Join our community of smart investors

Thinking globally

The Fanmags might be finding it tough to impress hard-to-please Wall Street but their recent knockout results underline in thick red ink the value and wisdom of investing beyond the borders of the UK. 

Amazon’s net income more than tripled to $8.1bn, while Apple revenues were up 54 per cent at $89.6bn. Microsoft’s numbers were impressive, too, and even if it hasn’t yet clambered onto the $2 trillion market cap podium alongside Apple, the combined market cap of those two companies’ alone is worth more than the total value of the All-Share.

There are, of course, domestic treasures to be found on the London market, attractively priced ones at that, and takeover targets too, as John Baron discusses in his column, but it would be silly for any investor to ignore the diversification and opportunity benefits of adding international flavours to their portfolio. For one thing it helps to make up for some of the inadequacies of the domestic market such as the dominance of out-of-favour sectors, the ongoing Brexit discount and the resurfacing of old worries about weaknesses in the UK economy.

The truth is international investing has become second nature to many investors who are being brought up on a diet of global brand names and outsourced investment choices through funds and ETFs. Location for them isn’t a big factor. That’s usually less about diversification and more about a desire to be invested in stellar performers regardless of where they are based. 

There is one other key trend of recent years that has helped to internationalise investors’ thinking, and that is the rise of the world’s newest and most volatile asset class. Yes, we are back to cryptocurrencies, partly because this week I have been looking at how crypto gains are taxed – and because this one development has been key in banishing all notion of “location” for those investors who dabble. All highly appropriate for a currency that was born in cyberspace and that knows no borders. For crypto investors, when it comes to choice of coins and exchanges, the options are all global not local. Miners of coins are dotted around the world as they locate themselves wherever there is cheaply priced energy to power their computers while exchanges (digital marketplaces) usually base themselves offshore for tax and regulatory reasons. Two of the largest exchanges, BiNance and Coinbase, are are based in the Cayman island and the US respectively.

Now some UK investors who have enjoyed eye-watering returns from their holdings are making plans to follow them. “We get a lot of people reconsidering their residency status,” says Chris Etherington, partner at RSM. “These are crypto investors who have done very well, and are asking themselves if they should still be UK resident. Many of them are very young and have not built up ties here. They are sitting on significant gains and their view is that they don’t need to be in the UK. Tax is a big factor as to where they relocate – they are seeking as favourable a tax regime as possible.”

They may not need to move very far either (neither Germany or Portugal tax gains made by individuals trading cryptos) but they will be a very modern addition to the tax exile club, which is more used to pop stars and business millionaires.