Fifteen Reasons Why U.K. Investors Can’t Afford to Ignore the U.S. Markets
Happy Friday to you all,
Ever since I can remember there have been well documented cases about some famous person diddling the tax man out of his bit.
He or she gets caught, has to pay it all back (with interest) and ends up doing a short, yet highly publicised, stretch at the pleasure of the state.
It is no secret that corporations and wealthy individuals have been placing non-accountable earnings into offshore havens in an attempt to prevent scrutiny by the tax collecting authorities of this world.
Any person can avail of such services by simply walking into the branch of a well known high street bank and asking. A handful of pamphlets and fliers are then stacked up in front of the individual, the majority of which usually end up in the nearest coffee shop litter bin along with the information leaflet on how garbage is among the highest contributing factors to global warming (hehe sorry).
Point being: It’s that simple.
None of this is informative, as we already know most of it, however there are, undoubtedly, many advantages to looking farther afield when making important life and family investment decisions.
1) On average the investment, be it stock market or some other avenue of a domestic nature yields a maximum of 6% a year. That, of course, is subject to capital gains tax and brokerage fees.
2) Any investment is expected at the very least to beat inflation. Now, as an example let’s take any stable, forthright economy and, for arguments sake, set our inflation rate at an average of 2.2% annually. We then factor in the CGT and brokerage fees, which can range from 1% to 10% of all profits earned and we are more or less back where we started. Thats not good.
3) For all the hassle and time spent observing and concerning oneself with the performance of the securities in our stock portfolio, wondering what all the technical data and jargon means, then losing your train of thought because something obscure on Wikipedia baffled you and what you would rather be doing is playing computer games or listening to music (yes, adults do those things too). You simply say to heck with it and hope you come out the other end with profit as it’s out of your hands now anyway.
4) As we’ve already established, our profits are eroded by fees, taxes and inflation so lets take the ISA (Individual Savings Account) family of investments in the UK as an example, since most countries have similar vehicles to offer citizens, it’s a fair representation of what a typical onshore package would look like.
On the surface it all appears to be fair with, and I quote Wikipedia, “Dividends are not subject to additional tax, interest on bonds is not taxed, and capital gains are not taxed”.
There is no need to report interest or other income, capital gains or trades to HMRC as it is not taxable income. This is a considerable paperwork reduction for active traders or those who may otherwise be required to report their trades because they have total sales value exceeding four times the annual CGT allowance, which outside a tax wrapper would require that all trades be reported even if there is no capital gains tax to pay.
5) Most of these trades are placed on the AIM (Alternate Investment Market) or put another way: London’s penny stock exchange. The companies traded therein do not pay dividends as most penny stock entities don’t have enough to pay the utility bill let alone a dividend!
If they were fortunate enough to afford dividend pay outs they would be trading on the LSE.
Bonds, if you’re planning on leaving your money parked up for ten years, are the way forward definitely, hands down and you’ll get 7-10%, if you’re lucky.
Thats 1% a year folks!
6) To top it all off, ten years ago the ISA was supposed to be tax free and guaranteed and, yes, I believe they used the G-word. As the global financial meltdown took its toll, ISA holders were told that it’s not guaranteed and they’ve lost their money. Nice one.
It’s now been subjected to a few amendments since then, but still remains a fair example of what not to do and where not to put your hard earned savings.
Using the UK as just an example is fair as that establishment is so well established that it acts a blueprint for other more emerging economies to copy.
Now lets focus on the positives
1) As we already know, investing your money in markets farther afield can result in you not having to expose yourself to Capital Gains Tax. This can be tricky as governments are fully aware of the advantages that foreign markets offer and put pressure on their financial regulators to again pressure financial advisors to guide people away from those opportunities. They give it the appearance that its not allowed or its dishonest, conjuring up thoughts that you could be breaking half a dozen laws. Not true!
2) If it were in anyway illegal such things would not exist. Banks certainly wouldn’t offer it now would they?
Investing your money with a broker in another country is no different to one onshore.
3) The main advantage is that the guy trading US markets for example is in the luxurious position of placing your money in the world’s largest market place, meaning there’s a much wider range to choose from.
4) When it comes to selling the position which, of course, is the most important leg of the trade, there’s sometimes an overwhelming response from those buying, which means you’re not held in an annoying queue waiting for the price you thought you were getting when the sell order was executed.
5) Take the Australian Stock Exchange; the ASX or the All Ordinaries Index to those closer to the action, it comprises around 1% of the global investment arena. Meaning that, not only are you going to be heavily restricted to a handful of bluechips from which to choose, you will not be beating inflation at any point soon as it’s a penny stock exchange in essence.
6) Putting ones funds into the hands of a stranger in another country is no different to those of a stranger in your local high street. They both have to earn your trust and get it right or no further business will be forthcoming.
7) Unlike the ISA type investment vehicles, where you are locked in for months or a whole year and are required to invest upwards of £75,000, things are done the old fashioned way. You choose how much you invest, the brokerage takes 1% and funds are repatriated in seventy-two hours.
8) To sum up, you can earn way above the odds: 200-300% is not uncommon, and you’ll be happy to pay the CGT.
9) Should you choose a longer term, more stable investment vehicle, the DJI Exchange Traded Fund (ETF) has delivered 15-16% annually these past few years.
If opening up to opportunities that are to be found in Fortune 500 companies (Apple, Google, Coca Cola, McDonalds, etc..etc..) is something that you desire then we can assist you.
Don’t forget to post a note to tell me how you feel; we enjoy writing this blog and giving the general public a bit of guidance, and do not mind offering advice on more personal level.
I hope this has been helpful Enjoy your weekend