This article was written in collaboration with OCBC Securities. All views expressed in this article are the independent opinion of DollarsAndSense.sg
Investing in overseas stocks may be intimidating to new investors. Even for those of us who have already started investing in companies listed on the Singapore Exchange (SGX), we may still feel that foreign-listed stocks require us to venture beyond our comfort zone.
To overcome our inertia to foreign investments, we need to turn this from an unknown quantity into a known one. The easiest way to do so is to simply observe the world around us.
Investing In The World Around Us
Each morning, we wake up from our Sealy Posturepedic (Sealy International, Inc.) beds wishing we could spend just five more minutes sleeping. After washing up, we rush to catch the perennially packed bus.
On our way to work, we’re already Googling (Alphabet Inc) our next holiday ideas on our iPhones (Apple Inc.). We look out the window just in time to see a shiny new Volvo (Geely Automobile) zoom past the bus…maybe we should save up for a car so we don’t have to squeeze with everyone every morning.
During lunch, we go to McDonald’s (McDonald’s Corporation), even upsizing our fries and Coca Cola (The Coca Cola Co). In our minds, we promise to finally go for that run later in the evening with our new pair of Nike (Nike Inc) trainers.
While eating, we revel about how epic the upcoming Marvel (Walt Disney Co) universe movie Ant Man is going to be. Instead, our colleagues seem more interested in finding the best deals on Taobao (Alibaba Group) and Amazon (Amazon.com, Inc.).
By midday, most of us start nodding off at our desk. Saving our work on Dropbox (Dropbox Inc), we head out for our daily Starbucks (Starbucks Corporation) fix. Flashing our new HSBC (HSBC Holdings) credit card on the Visa payWave (Visa Inc) machine certainly made it feel like an easier transaction.
Returning home from work, we eagerly await tuning into Netflix (Netflix, Inc.) or logging on to our gaming laptop, the Lenovo Legion (Lenovo Group) to play our favourite first-person shooter game. All that will have to wait for now – we’re going to watch the FIFA World Cup on our big screen Sony (Sony Corp) television set!
After celebrating our favourite team’s performance, we brush our teeth with the Advanced Whitening Colgate (Colgate-Palmolive Company) and tuck into bed. Before we doze off for the night, we log on to Facebook (Facebook, Inc.), WeChat (Tencent Holdings) and Snapchat (Snap Inc) to see what our friends have been up to.
If you haven’t caught on, this typical routine many of us live on a daily basis sees us interacting with some of the largest blue-chip or most exciting foreign-listed companies globally.
Starting Our Overseas Investment Journey
Compared to the market capitalisation of SGX, the New York Stock Exchange (NYSE) is close to 30 times larger with over 2,400 listed companies, the London Stock Exchange (LSE) is nearly six times larger with 2,500 listed companies and the Hong Kong Stock Exchange (HKEX) is five times larger with nearly 2,500 listed companies.
When you couple this with the fact that the companies that we engage with on a daily basis are also the ones listed on many of these overseas stock exchanges, it doesn’t feel as daunting to start investing in overseas stocks.
Moreover, these are also the companies that are likely to be the most highly-traded and researched companies. This provides us with both liquidity and extensive information to make our investment decisions.
It’s also fair to assume that if we frequently purchase products and services from a certain brand, we would be even more keen to put in extra research to better understand the company. This allows us to become savvier consumers as well as puts us in a better position to ascertain the company’s investment merits.
We’ll be more aware of a company’s competitors as well as be in-tuned to any technological advancements or pain points in the industry. This helps us gauge a company’s current operational strength and long-term business viability. It also smoothens the process of monitoring and rebalancing your portfolio as an investor.
Rather than to look at it as a hurdle, we should view overseas investments as essential to diversifying and strengthening our investment portfolio with highly-traded multinational blue-chip companies.
Which Stock Brokerage Account Should I Use?
This is an important question, as choosing the right brokerage platform can help an investor significantly in his or her overseas investment journey.
Here are some relevant questions that you should be asking to determine this.
Local VS Foreign Stock Brokerage House?
While it’s possible to open a brokerage account in the overseas market that you wish to invest in, you should first consider choosing a local brokerage platform.
The main reason is convenience. If you already have a stock brokerage account with a local brokerage house, it’s simpler to continue using them for your overseas investments. Even if you start off by investing in overseas stocks, it’s likely that you will invest in local stocks at some point in the future.
By using a local brokerage account, you gain access to both overseas and local stock exchanges on a single brokerage platform. This way, you buy and sell stocks on the same platform, you also pay for your investments the same way, and you get to monitor your entire portfolio on one app, regardless of whether it’s a local or foreign stock.
Access To Multiple Overseas Markets
If you are intending to invest in overseas stocks, you want to choose a brokerage account that provides you access to multiple markets, not just one.
For example, OCBC Securities enables customers to trade on 15 global exchanges — including the NYSE and Nasdaq in the US, the HKEX in Hong Kong and the Bursa Malaysia – just as easily as they would for Singapore-listed stocks on its iOCBC online platform and mobile app. Customers can gain access to even more global exchanges by calling their OCBC Securities Trading Representative.
Source: OCBC Securities
Targeted Analyst Research Reports
Access to diverse overseas markets alone may not be enough. Relevant research insights and reports, as well as economic commentaries, are also valuable resources that ensure we make more informed investment decisions. For example, OCBC Securities provides selected customers with access to its StockReports+ database, which aggregates research from different analysts on stocks listed in the US, Hong Kong, Malaysia and Singapore markets.
As we are based in Singapore, media outlets that we typically rely on may be tuned in to local news and current affairs, making it difficult and time-consuming to receive the same level of coverage for the overseas markets we’re investing in. As such, we want to lean on the on-the-ground expertise of the brokerage platform that we have chosen.
An added plus is gaining access to investment seminars to hear from experts, ask questions to analysts specialised in the individual overseas markets, as well as to mingle with other like-minded investors. Brokerage platforms like OCBC Securities have a full team of research analysts whose job is to cover a diverse base of stocks listed on SGX, as well as other major global markets.
Customer Service Support
Markets outside of our time zone, including major markets such as the NYSE and LSE, trade at odd hours. This makes it crucial that the brokerage house we choose to go with has a specialised trading desk team available when we require support during these odd hours.
Once again, a large brokerage house such as OCBC Securities would have a team of trading representatives on-hand to assist investors during the respective trading hours of all the markets that it offers access to. This means there will be someone with in-depth and market-specific knowledge ready to help you when you are facing an issue while trading US-listed stocks at 10pm (Singapore Time).
Invest In What You Are Familiar With, Through A Brokerage House That You Are Comfortable With
While investing in overseas market can be daunting, this can be somewhat mitigated if you start off by investing in the stocks of the companies that you are already buying products and services from, or are frequently engaging with some way.
On top of that, it’s worth considering a brokerage house that you are comfortable with, and which is able to support you in a holistic manner, rather than on just price, access or convenience alone, both in overseas and the Singapore market.