@PrefInvestor1 and @J_Westlock
I think diversification across the globe is pretty essential but I know certainly Pref and I see this in a different light. E.g. To me if you have a 7 digit value portfolio (as many do on ii too, by the way) and its all in GBP and we have a No Deal Brexit. you could be losing 10% plus when measured against the US dollar … or a basket of international currencies.
I’d agree that the US markets are more volatile than the UK generally, but I’d disagree with you @PrefInvestor1 when you say ‘growth only stocks predominate’ in the USA. It really isn’t the case, its just that the ones we hear about a lot tend to be mostly that type. There are lots of more mundane US stocks of ordinary companies that don’t trade outside the US that are safe plodders.
Dividends are definitely lower generally, but certainly not if you are investing in master limited partnerships, for example. They seem not to be available for non-US citizens though.
FTSE 100 is relatively very high yielding at the moment but that is partly due to the FTSE high yielders mostly paying out in foreign currency which has pushed their yield up since the GBP fell in 2016, which rather underlines my first point. A ‘positive Brexit outcome’ will see those yields drop.
Some pluses investing in USA directly:
No stamp duty - very useful if you are a trader.
Their regulation is better than any other country.
Generally much easier to research US stocks than those in other countries without the need to sign up to a subscription site (in great part due to their regulation).
Simply more choice in more sectors. Some sectors in the UK are virtually dead these days, Look at, say, Water, or Utilities, compared to 10 or 20 years ago. Most of our utilities are owned by German, French, Spanish or Canadian companies and no longer listed here.
Also, to offset some of the listed disadvantages…
Withholding tax is easily avoided in my experience.
Once you have a pool of US investments and cash, there are no currency charges. Easy for me to say having had many US investments in my portfolio from before the big drop in GBP. I agree its a dicier proposition now to get to the same position.
Diversification isn’t what it once was. Global markets do tend to follow each other these days. However, USA seems to be the strongest market and can virtually stand on its own. It does react to global woes, but tends to bounce back quickly so long as the US economy is deemed to be going OK. After a bit of a panic the market sorts out who has what exposure to any problem economy and readjusts accordingly. Whereas if USA goes down, all the main markets around the world will follow.
That’s why a large part of my diversification strategy is to hold USD and buy stocks and funds valued in USD and NOT just funds that are invested in US companies but valued in GBP. That seems to be pretty essential to meaningful geographical diversification these days.