However, it can prove difficult for UK investors to access an individual company listed abroad unless they go through a fund or investment trust. There are undoubtedly many benefits to taking this approach, not least diversification. But for someone who has a strong view on a particular company, it may not give them the concentrated exposure they are after.
Charles Stanley Direct’s Rob Morgan says anyone who wants to invest in equities listed abroad will need to go through a stockbroker as they would for those listed in the UK, but should be prepared to pay a higher price.
"The majority of stockbrokers do a limited amount of European and US share dealing," he said. "US shares are pretty easy to buy actually, and you can normally get access to the top 500 companies in Europe. Other markets become more difficult."
"For regions like Japan and emerging markets, or something more esoteric like South America, you will have to look for a specialist broker and this will be pretty high-cost, because you will often have to deal over the phone."
Morgan (pictured) says investors can expect to pay a fixed or percentage-based charge for buying foreign shares. He says this can be anything from 1 per cent or a one-off £20 to £30 charge on top of the usual dealing fee. "This will vary a lot from broker to broker. But it’s not massively expensive if you really want to buy that company. Just realise you’re going to have to pay more for it than a UK share," he said.
Brokers such as Hargreaves Lansdown, Barclays and TD Waterhouse all deal in foreign shares.
The Share Centre doesn't levy an additional charge for buying overseas stocks.
A spokesperson for The Share Centre said: "As long as the deals are settled on Crest, it’s the same cost as buying a UK share."
The Share Centre has a standard dealing commission of 1 per cent, but no dealing option fee. It also carries monthly administration fees, which vary depending on the type of account.
The firm also only deals in US and European companies so, as Morgan mentioned, investors looking to access individual firms in other parts of the world would have to look for more specialised brokers to handle the transaction.
Investors who wish to buy overseas companies have to fill out a W8-Benn form, which is for tax purposes. The Share Centre also says that the investor needs to ensure they are aware of the risk they are taking on by buying an overseas company, primarily through currency discrepancies.
Hargreaves Lansdown also only deals in US, Canadian and European shares, but levies additional charges for overseas dealing.
Danny Cox, the firm's head of financial planning, says normal dealing costs on the platform start from £5.95 and go up to £11.95, or a 1 per cent charge for transactions made over the phone.
"Overseas shares covered by the Hargreaves Lansdown Overseas Share Dealing Service are traded at our standard rates and can be traded online, by phone or post. They will be dealt at the overseas market price and converted into sterling by a UK base market maker," he said.
"The foreign exchange rate used will be based on the prevailing interbank exchange rate to which the market-maker will add an additional spread, dependent on the size of the deal."
This spread ranges from as high as 1.7 per cent for deals under £10,000 to as low as 0.35 per cent for deals in excess of £350,000 – clearly out of the range of the average investor.
Cox (pictured) says investing in overseas companies is typically the territory of more savvy operators who have already built up a portfolio of UK stocks and funds.
"In most cases, you would expect UK investors to build a portfolio of UK shares first, not least as there are plenty of opportunities on home soil," Cox said.
"UK investors do benefit from exposure to overseas markets, given the 70 per cent of earnings from FTSE 100 companies deriving from foreign markets. Diversification is a key issue when buying individual shares and an alternative is to invest in a fund which covers the countries or markets which appeal."
