This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
MARKET COMMENT
By
It wasn't that long ago that international investing was the preserve of the very wealthy. But today most online brokers now offer international dealing facilities that allow small investors to buy shares in almost every stock market around the world. Often the fees charged are little different from those levied on UK transactions. With the UK stock market in the doldrums, investors might be tempted to look at markets in alien lands in the hope that these countries could offer better returns for their money. It should be said that some investors have always preferred a wide spread of international stocks in the belief that a diverse spread of global companies can help reduce volatility in their portfolio. There is some truth in this of course but it has to balanced against the fact that, even today, it can be hard to get decent information on overseas companies. Company reports and other regulatory information can be in an unfamiliar format, making it difficult to decipher what little information there is. Often investing in foreign markets requires some familiarity of the country's political and economic systems too. Investing overseas also introduces an extra level of risk, namely that of currency risk. The gains from investing in overseas stock markets can be completely wiped out after exchange rate differences are taken into consideration. This is because a strong pound can reduce the returns from foreign investments, but conversely a weak pound will boost returns when the funds are translated back into sterling. You shouldn't forget though, that the UK market offers a diverse range of international exposure anyway. Companies like BP (LSE: BP.)(NYSE: BP), GlaxoSmithKline (LSE: GSK)(NYSE: GSK) and HSBC (LSE: HSBA)(NYSE: HBC) generate a large amount of their profits from overseas. Some industries aren't that well represented in the UK though. For example, those who are keen to invest in chip manufacturing, global retailing or car manufacturing may need to look overseas. The London Stock Exchange (LSE: LSE) also lists many large overseas companies under its International Retail Service. Another option could be investing in a global fund, like a large investment trust. Investing in overseas companies can be profitable and fun but just remember that regulations, information sources and business practices in these countries may differ from the UK. Just like any other form of investment, do your research thoroughly and keep your costs low.
A version of this article was originally published in August 2001. The author owns shares in GlaxoSmithKline.