Has anyone invested 100% of their superannuation in international shares? Their current returns are pathetic but apparently long term returns are best amongst all categories. What is the general opinion?
Superannuation Investment International Shares
rick5042 on 01/09/2022 - 17:46
Comments
Good chart.
But watch out the US shares is S&P500 which most of those are actually multinationals.
At the moment it depends on how people see fair value. If it is 20% from all time highs is it a discount or is it a real adjustment? It is like buying bonds. Is the current interest rate half way to the top or at the top. Buying low and selling high is tough.
International index is loaded with some really bad markets to invest in. Example is China. You need to be in the know to be a stock picker and be able to generate returns. The index is loaded with a lot of big state enterprises. When times are good the index lifts and when things are bad it is really bad because the government screws the shareholders.
I'd be wary trading international shares.
Knowing that you're playing with both shares and exchange rates. With the Australian dollar as weak as it is i wouldn't be overly keen.Also depends on your age.
If you're say under 50 YOLO
if you're over 50 i'd be looking at slightly more conservative options.With low AUD, the other way to think of it is
-you'll be screwed the AUD to USD conversion
-you'll make a killing on the USD to AUD income conversion (assuming you are generating USD income)*Assumes AUD remains low. If AUD starts increasing again you'll be screwed a second time as your USD income would be worth less. There are options to hedge the currency, but unfortunately there is a price to pay
International Shares are a dual bet on both individual share prices and also the Australian dollar. For the most part both need to move in your favour for you to make money.
It's actually irreverent what the conversion rate is now, what's relevant is whether the AUD goes up or down from here. If it goes up you lose, if it goes down you win.
Currently the AUD is on the low side of long term averages so based on long term averages it's more likely to go up in the medium term, eating into any capital gains you might make internationally.
It is true that out of a world full of companies, some are going to outperform the Australian share market, so sure, there are bigger theoretical gains to be made outside of Australia.
But in a world full of companies it's also unrealistic to expect that your funds manager will be on top of anything other than a fraction of them. And as a market as a whole, Australia has tended to outperform most non-third world markets, so you could do a lot worse just investing here.
Furthermore, your funds manager is likely to be more familiar with Australian listed companies, and is therefore in a better position to make informed decisions.
At the end of the day, you're better off just selecting the 'High Growth' option and not trying to out think your funds manager, who is both better qualified and more experienced than you are in making these kinds of calls.
If you were committed to investing in a shares option though, personally, I'd prefer Australian shares rather than international as Australian shares have tended to perform competitively against international markets, while also being partially insulated from exchange rate fluctuations. (Which can work a bit both ways, anyhow, since if the AUD does continue to decline Australian share prices are likely to be propped up by international investors looking for a bargain.)
It's actually irreverent what the conversion rate is now, what's relevant is whether the AUD goes up or down from here. If it goes up you lose, if it goes down you win.
So it is relevant as if the aud is at a historically lower than the mean then you'll be less likely to capitalise on the difference. You make money buying and selling by buying at the right price in the first place.
It's actually irreverent
No, they said irreverent, which means disrespectful to the sacred facts
I did back when the AUD was over USD1.
Converted it back to Australian at about 80cSo you went the ozbargain strategy of buy high, sell low… and it worked? What is this madness?
When you buy 1USD for 1AUD, and then sell 0.80USD for 1AUD, you make money
Thats just forex trading no?
Essentially yes.
But one of the safest and easiest ways to trade currency for a nobody.
Do you think australia will do better than other countries in the next few decades?
Yes, because i think the international market will perform well over the next few decades.
Which international market? They’re all different you know
No. OP is asking about a superannuation option. The superannuation company will split the investment between markets as they see fit. OP is not asking about which international market to invest in.
But let's run with this. Prey tell us all, which international market should OP be investing in? You sound very well informed about such things.
You sound very well informed
Not as well informed as you obviously, our resident expert.
But I do know that the ASX forms a miniscule part of the global market, so restricting your investments to Aus shares + “international” is rather limited when you can easily diversify into the other 98% of the world equity market & make your own choices on what to buy rather than allowing your superfund to blindly lead you into “International”, something you have no control over.
Even a cheapshot broker like Selfwealth allows you to invest in US shares & HK shares.
Apple & Google combined are worth more than the entire ASX.
Lumping 98% of the world market into one bucket and assume it is homogenous, that’s your choice friend.You've not had much exposure to how superannuation category options work, have you.
Wouldn’t they hedge against the exchange risk !
There is an ongoing cost associated with doing that.
Depends on where you think fair value is and your opinion of buying low and selling high. It is like OzB. If you could buy an item 20% off would you?
If fair value of international shares is 20% more than it is right now would you buy and hold it for 2 years and make 20%?
Very subjective. After every crash is the best time to buy but can you pick bottom and can you pick the top to get out.
Should I bet all my money on one horse? Unless its Makybe Diva, probably not.
While ASX is only 2% of world market value, it has performed pretty well (thanks to stuff in the ground, govts backing housing/banks and franked dividends). At least split local/global and consider splitting your global hedged/unhedged to balance out forex (AUD normally falling, which is good but has its moments, which can kill your global returns for the year). Then stop watching, come back in 3 - 5 years and see how things have gone.
Using this as a proxy, international shares (i.e. those representing the entire world ex. Australia) have actually not performed brilliantly over the last 30 years.
That said, the common wisdom (and I can see where this debate is going to go straight away) is that some allocation towards international shares within an appropriately diversified portfolio would be appropriate if seeking long term capital growth.