says international stock preferences also varied across generations, with Gen Y preferring to invest in technology stocks in innovative fields such as Advanced Micro Devices, Nvidia and Activision Blizzard.
“The big stock picks for Gen X investors were Amazon, Tesla, Microsoft and Alphabet, while Baby Boomers opted for Apple and Facebook, as well as more established players like Wells Fargo, Lloyds and Berkshire Hathaway,” she says.
“Generally, younger generations have longer investment timeframes, which allows them to pursue high growth assets, while Baby Boomers are opting for traditional blue chips names which offer reliable yields and have excellent long term track records.”
How to invest overseas
There are a number of advantages in investing overseas including getting a greater level of diversification and you get exposure to industries and companies that aren’t available in Australia.
It is not without risks though. One of the biggest concerns is currency risk if the domestic currency moves against you.
For example, if your international shares return 5% but the domestic currency appreciates by 10%, you’ll end up losing 5%.
You also don’t get any franking credits on your dividends as the company doesn’t pay tax in Australia.
You can buy international shares directly with a number of online brokers offering access to international markets including the USA, Canada, Hong Kong, Singapore, London, Paris, Brussels and Amsterdam to name a few.
Brokerage rates differ depending on the currency you are investing so it’s worth checking. Make sure you also ask what markets they cover, what research is provided, when you can place trades (for example you may be able to place orders while overseas markets are open) and whether there is a minimum transaction amount.
If you choose to invest overseas directly, make sure you educate yourself properly before taking the plunge. Research the country’s economy and outlook and take a good look at the company/companies you want to invest in.
Do the same level of research you would (or should!) when buying shares in an Australian company, if not more. You also need to take a view on the direction of foreign exchange rates as this could affect your returns.
If going it alone doesn’t appeal, other options for investing internationally are ETFs, managed funds and LICs. That way a professional does all the hard work and research for you.
You can also get a level of diversification you might not if you do it yourself – unless you have a really large amount to invest.
There are more than 50 ETFs and listed managed funds with a global focus on the ASX. Internationally focused LICs have also been multiplying. (See ASX for full list.)