The reason is that it is costly and not very convenient. Not all stockbrokers handle shares on overseas markets, and dealing costs are inevitably higher. There is the added complication of keeping up with the performance of stocks and companies and market conditions.
For small investors a pooled fund, such as an investment trust, is an easier way into foreign markets. "You would be looking at a portfolio of over pounds 100,000 before you considered direct overseas investment," says Richard Hunter, head of dealing services at NatWest Stockbrokers.
Internet share dealing sites can help overcome much of the inconvenience and reduce costs. Several broking houses have introduced web-based dealing services where clients can place orders and communicate with brokers. Market information, details of stock performance and market indices are available.
So far, these sites have been restricted to transactions on the London Stock Exchange. This partly reflects the difficulties in meeting regulatory requirements in more than one market, using technology that is still new to much of the industry. Also, only a minority of the shareholding population have foreign stocks. But if buying and selling overseas were cheaper and easier, more investors might do so.
This is the view of Charles Schwab. The company has just introduced internet- based dealing for its clients on the London Stock Exchange. By the end of the year, the firm expects to add trading in the major US markets.
Charles Schwab claims its internet site is "second generation": buy and sell orders appear directly on brokers' screens rather than via e- mail. This speeds up dealing and improves security, especially important in foreign markets.
Guy Knight, vice-president of Charles Schwab Europe, says the later launch for overseas trading is due to regulatory issues. "The idea that the internet is unregulated is wrong," he says.
One obvious safety measure investors can take is to deal with an established broker with a solid reputation. Like most on-line stock market services, Charles Schwab's internet trading is only open to those who register as clients first.
Mr Knight believes there is frustrated demand among UK investors for access to US markets. Internet users in particular are interested in computer- oriented stocks, many of which are not quoted in London. Fees on an average US transaction from an advisory broker or a private bank would, says Mr Knight, run to pounds 150. That could fall to pounds 30 to pounds 40 using internet technologies.
For investors who trade overseas, the US is by far the most popular market. In time, the internet will allow equally seamless access to dealing in Europe, although trading in 15 European countries means complying with 15 sets of consumer legislation.
Emerging markets are likely to remain the preserve of the specialist funds. Internet technologies do reduce the risks of dealing in volatile markets, although there is a trend for larger emerging market shares to seek listings in the US.
Mr Hunter says the most actively traded overseas market remains the US, followed by Australia and Germany. Occasionally, issues in other markets prove popular: privatisations such as France Telecom last year attract attention, and this week's float of Lazio may be followed by other Italian football clubs.
NatWest does not yet offer an internet dealing service, but has a dial- up system on test. This uses much of the same technology, but instead of connecting via an internet service provider (ISP) users dial directly into NatWest Stockbrokers' own network with a modem.
Again, only UK shares are available now via the electronic links, but Mr Hunter expects some overseas markets to be available within the next 18 to 24 months.
This will lead to information services that automatically track overseas equities. Charles Schwab has portfolio tracking options on its site, although it charges for some services. For a more general picture, the major stock markets provide their own, increasingly detailed Web pages.
q Links: Charles Schwab, http://www.schwab-worldwide. com; NYSE, http://www.nyse.com; Nasdaq, http://www.nasdaq.com; Paris Bourse, http://bourse-de-paris.fr (English option available); Frankfurt Exchange, http://www.exchange.de (English site).Reuse content