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How to diversify your investment portfolio by heading overseas

October 23, 2019

October 23, 2019

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How to diversify your investment portfolio by heading overseas

This year, the ASX average value grew by 14.2% to a massive $AUD18.29 billion, as close to 3.14 million transactions occurred within the company. However, this positive growth in the investment market is yet to be correctly reflected in the Australian economy, as the GDP has struggled to increase by less than 2% in the past 12 months.

This year, the ASX average value grew by 14.2% to a massive $AUD18.29 billion, as close to 3.14 million transactions occurred within the company. However, this positive growth in the investment market is yet to be correctly reflected in the Australian economy, as the GDP has struggled to increase by less than 2% in the past 12 months.

After a period of sustained investment growth in the ASX, why change?

To many portfolio managers, the answer is, diversification. Instead of choosing just one market, why not choose two or more? 

If you lose in one market, you may not lose in others. This is because stocks are not necessarily synced across borders. They may increase in one market but decrease in another. Of course this is not always the case, because markets often interact with each other and may influence one another’s direction. Research shows that the markets tend to move independently enough that portfolio managers still choose to use foreign investments as a way to diversify. 

Investing overseas is one way that many look to diversify their portfolio, increasing growth opportunities and minimising risk. Spreading a portfolio over different countries and markets is a way to hedge against one market’s volatility.

Exploring offshore investments is a great way for ambitious investors to broaden their portfolios and invest in opportunities not available in their home country.

US stocks represent around 30% of the global market – a sizable chunk – the US dollar and the country itself remain attractive for investors compared to other major global economies such as Europe, UK, and Hong Kong. However there are other large and growing markets that hold potentially strong value for shareholders, including South Korea and Brazil.

The reason US stocks are so attractive compared to others is the fact that the US dollar remains strong with open markets and the US presents the strongest investment climate in the world.

 

Foreign investment does come with challenges and risk. It can be harder to predict the costs and volatility when investing overseas. But for the well-prepared investor willing to do their due-diligence, it’s an opportunity to diversify and grow their wealth.

Berkshire Hathaway is one US company which has outperformed the markets decade after decade. It is considered a more defensive option compared to other major stock names in the US due to Berkshire’s cash-generating utilities, railroads, and consumer businesses… especially in the face of market uncertainty. 

Berkshire has proven, time and again, their outstanding ability to perform over the long term in different market conditions* and may outperform other more aggressive growth stocks in the US as investors seek out stability and safety during a time of geopolitical tensions. Such a scenario may also provide Warren Buffet with an opportunity to further deploy the $119 billion of cash sitting on the Berkshire Hathawaybalance sheet (as at 31 December 2018).

If you’d like to get some international exposure to one of the most successful companies of all time click here to download a PDS and investment overview.

 

*Past performance is not a reliable indicator of future performance

**Reach Markets are the advisors assisting with the management of this offer and may receive fees depending on whether an offer is taken up by investors.


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