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How You Can Grow Your Portfolio by Investing in Foreign Stocks


investing in stocks

So you’re eyeing the global markets? It’s smart—diversifying your portfolio with foreign stocks can offer substantial growth opportunities. But how much should you invest, and which stocks do you pick?

In this post, we’ll walk you through the essentials of international investing and help you create a balanced portfolio.

What are the Benefits of Foreign Stocks?

There are many benefits to investing in foreign stocks that investing in Australia simply doesn’t offer your portfolio. Any serious investor could consider investing in stock markets outside of Australia.

Diversification: By venturing outside the Australian market, you’re not just tapping into new industries and economies, but you’re also reducing your risk. You’re not putting all your eggs in one basket.

Access to Different Industries: Certain industries and companies aren’t available on the ASX. Investing in foreign stocks gives Australians access to different companies in technology, pharmaceuticals, automotive, and other sectors.

Emerging Markets: These markets can provide high growth potential that you won’t find in more mature economies. So, by looking beyond Australian shores, you’re giving yourself a chance to capture global growth

Currency Diversification: By investing in foreign markets, Australians can diversify their currency exposure. This can be beneficial if the Australian dollar weakens against other currencies.

Enhanced Liquidity: Some foreign stock markets offer greater liquidity due to their larger size compared to the ASX, which can make buying and selling large positions easier for investors.

How to Invest in Foreign Stocks

To invest in foreign stocks, you’ll need to open an account with a broker that offers international market access. With over 20 million users, including those from the United States, Singapore, Hong Kong, and Australia, Moomoo's Australian trading platform opens the door to simple foreign trading.

By choosing such a platform, you can trade not just during standard market hours, but around the clock with US stocks.

How Much Should be Invested in Foreign Stocks?

Determining the right proportion of your portfolio to allocate to foreign stocks hinges on your individual risk tolerance and investment goals.

There’s no one-size-fits-all answer, but a range of 15-40% is typical for most portfolios. If you’re more conservative, you might lean towards the lower end, while if you’re seeking higher growth and can stomach more volatility, you may opt for a larger percentage.

Also, consider your investment horizon. The longer you can remain invested, the more time you have to ride out the fluctuations of international markets.

Always ensure you’re well-diversified, not just internationally but also across sectors and company sizes. And remember, regularly review your portfolio to adjust your foreign stock allocation as your life circumstances and the global economic landscape evolve.

How to Choose an International Investment

When you’re ready to add international flavour to your portfolio, it’s crucial to assess the stability and growth potential of foreign markets and companies.

Look into the political climate, economic indicators, and market trends of the countries you’re interested in. It’s essential to understand the risks that can affect your investment such as currency fluctuations and regulatory changes.

Dive into company fundamentals. Study their earnings history, debt levels, and management’s track record. You’ll want to choose businesses with solid financials and competitive advantages in their respective industries.

Don’t forget to consider the tax implications and how you’ll diversify across different regions and sectors. By doing your homework, you can make informed decisions that help grow your portfolio beyond borders.

Types of Investments to Grow Your Portfolio

Similar to domestic investments, your portfolio should be made up of the following investments.


  • Equity Investments (Stocks)

  • Fixed-Income Investments (Bonds)

  • Mutual Funds

  • Exchange-traded funds (ETFs)


Putting together stocks, bonds, mutual funds, and ETFs in your investment portfolio offers great balance and variety of earning potential.


Stocks can make your money grow faster, but they can be risky. Bonds are safer and give you a steady income. Mutual funds and ETFs are a variety of stocks or bonds, which makes it easier to manage your money.


This mix helps protect your money from ups and downs in the market and works well for different saving goals and times when you’ll need the money.


Why Creating a Balanced Portfolio is Important

Diversifying your investments across various international markets is crucial for mitigating risk and stabilising your portfolio’s performance. This is the tactic that many Australians have been using to great effect as shown by Forbes.

Different markets react differently to economic events, and what causes a downturn in one region might not affect another. This means that if one part of your portfolio underperforms, the impact on your overall assets is cushioned by the parts that are doing well.

A balanced portfolio also capitalises on growth opportunities worldwide. You’ll have access to markets with high growth potential that aren’t available domestically. It’s about finding the right mix that aligns with your risk tolerance and investment goals.

 

Of course, always seek advice from a qualified professional.


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