You are a global person. Is your portfolio? How to invest in the world share market?
Your phone is from China. Your coffee is from Brazil. Your furniture is from Lithuania. Your shoes are from Taiwan. Your TV is from South Korea. Your clothes are from India. Your petrol is from the UAE. Your car is from Germany.
You live in a truly global economy.
You have seen the ruins of Michu Picchu, tasted the street food of Bangkok, marvelled at the Colosseum and been to a Broadway show in NYC.
You are a global person.
But ... do you invest like the life you live? Or are your investments Aussie centric?
If you only invest in the Aussie share market, you are only investing in 2% of the global share market.
Does that reflect the person that you are? Given how the global economy works, how the world share market works, is this the right long term investment approach?
In the last decade, China has become a major economic power in our region and the world. The Chinese stock market grew from being 4% of global share market cap in 2005, to 15% today. The US remains the largest stock market in the world by some distance - 41% of global market cap.
Investing in global stocks has some complexities. There are potential tax issues, currency risks, political risks - just to name a few. On top of this, you also need to find a broker to help you buy shares in global stocks. Brokerage fees is usually higher for global stocks too!
This is why ETFs are a great option if you want to invest in the global market:
- They are easy to buy with your Aussie broker (see the cheapest online brokers to buy ETFs)
- They offer great diversification, reducing political and single company risk along the way. For example, buying 1 share in Vanguard MSCI Index International Series ETF (VGS) is like investing in over 1,500 companies from around the world
- They are traded in $A, and you can select hedged or unhedged options