Listed companies around the world range from tiny start-up ventures to household names. Shares can be bought in companies across every industry, from mining to manufacturing, telecommunications to transport. You can invest in exciting new technologies like AI and robotics, and in traditional sectors like banking and retail.
If you’re starting out as a share investor you’ll need to decide whether to invest in Australian shares or international shares, or both.
The Australian sharemarket can be a good place to start investing because you’ll be familiar with many locally listed companies such as the big banks, retailers and mining companies. However, Australia’s sharemarket accounts for only about 2.5% of the world’s total. In other words, you’re missing out on 97.5% of investment opportunities.
If you plan to invest in shares by buying them directly yourself via a broker then the domestic market is the place to start.
The world’s biggest companies are all found beyond Australia’s shores, as are most of the small innovative companies with aspirations to grow into the big global brands of tomorrow.
Investing in international shares gives you access to more companies in different industries in different countries, and is therefore a great way to diversify your portfolio and benefit from growth opportunities not available in Australia.
What is currency risk?
Currency risk applies to international shares. It occurs when movements in the Australian dollar relative to the currency of the country where your shares are listed have a negative effect on your investment’s earnings or value. Investment managers can operate a strategy called ‘hedging’ to offset currency risk.