Investment Insider: Look at the US to fill gaps in your portfolio

Sometimes there are just no British equivalents to some American companies

Whenever I am asked why anyone should buy American shares my stock response is always why not?

The reason for me is quite simply size. Calvin Coolidge, the 13th president of the United States, once said that: “The business of America is business.”

That is exemplified by the enormous size of some of America’s top corporations.

Take for example Coca-Cola and PepsiCo. They are both a couple of orders of magnitude bigger than our fizzy drinks makers Britvic and AG Barr. Elsewhere, ExxonMobil is around twice the size of our largest oil company, Royal Dutch Shell.

Additionally, while many of us might like to think that Tesco is the UK’s answer to Wal-Mart, it is some five times smaller than the American retail giant.

Another, and perhaps more important, reason for looking at US shares is that sometimes there are just no British equivalents to some American companies. Consider, for example, Apple, Walt Disney, General Electric, Intel and IBM. There are simply no comparable companies in the UK that could compete with these iconic American corporations.

Buying American shares for your portfolio couldn’t be easier these days. There was a time when UK investors could only get exposure to the US market through managed funds.

However, with the advent of online brokers, private investors can now buy American shares as easily as buying shares on the London Stock Exchange. That said, brokers will insist on the completion of a W-8BEN form, which exempts UK investors from paying tax on US dividends.

 By and large, though, trading US shares is relatively straightforward. It may even be possible to buy shares in some US companies which have a listing on the London exchange, including Bank of America and General Electric.

If you are considering buying some US shares it might be a good idea to look for obvious gaps in your portfolio that could be filled by American companies.

For example, if there is a noticeable shortage of retail shares, then you may want to consider the likes of McDonalds, Wal-Mart or Home Depot. If it is technology that you are after, then Cisco Systems, Intel and IBM may fit the bill.

If you don’t have any specific shares in mind you could consider taking a more passive approach. This is where exchange traded funds (ETFs) might come in handy because they are effectively index trackers which trade like shares. Some of the most popular ETFs are those that track the Nasdaq, the S&P 500 and the Dow Jones Industrial Index. The Nasdaq 100 Trust or QUBEs, for example, tracks the Nasdaq 100 index; Diamonds Trust tracks the Dow Jones Industrial index and S&P Depositary Receipts hold all of the common shares in the S&P500.

It is also possible to buy London-listed ETFs that track the US stock market. For example, the iShares S&P 500 is designed to mimic the performance of the S&P 500.

From an economic perspective, there are signs that the US economy, after a protracted period of monetary easing, is growing again. Between April and June, US economic growth accelerated to 1.7 per cent compared to  1.1 per cent in the first three months of the year.

From an investor’s perspective, the boost in economic growth could bode well for not just the US but for US companies too. 

David Kuo is director of fool.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
Life and Style
Parker says: 'I once had a taster use the phrase 'smells like the sex glands of a lemming'. Who in the world can relate to that?'
food + drinkRobert Parker's 100-point scale is a benchmark of achievement for wine-makers everywhere
News
i100
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
    How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

    How to make your own Easter egg

    Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
    Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

    Bill Granger's twist on Easter Sunday lunch

    Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
    Joe Marler: 'It's the way I think the game should be played'

    Joe Marler: 'It's the way I think the game should be played'

    The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
    Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

    Cricket World Cup 2015

    Has the success of the tournament spelt the end for Test matches?
    The Last Word: Justin Gatlin knows the price of everything, the value of nothing

    Michael Calvin's Last Word

    Justin Gatlin knows the price of everything, the value of nothing