How To Help Recession-Proof Your Portfolio

Avalaugh:

Good question, which doesn't have a convenient answer. Hopefully these thoughts may prove useful.

I would say that currency diversification is de facto a good thing. USD and GBP may be "racing to the bottom" against, say the renminbi, but it doesn't do any harm to operate in both markets.

Of course, currency movements can have a significant effect on the capital value of your overseas holdings. And reliably valuing a multi-currency portfolio can be tricky - the bottom lines on my broker account, my own spreadsheets and Google Finance are never the same, largely for this reason.

I don't think, as often stated in the context of tax, one should let the currency tail wag the investment dog. More important to consider is costs.

Personally, I make it a rule never to get clobbered by broker's currency spreads twice (they're not generally known for their generosity in this regard). Well, I say "never" - there's no such thing, but I find it a good rule of thumb.

So from the point of view of costs, buying a US stock makes best sense if your medium-term plan is to reinvest both dividends and capital in the US market.

Upshot is (unlike certain comedians) what I send abroad stays abroad.

Specifically regarding US stocks, the tax situation is relatively straightforward. As an overseas investor you will have to fill out a form called a W8-BEN.

Hope this helps, J