Banks, miners and a few well-known blue-chip companies listed on the Australian Stock Exchange (ASX) have long been the mainstays of Australian investors' portfolios.
However, the ASX does not include any of the world's most prominent corporations, such as Apple, Amazon, Nvidia, Toyota and many others. Trading shares globally has grown in importance as a means of diversifying portfolios for investors seeking true protection.
Getting started without overcomplicating it
Investors looking to compare the various online trading systems will find POEMS Trade Australia offers the tools and market data to venture into the local as well as the global marketplace.
For new investors looking into this, a good place to start is with a broker that connects you directly to the markets you're interested in, rather than relying on a platform that only operates within the country. With the help of platforms like POEMS international share trading, investors in Australia may trade on dozens of worldwide exchanges with a single account, eliminating a significant barrier to entry for foreign investment.
It is prudent to begin with a small step from there. The majority of investors don't bother to build a globally diversified portfolio from the ground up; instead, they start with a small set of household brands they are already familiar with from their personal or professional lives.
Why stay local when the world is investable?
The Australian Stock Exchange (ASX) is dominated by financials and resources and it only accounts for a tiny fraction of the world's market value. Many Australian portfolios suffer from a lack of exposure to healthcare innovation, consumer brands that dominate markets elsewhere and global technology due to this concentration.
Pursuing expansion in other markets is only one aspect of global diversification. Lessening dependence on the success of a handful of regional industries is key. An internationally diversified portfolio provides additional sources of strength if mining or banking stocks experience a downturn.
What international trading actually looks like in practice
Not long ago, Australians who wanted to trade on foreign exchanges had to deal with convoluted paperwork, several currency translations and brokers who focused nearly entirely on Australian equities. Things have altered significantly. Australian investors may now trade on over 20 global exchanges with just one trading account. These include key Asian markets, the London Stock Exchange, the New York Stock Exchange and the NASDAQ.
Realistically, this is important. By consolidating reporting and allowing investors to log in once, investors can manage a truly global portfolio without registering separate accounts for U.S. shares, UK shares and Asian markets.
Currency considerations
Currency exposure is one factor that frequently surprises prospective foreign investors. Both changes in the share price and in the AUD/USD exchange rate affect the return on investment (ROI) when purchasing US-listed stocks using Australian dollars. Currency fluctuations over the same time period could cause a disparity in the returns delivered in USD and AUD for the same investment, even if the stock itself grows 10% in USD terms.
Investors shouldn't let this discourage them from participating in global markets; in fact, currency diversification can benefit them at times when the Australian dollar declines. However, you should familiarise yourself with it before making your first international trade.
A long-term view
Global traders can't rely on perfect market timing. Diversification allocates a portfolio's holdings so they are not highly sensitive to the economic cycles of any one country. Historically, over sufficiently long time horizons, such diversification has mitigated part of the volatility that comes from being too exposed to any particular market, including our own.
Looking outside local boundaries doesn't have to be complex for Australian investors who have only ever traded ASX equities. With access to the right resources, some familiarity with the fundamentals of currency dynamics and a patient approach, you can begin more confidently.
