Trading Abroad

blackrat779

Hi,
On another forum someone suggested that I should look to the US for online share trading (I am new to stocks and shares). They cited lower trading costs, no stamp duty and better investment tools.

It occurs to me that if this were reasonable then most people would be doing it (maybe they are). Are there any downsides? Is my money as safe? Why do we pay more in a global market? Or do we pay more because we have no choice?

Blackrat

mr_fishbulb

If you are buying shares priced in US$s then you are going to be subject to currency fluctuations. If the £ strengthens against the $ then your holdings will be worth less to you (and vice versa).

tradetime

I suspect this was suggested in the context of trading, investors with a reasonable amount of capital will always look to diversify across geographical regions anyway. But yes from a trading perspective there are benefits and drawbacks to trading in the US, and most active private traders will trade across markets. Whether it would benefit a particular individual would depend a lot on his / her circumstances.

DavidHayton

I use TD Waterhouse to trade on the markets in N America (mainly Toronto). You are right in that there is no stamp duty to pay and, if you trade actively, the markets are open in the evening (our time) so it fits much better alongside a full time day-job.

Disadvantage is foreign exchange fees. TD charge +/- 1.75% which means that should you want to eventually re-patriate all your returns to the UK in GBP then it will cost you 3.5% round-trip with TD.

Mr Fishbulb indicated the currency risk. This can work both ways. My main reason for trading in Canada is to hedge that risk. We have family in Canada so it is sensible to hold assets in Canada to protect us against the risk of the CAD climbing even further against the GBP.

However, with truly global stocks that enjoy world-wide earnings (e.g., Exxon, Microsoft, Disney) then you will find that the stock will move to offset the rise - or fall - of the USD, or any other currency for that matter.

Best wishes
David

blackrat779

Thanks for the info.

I think for the small amount of money I will be looking at, I am probably better staying with the home market once everything is taken into consideration.

Thanks for taking the time to reply.

Blackrat

sabretoothtigger

What Hayton said ^^ Hedging against natural costs is a great idea if you can.

I heard us brokers deal shares for 1 cent each and one broker has just said zero charges for etf buying. Sounds too good, the tax on dividends for usa is 15% or 30% if they are crap on foreign stocks like iii seem to be.
I keep meaning to find out which cheapy brokers are friendly to foreigners, I dont deal over there alot but if was low cost maybe I would

purch

Yes, there are numerous things to research and bear in mind if you trade overseas.

The U.S. Tax system is very different to ours (and many EU states) and you need to factor in these additional 'costs'

As in all things, if it sounds too good to be true it probably is.