Are you missing out on international exposure?
Are you missing out on international exposure?
When considering the size of the Australian equity market as a percentage globally, it represents under 2% of the total market capitalisation of global equity markets, as measured using the MSCI ACWI (All Country World Index).(1)
Australian investors’ portfolios are often domiciled and concentrated in our local market. Investors often feel more comfortable investing in Australian shares due to their familiarity with local companies. Australian domiciled securities are quoted in Australian dollars allowing Australian investors to easily understand and manage their investments in their own currency, and it is easy to access the ASX with a multitude of brokers to choose from.
As stock indexes go, the ASX200 is concentrated in a few major sectors. In fact, over 50% of the ASX200 is concentrated in Financials and Materials (materials being commodities and mining).(2) This leaves investors potentially over-concentrated in these sectors should they have a portfolio that replicates the ASX200 via an index ETF. Or they may be an investor that prefers ASX200 large cap companies. This is often referred to as concentration risk. If these sectors then underperform, it will impact the overall performance of a portfolio. Depending on their risk tolerance, investors could consider diversifying beyond the ASX200 or ASX to help mitigate the concentration risk.
The largest market globally by far is the United States (US). It contains the world’s largest companies by market cap such as Microsoft, Apple, Amazon and Nvidia.(3) They are all are domiciled in the US and listed on the technology focused Nasdaq stock exchange and included in the S&P500 and Nasdaq100 indexes. The S&P 500 is made up of the largest and most liquid companies in the US. It represents over 50% of global equity market capitalisation.(4)
A domestic only portfolio may be missing out on the largest companies in the world and the potential growth they can achieve. International shares provide geographical and asset class diversification which may improve a portfolio’s risk and return potential and help mitigate the concentration risk. Diversification is often considered a key mechanism in riding out the ups and downs of investing.
It is now much easier to access these international markets, more than ever before. Exchange Traded Funds (ETFs) provide an easy and cost-effective way for adding international exposure to an investor’s portfolio. ETFs listed on the ASX provide the ability to hold a particular index or focus on a specific sector. ETFs on the ASX are quoted in Australian dollars and may provide tax reporting that works with Australia’s tax system. Leveraged offers lending on over 200 ETFs listed on the ASX many of which offer international exposure and can be held directly.
What are the risks?
Investors should carefully evaluate the risks and opportunities when comparing international investing to domestic investing. Risks to consider include:
Currency Risk – Investing in a security that is quoted in another currency for example USD, the investor is not just exposed to the movements of the share price, but also movements in the exchange rate.
Regulatory Risk – The Australian market is regulated and companies must comply with stringent requirements to be listed. Other countries may have different requirements and different powers when it comes to intervening.
Individual internationally listed stocks can also be held, via custody arrangement on an approved platform. Individual holdings give an investor the ability to invest further in the stocks they prefer, including international holdings from markets other than the US, for example Europe and Asia. They can create a portfolio that works with their goals and risk appetite and the global companies they want in their portfolio.
A Leveraged Margin Loan offers lending on over 800 individual international securities. This includes international ETFs domiciled in those markets. Check our approved International Acceptable Investments List for the full list of securities(5) or call 1800 307 807 for more information.
Things you should know
(1) https://www.msci.com/indexes/index/892400
(2) As of 30 May 2025. This figure represents the combined market capitalisation, in percentage terms, of the Financials and Materials sectors within the S&P/ASX 200 Index. Data sourced from S&P/ASX 200 | S&P Dow Jones Indices
(3) https://www.spglobal.com/spdji/en/indices/equity/sp-500/#data
(4) As of 31 December 2023. Data sourced from: S&P Dow Jones Indices LLC
(5) https://www.leveraged.com.au/support/ail/
Gearing involves risk. It can magnify your returns; however, it may also magnify your losses.
Investing in international markets exposes you to risks including those related to movements in foreign currency exchange rates and market prices.
Issued by Leveraged Equities Limited (ABN 26 051 629 282 AFSL 360118) as Lender and as a subsidiary of Bendigo and Adelaide Bank Limited (ABN 11 068 049 178 AFSL 237879). This contains general advice only and does not take into account your personal objectives, financial situation or needs. The views of the author may not represent the views of the broader Bendigo and Adelaide Bank Group of companies (“the Group”). This information must not be relied upon as a substitute for financial planning, legal, tax or other professional advice. You should consider whether or not the product is appropriate for you, seek professional financial advice and read the Product Disclosure Statement and Incorporated Statements (together, the ‘PDS’) and Product Guide, together with the terms and conditions applying to the product or service, before making an investment decision. To obtain a copy of the PDS and relevant information please call 1300 307 807, visit www.leveraged.com.au or contact your financial adviser. Terms, conditions, fees, charges and normal lending criteria apply. Not available to self-managed superannuation funds.
Examples are for illustration only and are not intended as recommendations and may not reflect actual outcomes. Past performance is not an indication of future performance. The information provided in this article may be subject to change. It is given in good faith and has been derived from sources believed to be accurate. Accordingly, no representation or warranty, express or implied is made as to the fairness, accuracy, completeness or correction of the information and opinions contained in this article. To the maximum extent permitted by law, no entity in the Group, its agents or officers shall be liable for any loss or damage arising from the reliance upon, or use of the information contained in this article.
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