Investment Knows No Frontiers

Constraints on choice within the Irish market (where a small number stocks account for a large percentage of the ISEQ), coupled with a lack of liquidity in many second liners, would imply a compelling argument for international equities. However, while there is a growing interest, investing in overseas companies has remained a muted philosophy for many Irish investors.

The preferred strategy has generally been to maintain a domestic orientation, based most likely on the premise that you are better off purchasing companies of a familiar nature. Indeed, as many market participants assume the dual role of consumer and shareholder it is hardly surprising that companies such as Bank of Ireland, Kerry and Smurfit remain popular choices among Irish investors.

Yet as international and domestic investment markets do not move in tandem, overseas exposure can substantially enhance performance while at the same time reduce the overall volatility of a portfolio.

Furthermore, by ignoring the international arena, you eliminate the attractions of many sectors not readily available in the Irish market. For example, the US is the obvious home for those who want to capitalise on high growth technology stocks such as Oracle and Microsoft. UK investments such as Shell or BP Amoco provide the opportunity to capitalise on any oil price volatility, while Euroland offers the security of consumer staples such as Nestle and Heineken. Even where one can successfully source attractive domestic representatives, such as Elan in pharmaceuticals they are somewhat overshadowed by the lure of more global players such as Pfizer and Glaxo Smithkline.

Constantly improving communication technologies renders information on worldwide economies and companies readily accessible. As such investors should recognise the benefits of international equities and consider reducing their dependence on home sweet home.