British investors aren’t the fondest of investing in foreign shares, and it continues to be a minority sport. According to a benchmarking firm responsible for compiling the wealth-management industry’s data, Compeer, analysis indicates that while 7.5 million trades were made in UK securities, comparatively only 1 million trades were made overseas last year.
However, seeing as this is still a substantial rise from previous years, despite the turmoil of 2020, it’s growing apparent that UK investors now have a growing interest in foreign markets.
If you identify with the last statement, here are some key things that you should know.
Which Markets Are Suitable?
The best and easiest markets to access right now are Canada, western Europe, and the US. This is because trades from these markets can be settled from UK’s central securities depository, held as Crest Depository Interests, which firms hold in electronic forms.
As an investor, this is inaccessible and invisible to you but, the process of trading and settlement becomes much more simpler for brokers. Otherwise, these brokers would need custodians, as they do for stocks in other markets, to hold them on their behalf.
What Are Some Suitable Brokers?
When it comes to the aforementioned markets, you have a fair amount of choice in brokerage firms. Saxo Capital Markets, Hargreaves Lansdown, Interactive Investor, AJ Bell Youinvest, Interactive Brokers, and iDealing all offer a wide range of markets to verge into.
If you’re looking to narrow the market further, Saxo Capital Markets and Interactive Brokers cover most of the eastern market and offer major Asian markets online as well. AJ Bell Youinvest offers the latter as well through phone, provided a minimum trade size of £10,000.
AJ also offers South Africa by phone, while Saxo offers it online. Singapore, Hong Kong, and Australia are offered by Interactive Investor. Mexico is only offered by Interactive Brokers. You could also access most, if not all of these markets the traditional way, with stockbrokers such as Redmayne Bentley, Killik & Co., or Charles Stanley. If that’s what you’re gunning for, though, be prepared to pay a much higher fee.
Where Will I Get My Money’s Worth?
Since end results depend largely on your goals and how you trade, there’s no possible way to decipher which of these platforms promise the best value. However, you should be ready to pay anywhere from 0.5% to 1.5% in foreign exchange commission.
This value is determined by the size of your trade and varies from broker to broker. An exception to this, however, is Interactive Brokers – a firm with roots in the US but a UK-regulated branch. This enables it to charge a minimal trading commission and foreign exchange margin.
Bottom Line
Venturing into foreign markets isn’t a piece of cake and might even seem scarier than operating in familiar local markets. However, the profits that you get to pull in will be your cherry on top of the cake of profits. More and more UK investors are jumping on the bandwagon, and so should you!
