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Make $2,067 by diversifying your investments | Dollar Saver tip #62

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Save: $2,067

Tip overview:

Diversify your investment portfolio outside the ASX and you could increase your chance of higher returns.

Whether you're an active trader or someone who invests via index funds, diversifying your portfolio outside Australia is a good idea.

Investing in other markets spreads your risk and gets you access to more industries.

Did you know?

Index funds often outperform actively managed funds, according to Finder analysis.

Let's imagine you had $20,000 to invest, and started investing 10 years ago. If you'd put that money straight into the ASX 200 you'd get an 8.25% total return over the last 10 years.

Your investment today would be worth $44,188.

But what if you'd invested half those initial funds in the US S&P 500? There you'd have seen a 15.64% return.

  • $10,000 invested in ASX 200 at 8.25% = $22,094
  • $10,000 invested in S&P 500 at 15.64% = $42,764
  • Total investment value = $64,858

Diversifying into the US market would have given you an extra $20,670 in this scenario. That's an extra $2,067 per year.

Of course, it's impossible to determine future investment performance based on past performance. But this illustrative example shows the power of diversifying outside the Australian market.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involve substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances and obtain your own advice before making any trades.
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