Working Adult: Diversify Your Portfolio Overseas For Better Investment Outcome
We did an article on how come of Singapore’s top financial bloggers invest their first S$10K. While the pieces of advice work for a S$10K portfolio, readers highlighted the lack of diversification.
The Straits Times Index (STI) Exchange-Traded Funds(ETF) allows investors to invest in a variety of Singapore blue chip stocks, but it is still rather dependant on the health of Singapore’s economy.
Key Takeaways – 4 Ways To Diversify Your Portfolio Overseas:
- Invest in foreign companies listed on SGX.
- Invest in local companies with overseas exposure
- Invest in foreign companies listed on other exchanges
- Invest in funds/bonds or ETFs
Imagine this: You believe very much in a “Bak Chor Mee” business model and decide to invest heavily in it, owning up to 30 stalls all around Singapore.
You believe very much in a “Bak Chor Mee” business model and decide to invest heavily in it.
Despite being approached by several chefs to invest in their “Korean BBQ” and “Korean Ramen” businesses, you refused.
Cause “Bak Chor Mee” Is Life!
You continue putting all your lifetime savings into setting up more “Bak Chor Mee” stalls around Singapore and then it happened.
A Korean Drama took Singapore by storm and now every Singaporean thinks that eating Korean food is the way to go. No one patronises “Bak Chor Mee” stalls anymore. You just lost all your life savings.
On the other hand, should you have vested 50% of your savings setting up a few “Korean BBQ” stall, your risk is diversified from just selling “Bak Chor Mee’ alone.
Now applying this context back to investments, there is evidence to show that having a large number of international stocks is less risky than having a large number of U.S stocks. This is the same context for Singapore. You get what we are driving at!
What Are Some Of The Ways To Diversify Our Portfolio Overseas?
Contrary to popular belief, diversifying your portfolio overseas is not as complicated and troublesome than in the past.
- Unlike the past, buying and selling of investment instruments are just a few clicks away.
- Due to technology, we have access to all the information online, from fact sheet to even the price of certain stocks in real time.
With that, here are some ways we can do so.
Companies Listed On The Singapore Exchange
Singaporeans can start off first by looking in your backyard. There are actually foreign companies that chose to get listed on the Singapore Exchange (SGX). According to a survey done across 700 companies, overseas revenue made up 53% of total revenue for small and medium-sized enterprises (SMEs) and 40% of that for larger enterprises.
Two ways to go about doing so. There are actually foreign companies that chose to get listed on the Singapore Exchange (SGX). From there Singaporeans can look to invest in their shares through their preferred broker. Such companies include the likes of Chang Beer’s producer Thai Beverage from Thailand and Yangzijiang from China just to name a few.
One can also look to invest in local companies that have expanded their business overseas. According to a survey done across 700 companies, overseas revenue made up 53% of total revenue for small and medium-sized enterprises (SMEs) and 40% of that for larger enterprises. A few of such examples will be the likes of our familiar brand Singtel, which has a strong presence overseas such as Telkomsel in Indonesia and AIS in Thailand or QAF which earns most of its revenue from overseas market.
Almost everyone is familiar with companies such as Apple or Google, but little actually went ahead to invest in them.
One of our community member Jefferson actually invested in companies such as Google, Netflix and Apple with his first S$10K. The point here being, Singaporeans should not restrict themselves to only companies listed in SGX. Most of our brokerages actually allow their investors to trade overseas stocks as long as they apply for it. DBS Vickers, for example, allows one to trade U.S., Canada, Hong Kong, U.K, Australia and Japan stocks online.
A common misconception to highlight will be that companies listed on SGX mean they are safer to invest in compared to companies listed overseas. Ultimately, it all boils down to the fundamentals and performance of individual companies no matter where they might be listed.
Bonds, Funds And ETFs
There is actually a lot to choose from when it comes to the variety of bonds, funds and ETFs. Being familiar with the STI ETF, an exchange traded fund, I went on to search for an ETF that tracks the Korea Composite Price Index (KOSPI).
Take it as my first move in investing in that “Korean BBQ Stall”.
My search landed me on two methods which I can get my portfolio diversified in the Korea market.
- Invest in the iShares Core KOSPI 200 Index ETF traded on the Hong Kong Index. I can easily do so with the DBS Vickers account which I am currently using.
- The second method will be to head over to Fundsupermart and search for the best product that suits my preference using the Fund Selector.
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