This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, in a specially commissioned piece, Danny Cox of Hargreaves Lansdown explains how UK investors can buy overseas-listed stocks.
Apple (AAPL), Twitter (TWTR) and Facebook (FB) are all companies with household names whose shares are all listed on overseas stock exchanges. However that doesn’t prevent UK investors from buying shares in these and other overseas companies.
An overseas share dealing service allows investors to buy and sell thousands of American, European and Canadian shares online, by telephone or by post, just like UK shares. The account is easy to set up: the investor simply opens an account with a UK stockbroker offering this service either online or over the telephone, makes a deposit via a debit card or cheque, and then, once funds have cleared, they are ready to trade.
Online trading is usually cheaper than telephone trading and for security purposes, although a few days are normally required to set up trading passwords. As with a UK share dealing service, the stock broker conducts various identity checks to satisfy the anti-money laundering provisions. This normally takes the form of an electronic verification process in a matter of a few minutes.
Alongside UK share trading, investors can choose when to deal at the overseas market price. Many brokers also offer detailed information, charting tools and a consensus of whether the market thinks each share is a buy, sell or hold, to help you choose which shares to buy.
Currency and Exchange Rate Risk
The investor’s money is converted from sterling by the overseas share dealing service, so there is no need for a foreign currency account. However fluctuations in the relevant exchange rate will affect the sterling value of overseas share holdings and therefore increases risk.
Reduce Your Tax Bill
Before buying shares listed in America a W-8BEN form should be completed. This form enables residents of the UK and other eligible countries to pay reduced rates of tax on income from their US shares. In some cases, an overseas share dealing service will not permit any trading of US or Canadian shares without this form.
