In this guide
They’re some of the biggest and most dynamic companies in the world but there’s a catch – they’re all based overseas. Australians who want direct exposure to their growth need to invest in international shares listed on overseas stock exchanges.
There are good reasons for making the effort.
Gaining access to international markets provides opportunities that are not available in Australia, which represents less than 2% of global share market value.
Australian shares are heavily concentrated in the financial and resources sector, which means local investors are vulnerable to a downturn or negative sentiment in these industries. What’s more, some of the world’s most dynamic and profitable companies, and industries such as technology and pharmaceuticals, are not well represented on the ASX.
International shares also offer geographic diversity. If the Australian market is underperforming, your international shares may provide a buffer to your local equities.
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In the year to 30 June 2024, Australian shares performed well (up 7.8%, or 12.1% including dividends) but international shares did even better, with a stellar return of 21.5% led by the booming tech sector.
There is, however, the added complexity of currency risk when you invest in international shares. The return on your investments can be influenced negatively (and positively) by the value of the Australian dollar to the currency of the overseas assets you invest in. That said, the Aussie dollar finished 2023–24 up only slightly, with plenty of volatility along the way.
Investors with a relatively small amount of money to invest overseas, or who lack the time or confidence to invest directly, generally opt to invest in international shares via a managed fund or exchange-traded fund (ETF) for low-cost instant diversification.
But increasing numbers of SMSFs with sufficient funds to build a diversified international portfolio of shares, or the conviction to select certain stocks, are choosing to invest directly.
The 20 most popular international shares SMSFs invest in
We live in a world where most of us carry a mobile, work on a laptop or tablet, shop online, tap and pay, and spend hours each day checking our social media, streaming or googling information. So, it will come as no surprise that technology giants continued to dominate the top 20 direct international share holdings, accounting for 25.1% of the top 20 by market value.
In recent years, this trend gained further momentum from the global shift to working from home and in-home entertainment ignited by COVID.
The top 20 list in 2023 was led once again by – you guessed it – Microsoft, Alphabet (Google), Amazon and Apple, in that order. While their ranking hasn’t changed, the percentage of funds invested in these stocks increased significantly. Microsoft rose from 25.7% to 33.8%, Google from 23.6% to 29.5%, Amazon from 20.7% to 26.3%, and Apple from 18.6% to 23.3%. Six of the so-called Magnificent Seven tech stocks are in the top 10, with Meta (formerly known as Facebook) rounding out the top 20.
Market darling NVIDIA jumped from ninth (7.7%) to sixth place (11.1%) in 2023–24 due to its exposure to the exponential growth in artificial intelligence (AI),
Payments heavyweights Visa and PayPal remained popular as consumers continue to shift away from cash to online purchases.
Other big hitters from the old economy such as Johnson & Johnson, Disney and Warren Buffett’s Berkshire Hathaway are still high on the list.
But in a sign of the times, semiconductor industry heavyweights ASML Holdings and Taiwan Semiconductor Manufacturing Co. continued their rise up the list from 12th to 7th place and 19th to 17th respectively. In the other direction, Tesla lost more ground, slipping from 7th to 10th place.
While the top 20 list below is ranked by the percentage of SMSFs with international shares that hold each stock, the company that attracted the most money once again was Apple, with 8.9% of the value of SMSF international share investments. The next biggest holding by value was Alphabet (Google) at 8.4% followed by Microsoft at 8.1% but the size of holdings faded markedly from there.
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Top 20 international shares held by SMSFs
| Rank | Security code | Exchange | Company/investment name | % of funds with international shares that hold this security | % value of total SMSF international shares investment |
|---|---|---|---|---|---|
| 1 | MSFT | NASDAQ | Microsoft Corporation | 33.8% | 8.1% |
| 2 | GOOG(L) | NASDAQ | Alphabet – Class C (A) shares combined | 29.5% | 8.4% |
| 3 | AMZN | NASDAQ | Amazon.com | 26.3% | 4.9% |
| 4 | AAPL | NASDAQ | Apple | 23.3% | 8.9% |
| 5 | V | NYSE | Visa | 14.1% | 2.0% |
| 6 | NVDA | NASDAQ | NVIDIA Corp | 11.1% | 1.7% |
| 7 | ASML | NASDAQ | ASML Holding | 10.5% | 1.0% |
| 8 | BRK.A/B | NYSE | Berkshire Hathaway Class A & B combined | 10.2% | 3.9% |
| 9 | JPM | NYSE | JPMorgan Chase & Co | 9.4% | 1.3% |
| 10 | TSLA | NASDAQ | Tesla Inc | 8.7% | 2.3% |
| 11 | JNJ | NYSE | Johnson & Johnson | 8.1% | 0.6% |
| 12 | PYPL | NASDAQ | PayPal Holdings | 7.9% | 0.3% |
| 13 | DIS | NYSE | Walt Disney Company | 7.4% | 0.7% |
| 14 | MA | NYSE | MasterCard | 6.8% | 1.0% |
| 15 | MC | NYSE | Moelis & Co | 6.4% | 0.6% |
| 16 | COST | NASDAQ | Costco Wholesale | 6.4% | 0.7% |
| 17 | TSM | NYSE | Taiwan Semiconductor Mfg. Co. | 6.0% | 0.7% |
| 18 | HD | NYSE | American Multinational home improvement retail corp | 5.9% | 0.4% |
| 19 | BAC | NYSE | Bank of America Corp | 5.1% | 0.5% |
| 20 | META | NASDAQ | Meta Platform Inc (formerly Facebook) | 5.1% | 1.1% |
| Total (Percentage that the top 20 make up of total SMSF Investments in direct international shares) 49% | |||||
Source: Class. Data as of 30 June 2024 derived from 181,862 SMSFs that use Class software.
*Percentage each security makes up of the total Class SMSF international share investments e.g. Microsoft is 8.1% of the total Class SMSF investments in international shares.
International shares are likely to experience ongoing volatility in the year ahead, in the face of ongoing geopolitical tensions, the US election and sluggish global economy. But falling interest rates should support the upward trend in shares.
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