4. Risk vs. reward

For every reward there’s risk and international shares are no different to any other investment. Below we’ll canvass some of the main benefits and risks so you can make informed choices about where and how to invest your time and money.

 

Benefits

 

Diversification is a key element of any successful investment strategy. With international trading, you can invest in markets worldwide, accessing sectors that may not be available in Australia.

Access to well-known brands: International trading allows you to invest in businesses and brands you know, such as Google, Microsoft, Apple, Kraft and many others.

Quotes and research for US markets: CommSec International Trading gives you access to market news, sector analysis, stock news and index information for US markets, plus international watchlist and portfolio capability.

 

Risks

 

Currency risk: As international securities are denominated in a currency other than Australian dollars, the value of your investment may be affected by changes in currency exchange rates.

Political and regulatory risk: International shares are held by an international custodian, and are subject to risks relating to political, economic and regulatory changes in the country of the custodian or stock exchange. Also, the Australian market is highly regulated and, while the overseas markets CommSec allows trading in are regulated too, it’s important to note each market is regulated in a different manner with a different set of rules. Overseas, regulators have different standards and powers when it comes to intervening, specifically when trading conditions deviate from the norm. This means when there is increased market volatility and fluctuation in share price, investors may be more exposed to larger losses.

Taxation risk: Tax implications can be different from investing in Australian securities and may vary depending on your individual circumstances and which countries you choose to trade. There’s a special form you will have to complete for US share trading, for instance, so you qualify for Australian treaty benefits. Read more on US tax implications here.

ETFs come with their own set of risks. These include tracking error, where the ETF might not perfectly replicate the performance of its index, to counterparty risk—or the chance that the issuer of the fund goes into insolvency. For a deeper dive on ETFs and their risk and benefits, visit the CommSec Learn page here.

Disclaimer

CommSec Learn is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a market participant of the ASX & Chi-X Australia, a clearing participant of ASX Clear Pty Limited and a settlement participant of ASX Settlement Pty Limited.

 

 

Disclaimer

This site is directed and available to and for the benefit of Australian residents only. © Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec") is a wholly owned, but non guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and both entities are incorporated in Australia with limited liability.

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