4. Risk vs. reward
For every reward there’s risk and international shares are no different to any other investment. Below we’ll canvass some of the main benefits and risks so you can make informed choices about where and how to invest your time and money.
Benefits
Diversification is a key element of any successful investment strategy. With international trading, you can invest in markets worldwide, accessing sectors that may not be available in Australia.
Access to well-known brands: International trading allows you to invest in businesses and brands you know, such as Google, Microsoft, Apple, Kraft and many others.
Tools and research for global markets: CommSec International Shares gives you online access to a range of free research tools, real-time data, market news and much more to help you invest in global markets.
Risks
Currency risk: As international securities are denominated in a currency other than Australian dollars; the value of your investment may be affected by changes in currency exchange rates.
Political and regulatory risk: International shares are held by an international custodian, and are subject to risks relating to political, economic and regulatory changes in the country of the custodian or stock exchange. Also, the Australian market is highly regulated and, while the overseas markets CommSec allows trading in are regulated too, it’s important to note each market is regulated in a different manner with a different set of rules. Overseas regulators have different standards and powers when it comes to intervening, specifically when trading conditions deviate from the norm. This means when there is increased market volatility and fluctuation in share price, investors may be more exposed to larger losses.
Taxation risk: Tax implications can be different from investing in Australian securities and may vary depending on your individual circumstances and which countries you choose to trade.
ETFs come with their own set of risks. These include tracking error, where the ETF might not perfectly replicate the performance of its index, to counterparty risk—or the chance that the issuer of the fund goes into insolvency. For a deeper dive on ETFs and their risk and benefits, visit CommSec Learn.
Previous
Disclaimer
CommSec Learn is intended to provide general information of an educational nature only. Investing in overseas markets exposes you to risks including those related to movements in foreign currency exchange rates and market prices. The information has been prepared without taking into account your objectives, financial situation or needs. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to their objectives, financial situation or needs, and, if necessary, seek appropriate professional advice. You can view the product Terms and Conditions, Product Disclosure Statement, Best Execution Statement, Financial Services Guide and should consider them before making any decision about these products and services. 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. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited, a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited.