Sunday, February 25, 2007

Five ways to invest overseas

Regular readers will know that right now I’m a big fan of diversifying away from Australia into overseas markets. In my quest to promote this idea I decided to find five ways you can get offshore without learning French or catching the dreaded Delhi belly.

  1. Managed funds – No kidding you say, but what sort? I think a good active manager should be able to pick which international markets are on the up in the medium term (I like Europe and Asia over the US). Long term most of the active guys will probably come back to the pack but now I think the timing is right for actives because international index funds are often based on MSCI ex Australia so will have too much in the US for my liking. I always check the fund manager’s view on hedging. Most funds provide the manager with a discretionary range to hedge (e.g. 30-70%) while others have a firm policy.

  2. CFDs – plenty of alternatives are available here. If you're not familiar with CFDs get a flavour from one of my previous posts. Depending on the provider you can go from FTSE to DJIA through to indices in India and Shanghai. Most will offer a crack at straight index plays or get into the noxious world of binaries (a.k.a. bet options). And speaking of bet options…

  3. Betfair – I’m not joking, provided you’re not an AFL footy player you can bet on financial markets, including overseas interest rates and stock indices. Granted, it’s not exactly long term investing when you’re playing the hourlies, but you can do it. The Financials forum often has some spicy conversations with punters railing against rogue bots amongst many other things. This is strictly for entertainment.

  4. Index warrants – listed on the ASX with market makers happily making a price on either side for you. Call and/or put warrants are usually available over the Nikkei, S&P500 and Nasdaq.

  5. Overseas companies listed on the ASX – News Ltd is a great example of a stock where the drivers are primarily international. James Hardie and Rinker are two more. Also look at some of the property trusts, Babcock & Brown Japan is one example, Macquarie’s Prologis and DDR are two others that come immediately to mind (and please remember these aren’t recommendations, they’re examples)


Personally I’ve preferred options 1 and 5 for true investing leaving 2 & 3 for dabbling and entertainment.

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