Retirees aren't restricted to equities when investing internationally. They also have opportunities in other asset classes including listed and unlisted property, cash and fixed income. "Whatever you can buy here is also available offshore," Mahalingam says.
Retirees do face some additional complexities when investing overseas, including the need to manage currency and geopolitical risks. That's why Mahalingam says it makes sense for a retiree to consult with a financial planner or outsource to a fund manager when it comes to international investment. Retirees can also buy passive index funds that track international markets, including specific countries and sectors.
Mahalingam says some retirees may be reluctant to invest in global equities because local stocks have attractive dividends and franking credits. But he says the lower income from overseas stocks is often offset by higher capital growth.
Over the long run, global equities have delivered the same returns as Australian stocks. But those returns are achieved with less volatility than the Australian market, Mahalingam says.
"Over the last 40 years, Australian and international equities have produced similar returns, but international equities have been 15 per cent less volatile."
Less volatility means a smoother ride for retirees who need to avoid big falls in their portfolios.
While retirees feel more comfortable with the Australian market, and it does offer good income, global markets offer a whole new world of opportunities.
"The global economy is also subdued, but there are select and more diverse opportunities overseas that can increase a retiree's wealth," Mahalingam says, adding that if investors are selective, there are currently good global market opportunities in banking, insurance and healthcare stocks.
Retirees also need to recognise that the Australian economy is subdued, which could increase risk and volatility.
In this environment, Mahalingam says retirees should bolster their allocations to international investments.
"There's far greater opportunity available offshore in innovative businesses. Going global will help retirees generate decent returns in a risk-controlled and diversified manner."