Investing in overseas stock exchanges used to be costly, complicated and time consuming. But advances in technology and the development of investment platforms have made this more straightforward. Many of the world’s fastest-growing companies are listed outside of the UK, so there are good reasons to have exposure to them, if you have the right risk appetite and investor profile.
If you decide to invest in overseas stocks directly rather than through funds, you need to consider via which investment platform you can do this most efficiently. And there are wide variations in what choice of overseas listed equities they offer. For example, AJ Bell Youinvest, EQi and Hargreaves Lansdown each provide access to at least 20 exchanges across North America, Europe and Asia. Interactive Investor offers its users 17 global exchanges and IG users can buy shares listed in the US, Ireland, Germany, Netherlands, Belgium, Austria and Australia.
Consider the costs
Buying overseas stocks is more expensive than buying ones listed on London Stock Exchange because you have to pay foreign exchange costs. This means that every time you trade, there is a conversion from pounds to the currency you are buying in and every sale you make is converted back to pounds.
Most platforms charge a foreign exchange fee as a percentage of the total amount invested on top of their usual dealing fees. For example, AJ Bell Youinvest charges 1 per cent on the first £10,000, gradually falling to 0.25 per cent for any amount over £30,000. Hargreaves Lansdown charges 1 per cent for the first £5,000, falling to 0.25 per cent for investment amounts over £20,000.
Unless you are investing very large amounts in individual equities, IG is one of the cheapest platforms via which to invest in overseas listed equities. It has a flat foreign exchange fee of 0.5 per cent and commission on European-listed shares is charged at €10 (£9.04) per trade or 0.1 per cent – whichever is higher. No commission is charged on US shares if you traded three times or more in the previous calendar month, otherwise the charge is £10 per trade.
Interactive investor has different charges depending on what investment plan you have, and is particularly attractive for buying US stocks. If you invest via its cheapest investor plan it costs £7.99 per trade of US stock for transactions under £100,000. For other overseas listed stocks you pay £19.99 per trade for transactions worth up to £25,000, and 0.1 per cent per trade value thereafter.
If you trade overseas listed stocks frequently it could make sense to do it via a platform that lets you hold foreign currencies in your account. Doing this would mean that you do not pay currency conversion fees every time you transact. Interactive Investor, for example, lets you hold nine different currencies including the US dollar, euro and Hong Kong dollar.
But AJ Bell Youinvest, EQi and Hargreaves Lansdown only let you hold sterling in your account.
|Platform||No of foreign exchanges available||Dealing charges for overseas listed shares||Foreign exchange charge||Foreign currencies|
|AJ Bell YouInvest||24||£9.95, phone £29.95||First £10,000, 1.00%, next £10,000, 0.75%, next £10,000, 0.50%, value over £30,000, 0.25%||No|
|EQi (formerly Selftrade)||20||£10.99 (ETF £9.99)||Up to £25,000 – 0.95%, £25,000.01 – £50,000 – 0.75%, £50,000.01 – £100,000 – 0.5%, £100,000.01 and above – 0.3%||No|
|Halifax||6||£5 per trade||1.25% adjustment to the exchange rate per trade||No|
|Hargreaves Lansdown||20||£11.95, phone £20-£50||First £5,000,1.00%, next £5,000, 0.75%, next £10,000, 0.50%, value over £20,000, 0.25%||No|
|IG||10||£10 per trade||0.50%, Commission on European-listed shares is charged at a minimum of €10 per trade, otherwise 0.1% of the value of the trade.||N/A|
|iWeb||6||£5 per trade||1.5% adjustment to the exchange rate per trade||No|
|Interactive Investor||17||Investor plan – £7.99 US stocks, other international £19.99||First £25k 1.5%, £25k – £50.k 1.25%, £50k – £100k 1.00%, £100k – £600k 0.50% 600K – £1m 0.25%||Clients can hold GBP, USD, CAD, EUR, AUD, HKD, SGD, SEK, CHF in account|
|iDealing||12||£9.90||€14.5 and $14.50||Clients can hold EUR and USD in account|