After yesterday’s article: Tesla’s Massive Gamble on Bitcoin we had countless Facebook messages asking how to gain access to Tesla and other great US companies. After browsing the internet we realized there really isn’t that many good articles on International share trading in Australia. So here we are. How to Invest In International Shares for Beginners.
International Investing is a wise decision for many Investors. Through investing internationally we can add significant diversification to our portfolios. Not only do we gain access to international equities but also, we can gain indirect diversification to offshore currencies.
Considering that for the majority of us our jobs, cash, homes and most of our assets are based in Australia, picking up some foreign exposure can reduce any impacts a slump to the Australian economy can have on our returns. We can gain access to the top economies and global companies in the world. Since Australia is only around 2% of the global economy it makes sense to expand internationally.
International Shares for Beginners
There are many ways to invest internationally and it can be quite confronting. I’m going to touch on the two most popular ways and the ways I recommend. Firstly, we can pick up many international shares just like we can Australian shares on many of the top brokerage sites (think commsec and Nabtrade etc.).
Another way to gain access to international equities is through international ETFs. ETFs are a great way to buy a passive index fund and achieve a diversified portfolio. There are also many ETF options available for overseas opportunities. When considering these it is important to chose the right fund to maximize returns and limit costs. Have a read through our ETF checklist to find the right fund for you. We also break down the most popular ETFs in our latest eBook available here.
International Shares for Beginners: Brokers
The main question we get is; Which broker can I use to buy International shares? We have always recommended the brokerage services offered by the big 4 banks. Commonwealth Bank, NAB, Westpac, and ANZ all offer excellent brokerage services which allow trading in a lot of international markets. For help getting started in the stock market, check out our guide here.
eToro: eToro has released a solid trading platform with access to a lot of financial products and 13 international markets. For a very low cost. They do offer a lot of valuable research data and information, a lot of which is derived from their engaged community of investors.
|All Trade Sizes||$0 USD|
Best International Share Trading Platforms: Brokerage
Fx Foreign Exchange: International trades incur a foreign exchange conversion spread of 0.50% of the trade transaction value.
Other Fees: After 12 months with no login activity, a $10 monthly inactivity fee will be charged on any remaining available balance. They have a flat fee of $5 when withdrawing funds.
Sign up to eToro here for the best deal.
Commsec: Commsec offers availability to over 25 International exchanges, with brokerage prices varying from region to region. Brokerage fees range from $19.95 (USD) up to $65 (USD) or 0.75%. They also charge a currency spread of around 0.60%. Here’s their price breakdown for US shares;
-USD $19.95 for trades up to USD $5,000
-USD $29.95 for trades up to USD $10,000
-0.31% for trades above USD $10,0001
Nabtrade: Nabtrade allows access to markets in the US, UK, Hong Kong and Germany. Their brokerage fees start at $14.95, for a full breakdown visit their website here. They charge a currency spread of around 0.50-0.80%.
Westpac: Westpac also offers availability to over 25 International markets. Here’s their break down of US fees;
-NYSE USD $19.95 for trades up to USD $5,000
-NASDAQ USD $29.95 for trades up to USD $10,000
-NYSE Amex Equities 0.31% for trades above USD $10,000
ANZ: ANZ offers availability to exchanges across the US, Canada, Europe, and Asia. Brokerage for ANZ starts at $59 with an FX spread of 0.60%
Selfwealth: Selfwealth is a low cost online broker that we highly recommend. They offer investors access to US markets for a flat fee of only $9.95 per trade with competitive FX spreads of 0.60%.
These are the five brokerage services that we endorse for both domestic and International share trading.
I just wanted to highlight a few CFD service providers that are also large competitors;
CFDs or Contracts For Difference are financial instruments allowing investors to trade an underlying commodity or company without owning the asset. The investor never actually owns the underlying asset but instead receives revenue based on the price change of that asset. CFDs may allow access to the underlying asset at a lower cost than buying the asset, ease of trading, and the ability to go long or short or leverage a position.
This brings up further risks than simply owning a share, as more than your initial capital may be at risk. A lot of these services will not charge brokerage but will instead apply a spread to the CFD. CFD providers can have hidden fees so make sure to fully read and understand their PDS and chose reliable providers. As with all investing be sure to never invest in something you don’t understand.
How to Invest In International Shares: Additional Considerations
With these international securities there may be some additional administration required from your end. This is usually pretty minor and easy to complete but important that you look into it in relation to the particular country that the company is domiciled to. For example, when investing in US products investors may have to complete a W-8BEN form every 3 years. This form allows foreign investors to claim tax treaty benefits and reduce the value of dividends that the US may withhold.
Also note that when completing your tax, you can most likely use any foreign tax paid to offset your Australian tax burden. Additionally, if you have a significant investment you may be liable for US estate tax upon death.
Hopefully this helps investors get started in their journey of international investing. For any questions reach out to us on Facebook. For help in valuing stocks and all things getting started in the stock market, check out our eBook here.
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