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Seeing as the UK still ranks as the sixth largest national economy in the world, and is home to one of the world’s most renowned stock exchanges, UK stock markets are certainly still viable for international investments.
Some of the benefits investors stand to gain from investing in UK-listed financial securities include the following:
- Ready access to blue chip stocks: The UK houses many of the largest blue chip companies in the world, ranging from GlaxoSmithKline (LSE:GSK) to British American Tobacco (LSE:BATS); this makes investing in the region less risky than investing in many other financial markets around the world.
- Access to advanced financial trading floors and systems: Second to only the New York Exchange, the London Stock Exchange is widely believed to be one of the most technologically and systemically advanced securities trading platforms in the world.
Nevertheless, one major risk that investing in UK stock markets generally involves rises from the fact that the UK economy is predominantly service-based. As a matter of fact, as is common with many developed economies the world over, over 70% of the economy consists of service-oriented industries. Notwithstanding that this phenomenon often assures greater stability, it still poses a very risky situation for domestic and international investors alike as even the slightest changes in consumer credit levels and commodity prices can very quickly result in problems and losses for investors. Moreover, the inherent risks are further heightened in light of the fact that the UK economy is highly dependent on consumers.
For US investors seeking to invest in UK-listed financial securities, there are a number of alternative avenues to take. Stocks can be purchased directly on the London Stock Exchange. Investors can also opt to make use of US brokerage accounts that offer international trading capabilities. In some situations however, prospective investors may be obligated to open foreign brokerage accounts.
In specific terms, some of the investment products that have proven to be quite appealing to international investors are easy-to-use exchange-traded funds (ETFs) and American Depository Receipts (ADRs). ETFs are investment products that provide investors with diversified exposure in single securities that can be traded like standard stocks; whereas, ADRs are US-listed securities that mimic the movement of foreign stocks. Some viable ADRs for investment in the UK are stock in GlaxoSmithKline, Barclays (LSE:BARC), BP Plc. (LSE:BP.), BHP Billiton Plc. (LSE:BLT), and Rio Tinto (LSE:RIO). Asides ADRs and ETFs, there are also some more complex direct investment alternatives available on the London Stock Exchange.
With regard to their foreign investments, it is of paramount importance that investors endeavor to be aware of applicable tax or legal implications before embarking on any particular investment path.
