International shares

Investing in overseas shares

International shares can give you investment opportunities that are not available in Australia, as well as provide extra diversification. However, there are risks you should be aware of before you add international shares to your portfolio.

Here we explain how to invest in international shares and how to decide if they are right for you.

Comparing the Australian share market to the world's markets

The Australian share market has total market capitalization of $1.7 trillion, (as at July 2015) which represents only around 2% of the world's total share market value.

Australia's major stock exchange, the Australian Securities Exchange (ASX) is the fifteenth largest in the world by market capitalisation, but is relatively small when compared to other international exchanges. 

Worlds 15 Largest Exchanges

Source: World Federation of Exchanges, May 2015. Based on an exchange rate of $1 USD = $0.79 AUD

The Australian share market is heavily weighted toward the financial and mining sectors, which account for 60% of the ASX All Ordinaries index.

International share markets also tend to be dominated by a few industry sectors. For example, the biggest players in the US markets are the information technology and financial sectors.

Investing in international shares can give Australian investors exposure to large companies in sectors that may not be well represented in the Australian market.

Benefits and risks of international shares 

Benefits of international shares

Here are some of the benefits of investing in international shares:

  • More options - Investors are able to invest in companies, industries and asset classes that are not represented, or are underrepresented, in the Australian share market.
  • Diversification - International shares can provide investors with geographic as well as asset class diversification. This means a slowdown in one market will have less of an impact on your portfolio.

Risks of international shares

Investing in international shares carries many of the same risks as investing in Australian shares but there are also some risks that are unique to global investments. These include:

  • Currency risk - Foreign shares are held in the currency of the country of origin. Income and capital gains or losses must be converted into Australian dollars (AUD) which means you are exposed to additional volatility from movements in exchange rates. If the value of the AUD rises against a particular currency, the value of investments held in that currency will fall. Also a fall in the AUD will increase the value of your investments.
  • Political and regulatory risk - International shares are subject to country-specific risks such as political and regulatory changes. While it might be easy to keep up with these changes in Australia it may be harder to keep track of what's happening in other markets. You will need to understand the market and laws relating to foreign investment in the country you are investing in. You will also want to find reliable information sources to help you keep track of your investments.
  • Time differences - Other markets operate in different time zones so trades and information may be delayed.
  • Tax - For taxation purposes, investment income from international investments is treated differently to income from domestic investments. If you hold international shares and receive income, professional tax advice is recommended.

If you are concerned about any of these risks you should seek professional financial advice before you invest in international shares.

How to invest in international shares 

Smart tip

Look around for a broker that provides the services you're looking for at an affordable price. Services and fees can vary alot depening on who you choose.

Typically Australians invest in international shares in one of three ways: using a broker, through a managed fund or through an exchange traded fund (ETF).


Most brokerage firms or online broking services have the ability to buy and sell shares listed on major international exchanges such as the New York Stock Exchange, NASDAQ, London Stock Exchange and Euronext. For smaller markets or exchanges, check whether your broker can trade on these.

Direct investing in international shares is significantly more expensive than investing in Australian shares. Make sure you look at all the fees including brokerage fees, currency conversion fees, foreign security custody fees and internal transfer fees.

Managed funds

Managed funds pool your money with money from other investors and an investment manager manages it on your behalf.

Some funds will focus on international shares, perhaps specific regions or industry sectors, while others will simply include international shares as part of a diverse mix of assets.

Fund managers may have strategies in place to limit the impact of exchange rate movements on your investment. As with any managed fund, read the product disclosure statement (PDS) before you invest and only choose investments that are compatible with your investment goals and risk tolerance.

Exchange traded funds (ETFs)

These are investment funds listed on a stock exchange that track the returns of a specific index or market sector. They can be bought and sold like ordinary shares through your stock broker or online trading account.

The ASX has a range of exchange traded funds that track a single market index such as the ASX All Ordinaries index, a global index such as the Global Health care index or a range of regional indices. ETFs can be a cost effective way to gain exposure to international shares listed on an index, but it's important that you read the PDS to know what you are investing in and the risks involved.

Find out more about how exchange traded funds work and their risks.


Diversification is an essential part of managing investment risk. Ideally you want to be diversified both within and across asset classes.

Geographic diversification can lower overall investment risk. Economies grow at different rates and at different times, so a portfolio that is diversified geographically benefits from changes in faster growing economies and offers some protection from slowing economies.

Find out more about diversification.

International shares are now easier for Australian investors to access and can be an effective way to diversify your portfolio. However, they can involve greater risk and higher costs than investing in Australian shares. Weigh up the benefits and risks carefully and seek professional financial advice if you are unsure whether international shares are right for you. 

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Last updated: 01 Aug 2016