Investing in stocks from around the world has become a lot easier in recent years. If I think back a decade, finding a way to buy Amazon shares or similar large-cap US stocks was by no means straightforward. Due to the boom in retail investing recently, providers have made it a lot more simple for UK investors to buy US shares. So when looking for the best shares to buy now, should I be investing across the pond?
Similarities and differences
Even though the US has a different economy to the UK, there are plenty of similarities. Both countries are developed, so consumer demand is fairly similar. This means that a lot of the same investing themes apply to both sets of shares.
For example, both countries have well-established banking systems, with listed banks and financial services companies for me to consider for my portfolio. Both countries also have mature utility and energy companies listed, with some paying out dividend income.
From an economic point of view, both nations are quite similar. Recently, rising inflation in the two countries has meant that investors are concerned about central banks raising interest rates sooner than expected. Both the US and UK currently have almost the same interest rate (0% vs 0.1%).
However, there are some differences between large-cap stocks. For example, the US has most of the large technology companies listed. In the UK, we don’t have technology shares to rival the likes of Apple and Microsoft.
The UK also has a higher average dividend yield than the US, when comparing the FTSE 100 to the S&P 500. So income investors might choose to favour the UK for the best dividend shares to buy now.
Buying the best shares from a larger pool
Given the differences mentioned above, I’d look to invest in shares that have the best position for what I’m looking to achieve. So when looking for attractive tech growth stocks, I’d prefer to buy US companies.
I can also take advantage of the different markets as I might not find a stock that fits my goal. For example, I might want to find the best utility share to buy that has exposure to Africa. Or I might want to invest in a fashion company that’s targeting growth in Europe.
By looking across both the UK and the US, I give myself a better scope of stocks to go through in order to find what I’m looking for. This helps me to not compromise on my investing goals. This is especially important if I’m using ESG criteria.
In reality, as a UK resident I’m more likely to buy UK shares. Given my more in-depth knowledge of the UK economy and domestic stocks, it’ll be easier for me to identify the best shares from the UK rather than the US. So for most investors like me, the answer to the question in the title would be UK stocks.
However, I would stress that by broadening my horizons and holding some US stocks, I think I’ll have a better, well-rounded portfolio.
