Why I Invest Outside Australia
Australia has just over 2,000 public companies listed on the ASX, which is our largest stock exchange.
However, in reality, it is far less than 2,000.
Because by the time we exclude unprofitable companies, those that are dependent on property prices, China and resources, my best guess is savvy investors have less than 200 good quality businesses to choose from.
200 companies might sound like a lot, but with dozens of big Super funds, investment brokers, thousands of analysts, tens of thousands of DIY investors and a few hundred fund managers, finding good companies trading at compelling prices is harder than you think.
What’s wrong with the banks?!
We also have to consider that Telstra, the banks and CSL Limited (ASX: CSL) make up over 20% of the ASX 200. But, of course, the banks are highly correlated to property. Meaning, their share prices will most likely move in the same direction as Sydney and Melbourne house prices.
Therefore, if most of your investments are in property, or your job is linked to property markets, buying shares in Aussie banks might not be the best investment idea. Some exposure to the banks may be ok. But any finance professor would tell you it might not end well if house prices fail to regain their mojo.
Why I invest outside Australia
When I started Rask Invest, I wanted to prove to local investors that investing overseas has many perks. Sure, it might take an hour to fill out the simple U.S. tax form, sign it and email it back to your broker. But I think it is worth every minute of your time.
The first reason I invest in overseas shares is there is more to choose from. You’ve probably heard it before but it’s estimated more than 98% of investment opportunities lay outside of Australia. Think Apple, Facebook, Nike, ING Bank and Samsung. You can’t buy shares in those companies on the Aussie stock market.
Investing abroad might also lower risk. Trade wars, taxes and a currency moving against you are risks to investing abroad. But let me put the currency angle to you another way…
Since 2013 the Aussie dollar has fallen from over $1.03 to its current level just below 75 US cents. That’s a 27% decline.
Unless you’ve been buying imported goods from Amazon, traveled overseas or run your own business, you may not have noticed the currency decline. But in US dollar terms it means Aussies have become 27% poorer since 2013. Sure, it might not make a difference to our day-to-day lifestyle. But smart investors could have avoided some of the currency decline by getting some overseas exposure.
With household debt breaking records at a time when property prices are slowing, mark my words, it might be a good time to at least consider investing outside of Australia.
Exposure to new ideas. Australian investors can get exposure to overseas shares by buying into a managed fund or Exchange Traded Fund (ETF). But what if you wanted exposure to a specific electric vehicle maker, an online-only bank, smartphone maker or a company at the forefront of healthcare?
Similar to the way it is in Australia, obviously not everything overseas is worth buying. Using the broker I chose for Rask Invest, I can buy shares in more than a dozen international markets painlessly. I buy into the exact companies I want and plan to hold them for the long run.
We are about 10 years in a global bull market and here in Australia we’ve gone more than 25 years without a recession. I don’t know when bad times will strike, how long a downturn will last or how to avoid it unscathed. However, I’m not prepared to have all of my eggs in one basket.
So although the Rask Invest portfolio is relatively new, the number-one market for each of the companies I have released as official investment ideas to Rask Invest members is outside of Australia. Fortunately, there are many more high-quality companies on my radar, from outside Australia and on the ASX.
Cheers to our financial futures!
This article contains general financial information only and should not be relied upon. This information does not take into consideration your needs, goals or objectives. Therefore, you should consult a licensed financial adviser before acting on any of the information presented here. Past performance is no guarantee of future returns. At the time of publishing this article, Owen Raszkiewicz owns shares of Apple Inc.