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Investors of all sizes, from individuals overseeing their Isas to huge institutional pension funds, are increasingly global in their outlook. For many, this means buying into one or more of the huge number of available funds which invest in other markets. But a growing number of DIY investors are going further, and buying shares in overseas companies directly.
This trend is gaining momentum so rapidly that most stockbrokers are refining their overseas shares service, cutting charges and offering new features such as the ability to hold different currencies or trade across many niche markets.
The 10 overseas shares most popular with British investors - Telegraph
Stockbrokers cite two main reasons for the growth in popularity of overseas share ownership. While Britain's FTSE index of blue chips includes many solid dividend payers, they tend to be restricted to just a few sectors: So when a sector such as banking undergoes a major crisis, the consequent impact on a portfolio's dividend stream can be severe. By looking to overseas companies with strong dividend track records investors can protect against this risk. The latter has increased its dividend payouts for a decade.
Drug firms Novartis and Roche, whose shares are traded in Zurich, are other popular overseas divi payers, both having grown their dividends each year for several decades. The second reason investors are drawn to overseas shares is to access the potential returns from new technology. While British firms develop and produce innovative technologies, the world's biggest technology leaders predominate in the US.
The table, below, cites the most popular overseas shareholdings with the clients of Britain's biggest investment broker, Hargreaves Lansdown. The holdings are ranked by the number of trades. Most of the names are recognisable to consumers and investors anywhere in the world.
The less familiar include Tesla Motors, a company which makes fully electric cars, including luxury and sports models. It also sells batteries to other motor manufacturers including Toyota. Tesla broke into profit in Other possibly less familiar companies include Gilead Sciences, a biotech firm which develops and sells new drugs and treatments.
Alibaba is a vast Chinese online retailer, founded in Although almost all of its revenues and activities are in China, it floated on NYSE in September , creating enormous interest among investors worldwide. Isa rules have an annoying quirk: So whenever you trade in foreign shares there will always have to be a foreign exchange transaction, which can add to the cost see below for more details on charges.
International Trading FAQs | Barclays Trading Hub
Most brokers, including Hargreaves Lansdown, TD Direct Investing, Interactive Investor and Telegraph Investor, allow overseas shares to sit just like any other in your Isa portfolio. In most cases the online trading process is exactly the same, too: As with any other order, this will expire after 15 seconds and if you do not trade within that period you have to request a new quote. When you view your Isa portfolio's holding, your overseas shares will be shown alongside other investments, usually valued in sterling.
There are some exceptions.
Barclays Stockbrokers Partners with FXCM for Retail Forex Offering
Barclays Stockbrokers, one of the biggest three brokers alongside Hargreaves and TD Direct, does not allow customers to hold overseas shares inside their Isa.
This shortcoming arises from Barclays' use of another service to provide its international dealing. Barclays has said it is improving its broker service. But in the meantime, those who are thinking of switching Isa provider and who might want to own overseas stocks should look elsewhere.
When it comes to overseas shares most levy the same fee - but with a currency conversion fee on top. This is normally worked out as a percentage of the trade.
The same commission usually applies to the conversion of dividends. And because you can't hold foreign currency inside an Isa, every dividend payment has to be switched to sterling.
That's an expense which, remember, will have to be factored in both when you buy and when you sell. TD Direct Investing operates a different charge, where only a percentage fee applies. But for smaller trades this can be as high as 1. The costs outlined above are a deterrent for those making smaller transactions or who want to trade their international shares frequently.
If you are going to be using your Isa for your international holdings there is no easy way round this. The best you can do is identify your target holdings on the basis that you will buy and own them for long periods.
But for those who have trading accounts in addition to their Isa, there are cheaper ways to buy and sell overseas shares. If you fall into this category, you could continue to use your Isa for your funds and British shareholdings, and then trade in US and other stocks in a non-Isa account. Both TD Direct Investing and Barclays Stockbrokers offer non-Isa accounts in which you can hold US dollars and, at TD Direct, a wide range of other currencies as well and buy US shares.
When you sell shares or receive dividends, the proceeds are kept in dollars and shown as dollar balances on your account. Apart from significantly reduced trading costs, the other advantage of this approach is that you can use competitive currency providers to top up your dollar balances when you feel you could benefit from attractive rates of exchange. Howard Marks, an Oxford University graduate turned drug smuggler, made millions.
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Accessibility links Skip to article Skip to navigation. Monday 19 June Richard Evans Globalisation doesn't mean all stock markets are the same. Robert Burdett and Gary Potter Investors must move beyond the same old giant funds. James Bartholomew The real reason stock markets plunged in January. Jim Slater These eight books made me a better investor. The 10 overseas shares most popular with British investors More investors than ever are using their Isa and pensions to invest in firms like Apple, Google and Alibaba.
Here are the 10 most popular holdings - and what it costs to buy and sell them A Tesla electric vehicle on show in Detroit, The company's US-listed shares are among the most popular overseas holdings among British investors. Why are Isa investors increasingly likely to own overseas shares?
That makes the process quite expensive. Are you going to buy and hold, or trade more frequently? The benefit of a non-Isa account is that you can hold foreign currencies inside it.
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