Business & Investment

East, West — Who cares?Just go

Should I invest abroad? My view is simple: yes.

There are certainly challenges in doing so. Sure, it’s a little more complicated. The tax situation can be awkward, with risks such as withholding to avoid and filling out country-specific forms.

Many investors also feel that they have at least some knowledge and understanding of the UK stock market and that they know better about the many companies in the UK stock market.

Australia, Germany, France, Singapore, Canada, USA — As you may know a little, these investors may say that the level of visibility and awareness on a daily basis is not the same. They think it’s much better to invest at home, where the risks are at least more obvious.

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Missing

Nevertheless, I still think such a view is generally wrong.

Certainly, investing abroad teeth More complicated.Yes tax position NS It needs to be considered carefully.Yes there May It will be a form to fill out.Yes, you can claim that there is a risk that is Better — probably because the investor’s level of knowledge, everything in mind Will It gets lower.

Yields can also decline for income investors, especially in the United States. The last time I looked, the broadly based S & P 500 Index of the 500 largest citations in the United States yielded just over 1%.

But in my view, investors please do not Investing abroad faces other risks — almost certain risks.

For example, home country bias. Insufficient diversification. You are missing out on the opportunity to invest in industries, sectors, and individual companies that are not part of the UK stock market.

And perhaps most worrisome is missing out on the excellent performance of overseas stock markets. For example, over the last five years, the FTSE 100 has risen 26%, while the US S & P 500 Index has risen just over 110%.

Symbolic leader

Why did the American S & P 500 outperform the British FTSE 100 by such a margin?

Forget about Brexit, Covid-19, and the downturn in the UK economy. These play a role to some extent, but the real reason is elsewhere. There are clues to what I wrote above about missing the opportunity to invest in industries, sectors, and individual companies that are not part of the UK stock market.

Consider a very large S & P 500 company. Apple, Microsoft, Amazon, Meta platform (Facebook), alphabet (Google), Tesla — You can continue, but you understand the idea.

Simply put, there is no such iconic business in the UK. Or many other iconic businesses, one of the following: Disney, Boeing, Modana, Berkshire Hathaway, When Union Pacific..

Don’t forget Asia and Europe

Also, North America is not the only potential source of investment funding.Asia is also full of opportunities — especially the world’s largest semiconductor manufacturer Taiwan Semiconductor Manufacturing (TSMC), and Samsung.. Where are their British equivalents? Also absent.

Europe also contains some nasty hardliners. Nestle, ASML Holdings (Manufacturing semiconductor manufacturing equipment), Siemens, Daimler, Software giant SAP, Bosch, and so on.

But enough, enough. You understand the idea, I’m sure.

Road to wealth

How do you get exposure to these global stock markets? Indeed, the Index Tracker Fund is an option and is popular with many investors.

That said, that’s not always the only way to get exposure abroad.

Exchange Traded Funds (ETFs) are also popular with investors and are attractive because they offer real-time pricing and (potentially) low holding costs, depending on the fee policy of the investment platform. Like index tracker funds, ETF providers handle the foreign tax side of things.

I certainly had a lot of foreign index trackers, as well as ETFs. But lately, I tend to prefer investment trusts. Again, real-time pricing has advantages and can result in lower cost of ownership. Again, investment trusts handle the foreign tax aspect of things.

That said, investment trusts do not follow indexes generously, but usually follow themes such as income, growth, or emerging markets.

And, of course, it is always possible to buy shares of individual companies directly. With a decent broker, you should be able to buy stock in any of the companies I mentioned above. However, for tax purposes, please do it yourself.

Better inside than outside

In short, my view is simple and clear.Whatever the route to overseas markets, what matters is of They weren’t just invested in the UK.



East, West — Who cares?Just go

https://www.fool.co.uk/2021/11/13/east-west-who-cares-just-go/ East, West — Who cares?Just go

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