{"id":43057,"date":"2020-04-24T11:22:25","date_gmt":"2020-04-24T03:22:25","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=43057"},"modified":"2024-01-31T17:24:59","modified_gmt":"2024-01-31T09:24:59","slug":"invest-overseas-unit-trust","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/invest-overseas-unit-trust","title":{"rendered":"How To Invest Internationally \u2013 Even If You Aren\u2019t A Millionaire"},"content":{"rendered":"

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What comes to mind when you think of investing overseas?<\/p>\n

If you\u2019re imagining yachts, beach houses and foreign bank accounts flush with cash \u2013 in other words, something only the uber-wealthy can afford \u2013 you\u2019d be mistaken.<\/p>\n

Investing overseas can be easy and affordable. In fact, it could be an important part of your retirement portfolio. With the changing global market conditions, it may now be a good opportunity to invest and reap the benefits of staying invested for the long term.<\/p>\n

Here\u2019s why you should invest overseas \u2013 even if you aren\u2019t wildly rich \u2013 and how to go about it.<\/p>\n

<\/span>Why should you invest overseas?<\/strong><\/span><\/h2>\n

Investing overseas is sometimes associated with higher risks. But that\u2019s not always true. In fact, diversifying overseas could help manage your investment risk by spreading it overseas, and opening up your portfolio to better growth opportunities in the long run:<\/p>\n

1. Spread your risk geographically<\/strong><\/p>\n

The FBM KLCI (the index that tracks the 30 biggest Malaysian companies) only gained 26.8% between 2010 and 2019. This was due to<\/a> domestic factors like weak crude oil prices and political uncertainties, as well as international factors like low interest rates and the US-China trade war.<\/p>\n

This means that if you had invested RM10,000 in the FBM KLCI at the start of 2010, your investment would have only grown to RM12,680 by the end of 2019 (assuming you did not make any other buying or selling transactions in between).<\/p>\n

You may have been better off with a fixed deposit: if you had put the same RM10,000 in a fixed deposit with an annual return of 4%, it would have grown to RM14,802 in the same time period.<\/p>\n

This is the downside of investing only in one country: if the local stock market isn\u2019t doing well, it could limit your portfolio return. But by spreading your portfolio across different locations, you can reduce your risk and potentially improve returns.<\/p>\n

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2. International stocks could offer higher rates of growth in the long run<\/strong><\/p>\n

The most exciting stock market gains in the past few years have happened overseas, especially in the US. Think about the most valuable brands<\/a> in the world today \u2013 they happen to be American companies like Apple, Google, Microsoft and Amazon. The American stock market has been the best-performing<\/a> major stock market in the world, with the S&P 500 (an index that tracks the performance of 500 large companies) climbing 248% between 2010 and 2019.<\/p>\n

Recently, the US stock market \u2013 along with the global stock market \u2013 has been experiencing volatility due to uncertainty around the coronavirus (COVID-19) pandemic. But if you\u2019re investing for the long term, this could be a good opportunity to pick up investments that are currently undervalued \u2013 that is, investments that are trading below their true value. And by staying invested over the long term, you could potentially ride out any market volatilities and reap the benefits.<\/p>\n

Across the pond, Europe also presents opportunities<\/a> for overseas investors, as valuations are low and dividend yields are high. The region is also home to some of the top global brands, such as Mercedes-Benz, Nestl\u00e9 and Accenture.<\/p>\n

Closer to home, China represents one of the fastest-growing<\/a> emerging markets in the world. It\u2019s expected to overtake the US by the next decade to become the world\u2019s biggest economy by gross domestic product. China holds great appeal<\/a> for foreign investors, due to its economic strength and potential for growth. It may also be the first country to restore economic growth<\/a> due to early precautions taken to stop the spread of COVID-19.<\/p>\n

By diversifying your portfolio abroad, you\u2019ll have the opportunity to invest in high-quality companies in developed markets, as well as take advantage of fast-growing emerging markets. In fact, overseas investments have been the main drivers of income for the Employees Provident Fund<\/a> (EPF) and the Amanah Saham Bumiputera<\/a> (ASB).<\/p>\n

3. Protect against ringgit depreciation <\/strong><\/p>\n

The ringgit has depreciated 20% against the US dollar in the past ten years. If your investments were entirely denominated (i.e. measured) in ringgit, your investments would have lost value, simply because the ringgit has weakened.<\/p>\n

Investing abroad can help protect your portfolio against ringgit depreciation. For example, let\u2019s say you invest in assets denominated in US dollars. If the ringgit depreciates against the US dollar, the value of your investment will now be worth more in ringgit terms.<\/p>\n

However, this works both ways. If the ringgit appreciates against the US dollar, then the value of your investment will be lower in ringgit terms.<\/p>\n

<\/span>Invest directly in foreign-listed stocks<\/strong><\/span><\/h2>\n

So how do you invest abroad?<\/p>\n

Generally, there are two ways. The first is to invest directly in foreign-listed stocks. You can do that through a local broker that covers international markets, or through a foreign or online broker.<\/p>\n

However, for many Malaysians, this isn\u2019t very convenient. Here\u2019s why:<\/p>\n