Stock trading is probably one of the most antique methods of trading something that is intangible. It is the basics of making money with money, and sometimes even automating it to a point where it’s a form of passive income. Although it may not have the largest traded volume compared to Forex, it is still one of the best markets to engage in. The primary advantage of stock trading is the relative easiness of doing so.
There may be extra intricate trading strategies connected to day trading stocks or closing them within a couple of days of opening a position. But when it comes to long-term investments it all comes down to the performance of a single company. Should the investor be informed about the industry or in fact, be a devoted follower of that industry, he or she will have a lot more hindsight to make educated decisions.
But just like everything else, stocks often fall prey to politics and local economies. No matter how successful or large a company may be, the local political or economic situations may slow it down, therefore investors sometimes avoid companies located in smaller or unreliable countries. Even if the company has great potential. This is where the main question of the article forms. Is it better to invest in US stocks or opt for UK stocks instead? Let’s find out.
The differences between UK and US stock markets
Before naming the key differences between these two Goliaths, one very important shared feature needs to be mentioned. Both of these markets are hubs for off-shore companies. They host the go-to exchanges for any aspiring Start-up or an already established foreign company. But no matter this one small feature, the US market is still able to field a lot more options, and what’s even more important, the US market has more blue-chip options.
The key differences in investing in any of these markets are the trading strategies of the investors themselves. For example, Today Trader lists some of the most important aspects and best of both world options. The ultimate guide on how to invest in US stocks vs UK stocks revolves around the volume you’re aiming at. For example, if you want steady but slow growth, the US stock market is much better thanks to the dozens of blue-chip stock options such as Apple, Microsoft, and Disney. While the London market fields companies that are a bit more volatile and smaller.
The best strategy would be to divert about 80% of your budget towards the US market for blue-chip stocks, while the other 20% can be used for the UK stock market with a bit more risk attached. I’d suggest going for companies such as Apple or Microsoft for filling up your savings account with dividends while investing in the newly decreased stock prices for UK companies due to Brexit. It may sound risky, but the growth potential is much bigger in Britain.
How can you invest in both markets?
As already mentioned, going for both options is the optimal choice, however, that doesn’t mean that it’s going to be easy. Paying attention to the development of two markets can be exhausting. That’s exactly why I’m suggesting to go for blue-chip stocks in the USA, as they don’t require too much attention. Should a blue-chip stock fall significantly, it’s almost always temporary. Take Apple as an example. They managed to drop by a significant margin, only to climb their way back up as a trillion dollar company again.
The UK-based stocks, however, are way more volatile and require knowledge about the local market, which not everybody possesses. Furthermore, it requires knowledge about the EU and what Brexit means. Overall it has a lot more research value. But the gains are divided fairly.
You may be asking how it’s possible for a citizen of either of these countries or even outside to invest in both stock markets. Well, the US and the UK have a great financial relationship, which will continue even after Brexit. The CFTC and FCA have signed an MoU, confirming that both parties will be able to trade each others’ stocks without any interference. Therefore, going for only one exchange located in either New York or the UK will be enough to get the best of the two worlds.