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 to share in their growth need to invest in international shares listed on overseas stock exchanges.
Gaining access to international markets provides opportunities that are not available in Australia, a country 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 economy is weak while other national economies are doing better, your international shares will provide a buffer to your local equities.
Of course, international shares are subject to currency risk. The return on your investments can be influenced negatively (and positively) by the value of the Australian dollar versus the currency of the overseas assets you invest in. There may also be less research available on international shares than there is on local companies.
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 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 in international shares.
Note: At June 2020 the percentage of SMSFs that directly hold international shares is still just 2.79%. Many more SMSFs have exposure to international assets through managed funds and ETFs.
20 most popular international shares invested in by SMSFs.
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 or googling information. So, it will come as no surprise that technology giants dominate the top 20 direct international share holdings.
In 2020, this trend was turbo-charged by the global shift to working from home due to COVID.
In fact, tech companies accounted for 15 of the top 20 as of 30 June 2020. The top 20 list was led by – you guessed it – Microsoft, Amazon, Apple, Visa, Alibaba (the e-commerce giant known as the Chinese Amazon) and Google (listed as Alphabet), Facebook and Tencent – the Chinese group best known for its WeChat mobile messaging app).
| Rank | Security code | Company / Investment name | % of Funds with Domestic Listed Securities that hold this security | % of total SMSF Domestic Listed Securities Investments* |
|---|---|---|---|---|
| 1 | MSFT.NDQ | Microsoft Corporation | 18.6% | 6.4% |
| 2 | AMZN.NDQ | Amazon.com Inc. | 16.2% | 7.4% |
| 3 | AAPL.NDQ | Apple Inc | 14.3% | 6.4% |
| 4 | V.NYE | Visa Inc – Ordinary Shares – Class A | 14.3% | 2.7% |
| 5 | BABA.NYE | Alibaba Group Holding Ltd – ADR | 14.2% | 3.7% |
| 6 | GOOG.NDQ | Alphabet Inc – Ordinary Shares – Class C | 12.6% | 3.5% |
| 7 | DIS.NYE | Walt Disney Co (The) | 10.4% | 2.0% |
| 8 | BRK/B.NYE | Berkshire Hathaway Inc. – Ordinary Shares – Class B | 9.2% | 2.8% |
| 9 | GOOGL.NDQ | Alphabet Inc – Ordinary Shares – Class A | 8.9% | 3.0% |
| 10 | FB.NDQ | Facebook Inc – Ordinary Shares – Class A | 8.4% | 2.0% |
| 11 | 700.HKX | Tencent Holdings Ltd. | 7.3% | 2.3% |
| 12 | MA.NYE | Mastercard Incorporated – Ordinary Shares – Class A | 6.5% | 1.8% |
| 13 | PYPL.NDQ | PayPal Holdings Inc | 6.3% | 2.3% |
| 14 | ACN.NYE | Accenture plc – Ordinary Shares – Class A | 5.7% | 0.8% |
| 15 | SNDE.NDQ | Sundance Energy Inc. | 4.9% | 0.1% |
| 16 | JNJ.NYE | Johnson & Johnson | 4.2% | 2.1% |
| 17 | NKE.NYE | Nike, Inc. – Ordinary Shares – Class B | 4.0% | 0.5% |
| 18 | TSLA.NDQ | Tesla Inc | 3.8% | 6.6% |
| 19 | SNE.NYE | Sony Corporation. – ADR | 3.8% | 0.2% |
| 20 | VXRT.NDQ | Vaxart Inc | 3.5% | 0.1% |
Source: BGL (bglcorp.com.au). Data as of 30 June 2020
*Percentage each security makes up of the total SMSF International Share investments e.g. Microsoft is 6.4% of the total SMSF investments in International Shares.
In 2020 Elon Musk’s Tesla also shot into the top 20. It’s share price has taken off like a SpaceX rocket since March, after the company finally turned a profit.
Chart: Tesla share price (January 2020 to November 2020)
Source: Yahoo Finance
Rounding out the top 20 is biotech group Vaxart, one of the many global drug makers vying to develop a COVID vaccine.
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