A trader in the New York Stock Exchange reacts at the closing bell as the Dow Jones Industrial Average closes above the 20,000 mark for the first time, in January this year.
A trader in the New York Stock Exchange reacts at the closing bell as the Dow Jones Industrial Average closes above the 20,000 mark for the first time, in January this year. JUSTIN LANE

Give your money an overseas trip

FOREIGN currency is in the news again with the Australian dollar losing value against the American dollar.

Having a strong dollar may make you feel good but it is important to understand that currency movements are a two-edged sword.

Exporters receive less as our dollar strengthens and imports and overseas holidays become cheaper.

A falling Australian dollar also means the value of your international investments may rise.

The gain could be a temporary one because currencies do fluctuate between wide bands, but it is a good time to remind yourself that there are still good reasons to have part of your portfolio in international assets.

Our stock market represents less than 2% of total world stock markets and there are many industries such as pharmaceuticals, aircraft building and heavy engineering that do not exist in Australia.

Also, the economic cycles in various countries are often in different phases, so investing internationally gives you the chance to catch the up cycle in one country when there might be a down cycle in another.

The best way for most Australians to invest internationally is to use one or more of the international equity trusts that are now available.

They are run by experienced fund managers, often with offices offshore, who spread your money over a wide range of assets.

This protects you if one company goes bad.

You should obtain advice from your adviser before you invest in overseas shares because they do not pay franked dividends and tend to have lower yields than local shares.

Your adviser will be able to explain the advantages and disadvantages to you to help you decide what proportion of them should be in your portfolio.



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