Investing in US markets

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2. Opportunity

The second main reason for investing abroad is opportunity

As an investor, you look for fast-growing, profitable, well-managed companies whose shares trade in a liquid market and can be bought at a fair price.

Those are demanding criteria, and if you limit your search to UK companies, you might have trouble finding any suitable companies at all.

In certain sectors, the UK may not have any world class companies. To get a slice of the action in that sector, you have no choice but to look abroad.

If the UK economy is not growing, but other economies are, you may have to invest abroad to achieve the growth rate you want.

If share prices in the UK market are high (based on average P/E ratios), you may have to look at companies in less highly-valued markets to get the value you want.

For all these reasons, it makes sense to consider American, French, Italian, German and other foreign companies for your portfolio. When you find a suitable one, you don't necessarily have to buy shares on the foreign market to get exposure:

The company may be listed on the London Stock Exchange (about 500 foreign companies are), in which case you can buy its shares exactly as if they were those of a UK company.

You may find a unit trust or investment trust which owns shares in the company, and invest in that fund (of course, you'd have no control over whether the fund retains the shares).

But even if you do have to buy shares in the company's domestic market, that's not a reason to be put off. The global securities industry is rapidly becoming more integrated, and brokers are making it easy and cheap for investors to trade across national boundaries.

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