Investing in global sharemarkets can be both exciting and daunting. With opportunities to diversify and tap into industries worldwide, it’s important to be aware of the unique considerations that come with international investing. Here are ten key things to know before you start investing in global markets.
Understanding "home bias"Many Australians tend to invest locally because it feels familiar and safe. This is known as home bias. While backing local businesses has its merits, it can limit your exposure to global growth opportunities.
You could unlock the benefits of diversificationGlobal investing allows you to spread your investments across different economies and industries. This can help reduce risk if one market underperforms. For example, if the Australian economy slows, overseas markets may still perform well.
You will be exposed to foreign currency riskWhen you invest in global markets, your returns are affected by exchange rate movements. If the Australian dollar strengthens against the currency of your investment, your returns may be less than expected when converted back. Currency risk can work for or against you, so it’s important to factor it into your strategy.
Keep tax implications in mindInternational investing can trigger additional tax obligations such as:
Australia has tax treaties with many countries to reduce double taxation, but you may still need to lodge extra documentation or claim foreign tax credits.
Learn more about the tax implications of investing in shares.
Get to know regulatory differencesEach country has its own rules around trading, disclosure, and investor protection. Some markets are highly regulated, while others may be less transparent. It’s important to always understand the legal environment before investing.
Be aware of political and economic riskGlobal markets are influenced by political events, trade policies, and economic conditions. Changes in government, interest rates, or trade agreements can impact your investments. Stay informed and consider how geopolitical factors may affect your portfolio.
Consider the different costs and feesInternational investing may involve:
Compare platforms and products to understand the total cost of investing globally.
Learn more about the cost of investing in shares.
Decide how you will invest internationallyYou can invest globally through:
Each method has different levels of cost and complexity. Choose the one that aligns with your goals and experience level.
Consider your risk tolerance and strategyBefore investing, assess your comfort with risk. International markets can be volatile, and your strategy should reflect your financial goals and ability to handle fluctuations. Some investors prefer a long-term approach, while others may seek short-term opportunities.
Learn more about the risks of investing in shares.
Always keep a record of your transactionsKeeping detailed records of all international transactions can help with tax reporting and portfolio tracking. Always keep the below for your records:
At CommSec, customers can find their international trading records by downloading their activity statement through their International Shares Account.
By taking the time to understand the complexities of global investing, you can make more informed decisions and potentially enhance your financial outcomes over the long term. Always consider seeking advice from qualified professionals to ensure your strategy aligns with your personal circumstances and goals.
The Academy is intended to provide general information of an educational nature only. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Investing carries risk.
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