Interactive Investor

Home bias? UK stocks account for 84% of the average equity portfolio

24th January 2020 14:36

Myron Jobson from interactive investor


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interactive investor is running a two-day, commission-free trading offer for US and international shares on Wednesday 29 and Thursday 30 January.

With US Q4 earnings season in full swing, next week sees results from the likes of Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Coca-Cola (NYSE:KO).

While these giants are embedded in our everyday lives, UK stocks account for 84% of the average interactive investor customer’s direct equity portfolio.

But investors sticking solely to domestic stocks may be unwittingly gaining overseas exposure – around 70-75% of FTSE 100 company earnings, for example, come from outside the UK.

Of the top five most-bought overseas companies on the interactive investor platform last year, all were American tech stocks – in rank order: Tesla (NASDAQ:TSLA), Apple, Amazon (NASDAQ:AMZN), Microsoft, and Advanced Micro Devices (NASDAQ:AMD). But they were a long way down the pecking order compared to UK stocks. For example, of the most-bought direct stocks in 2019 from both UK and international shares, Tesla ranks 57th, Apple 59th, Amazon 69th and Microsoft 93rd.

interactive investor is running a two-day, commission-free trading offer for US and international shares on Wednesday 29 and Thursday 30 January (see notes to editors for Terms and Conditions).

Moira O’Neill, Head of Personal Finance, interactive investor, says: “When it comes to international diversification, investors are more likely to use funds, investment trusts and ETFs for international exposure. It is interesting that even our most popular US stocks, which are global household names, are very far from the top of the best-buy charts when you bring the UK into the equation. 

“But even where investors invest directly in the UK in direct shares, around 75% of FTSE 100 company earnings are from outside the UK. So, whether home bias actually exists is debatable. For those who are looking at funds and trusts to diversify their portfolio internationally, it’s worth reviewing how global some of those funds actually are. 

“For example, there are three investment trusts in the AIC Global/Global Equity Income sectors with more than 50% of their assets in the UK – fine if you are using it as a global one-stop shop. But if you already have a lot of UK shares that you hold directly, this balancing act needs weighing up and you might want to choose a global fund or trust with UK exposure at the lower end.

“Holding international shares directly can be very rewarding for active investors. Take the US, for example, where over the last few years investors have benefited from the double whammy of a strong US market and the weakness in sterling.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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