Fancy owning a share of an American car giant or a cutting-edge Japanese tech firm? Happily, the nature of global markets means that just because a company is based overseas, it isn’t necessarily difficult for a UK resident to buy shares in it. Not only can it give you a more diverse portfolio, but it also enables you to support (and potentially make a profit from) companies you admire that happen to be based overseas. We weigh up the pros and cons and explain how to get started with investing in overseas shares.
What are overseas shares?
This isn’t a trick question. Overseas shares are simply shares in companies that are listed overseas rather than in the UK. Tesla and Facebook are good examples. While they’re well-known brands in the UK, both companies are based in the US.
As is the case with UK companies, each overseas share you buy represents your ownership of a unit of the company, as we explain in our beginners guide to shares.
Can I invest in overseas shares?
In many cases, yes. Living in the UK doesn’t restrict you to shares in companies based in the UK. If you wish, there are ways to buy shares in major overseas markets in Europe, Canada, the US and even Asia.
There are likely to be some, typically less popular or less established, international markets where it’s harder to buy shares. In some countries – such as China – regulation may mean that shares in certain companies can’t be bought by foreign investors.
How do I buy overseas shares?
You can buy most overseas shares in the same way you buy UK shares – from a traditional face-to-face or phone-based stock broker or, more usually these days, using an online share dealing platform that deals with international markets.
The process for the purchase of overseas shares is likely to be nearly identical to the purchase of UK shares. There may be some differences in the fees you pay depending on whether the shares are listed on the UK’s stock exchange (the London Stock Exchange) as well as the stock market for the country they’re based in.
Dual-listed (or cross-listed) shares
If a company is listed on the London Stock Exchange as well as on the stock exchange for the international market the company is based in, it’s what’s known as “dual-listed” or “cross-listed”. There are a couple of legal differences between these types of listings. But what it boils down to for most retail investors is that you can buy dual or cross-listed shares on the London Stock Exchange in the same way you would buy shares in UK companies.
Examples of companies that are listed on both the London Stock Exchange and in other countries include US electric car manufacturer Tesla, retail giant Amazon and Netherlands-based Unilever.
Shares that aren’t listed on the London Stock Exchange
If a company is listed on an international stock exchange, but not on the London Stock Exchange, you will need to buy it directly from that exchange. The price will be listed in the relevant currency for the country. In the vast majority of cases, as a UK investor, you will still pay in pounds, but a foreign exchange charge will have been applied. Some brokers or trading platforms may also charge a higher fee or commission to buy and sell shares from international exchanges, though this varies by platform.
Depending on the country you’re buying from, there may also be extra tax implications for any dividends you receive, and you may need to fill in some extra forms to make sure you’re taxed correctly.
Which providers offer overseas shares?
If you want to buy shares in overseas companies that are dual-listed or cross-listed on the London Stock Exchange, you shouldn’t have any issues. Almost every share dealing platform in the UK lets you buy shares listed on this exchange.
If you want to buy shares that are only listed on exchanges outside of the UK, you’ll need to be more selective in your choice of share dealing platform. Not all platforms offer access to overseas exchanges and, of those that do, many only let you buy from one or two.
What overseas markets can I invest in via online share dealing platforms?
In its review of online share dealing platforms, Finder publishes details of some of the most popular foreign stock exchanges available through each platform. Head to our share dealing platform comparison and click on “View details” for each provider in the table to see the exchanges on offer.
By far the most widely accessible exchange is the US Nasdaq. A decent number of platforms also let you buy shares from the following:
Canada – Toronto Stock Exchange (TSX)
Europe – Euronext
Germany – Deutsche Börse
US – New York Stock Exchange (NYSE)
Access to stock markets in other countries, such as China or India, is harder to come by, so you may need to seek out a broker that specialises in less mainstream markets.
The price of a share can vary dramatically by company, regardless of whether it’s based in the UK or overseas. This (along with market fluctuations) is likely to have a bigger impact on the price of a share than where the company is based.
However, there may be a difference in the fees you pay if you buy shares from overseas stock exchanges. There’s likely to be a foreign exchange fee built into the price you pay, and some stock brokers or trading platforms may charge higher dealing fees for buying and selling overseas shares. So make sure you check the likely impact of these charges before venturing into foreign markets.
What are the benefits of investing in overseas shares?
The main benefit of investing in overseas shares is increased diversification of your investment portfolio. Diversification is an investment strategy that involves spreading your investments across lots of different asset types and sectors. So you might have a mix of cash, funds and shares in your portfolio – that’s the different “types”. And you might buy shares or funds that focus on, for example, the energy sector, the financial sector or the technology sector. You might also have shares in a mix of newer (and typically riskier) and better-established companies.
You can achieve this level of diversification by investing purely within the UK market. Adding overseas shares to the mix has the potential to take this to another level. Different international markets may follow different trends. If the US economy is booming while the UK is struggling, having shares in US companies could soften the blow of poorly performing UK companies. Plus, there are currency fluctuations to take into account. If the euro, for example, is performing strongly against the pound then, even if the companies in the two locations are delivering similar results, you may get better returns from shares in European companies.
What are the downsides of investing in overseas shares?
Scroll back up to the previous question and read the benefits of investing in overseas shares. Now reverse those benefits. If the UK pound is performing strongly against other currencies, or foreign economies are struggling, your overseas shares may perform less well than your UK ones. It’s all swings and roundabouts though, and investment is for the long term. In the end, diversification is usually the best strategy and helps to level out your risk.
The other downsides may include the following:
Having to research and understand an entirely different market. Investing in shares generally involves more attention to detail and active management than investing in funds, for example. Extending this to another international market will almost certainly require more effort on your part.
Potentially higher fees and charges. At the very least, you’re likely to pay a foreign exchange fee to invest in overseas shares – though this may be worth it if, when you purchase the shares, the pound is performing strongly against the currency of the exchange you’re buying from. Plus, some providers charge more for trading overseas shares than UK shares.
If you’re thinking of branching out into overseas investments but need help to decide if these potential downsides are justified by the potential benefits, we’d recommend speaking to a regulated financial adviser.
Bottom line
Investing in overseas companies can potentially be a good way to diversify your investment portfolio. Many online share dealing platforms let you buy overseas shares, though the foreign stock exchanges available to buy shares from can vary by provider. If you’re considering buying overseas shares to diversify your portfolio, make sure you’ve done your research into the companies in the same way you would for UK companies. And consider the impact of any extra fees and the potential tax implications on any dividends you receive. If you’re new to buying overseas shares, it’s worth taking time over the decision. A regulated financial adviser may be able to help you make the right choices for your circumstances.
Frequently asked questions
Regardless of whether you buy UK or overseas shares, when you use an online platform, you’ll typically pay a fee per trade plus, with some providers, an annual platform fee.
However, if you buy overseas shares, the fee per trade may be higher. Plus, because shares on foreign exchanges will be listed in the exchange country’s currency, there will be a foreign exchange fee built into the price you pay in pounds.
Yes. Many funds offered by UK providers include some shares in foreign companies. For example, you could invest in a global index fund. Index (or “passive”) funds are designed to follow the performance of certain stock market indices, such as the FTSE All-World Index. Some actively-managed funds will also include shares in overseas companies.
Potentially, yes. This will usually come into play when you are paid dividends. In some cases, you may be charged tax by both the UK and the overseas country. Depending on the country, you may be able to claim back the overseas tax to avoid what’s known as “double taxation”. This can be a faff, though, and may not be worth the effort for small dividends. If you plan to hold large numbers of overseas shares, it’s worth getting professional financial advice to understand the tax implications. You can also minimise the UK tax you pay by investing in shares through a tax-free “wrapper”, such as a stocks and shares ISA.
Ceri Stanaway is a researcher, writer and editor with more than 15 years’ experience, including a long stint at independent publisher Which?. She’s helped people find the best products and services, and avoid the pitfalls, across topics ranging from broadband to insurance. Outside of work, you can often find her sampling the fares in local cafes. See full bio
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