UK based, buying USA stocks.

🤝 Help
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Hello, I am really new to this whole investment business, I created an ISA account and already invested in 3 pies, with two of them being ETF’s. I one of the pies I got a mix off (VUSA) Vanguard S&P 500, and (TRE3) Invenso US treasury 1-3 bond, someone recently told me that I should steer away from US bonds a.s.a.p. but despite asking as to why I did not get any answer, so my question is this, is there any issue with me investing on US stocks and bonds while I am in UK? or is it just a problem that the bonds are in dollars?

And if in fact there is some sort of a problem, should I just find some alternative on the UK’s stock exchange?

I tried to do a little search, but I got lost under a mountain of terminologies and other things.

Any help would be greatly appreciated.

2

@Lionpride good questions. There is absolutely no reason why a UK investor shouldn’t trade in US equities or USD funds.

One thing to be aware of is that if the instrument is proceed in USD you will be faced with the GBP/USD exchange rate. You can mitigate against this with some ETFs that are priced in GBP.

For example you can buy the Vanguard USD treasury bond. VDTY is priced in $ but VUTY is priced in £. They are the same asset but priced in different currencies.

To use your TRE3 example above. The fund provider is Invesco and the fund is priced in USD. IBTS is an iShares fund that tracks the same bonds but is priced in GBP. There are other funds priced in GBP available too that track the same bonds.

I only buy ETFs that are priced in GBP to avoid currency exchange.

My advice is have a look at Justetf and compare funds that track the same bonds. Then look at the ongoing charges and find the lowest cost fund.

I hope that explains things and good luck with your investments :+1:

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Thank you very much for your help! :grin: This cleared up things.

I checked a bit the the website right now, and it seems a very useful one, definitely I am going to check it more thoroughly.

So, from my understanding is better to go for local currency, and go for cheaper stocks, as in cost in percentage (0.7)?

As for example one bond in the US treasury TRE3 is around $40, and one in the ishare is £ around £100, should I just find cheaper ones so I can get more?

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Don’t think about the price of the instrument. Most will be fractional which means you buy a quantity for the money you have.

The underlying instruments (bonds) should track broadly the same so if you invest £100 for example, you get the same % return.

Think about it this way:

1 X share at £100 - increase 10% is £110.
10 X share at £10 - increase 10% is £110.

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Ah, that make absolutely sense, you are right.

Thank you so much for your help! I tried to ask those things around but you are the first who helped me. :grin:

Thanks again, and I wish you good luck with all your ventures :four_leaf_clover::slightly_smiling_face::crossed_fingers:

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@Lionpride I would also keep in consideration the stamp duty you are paying when buying UK stocks. Try to estimate if stamp duty (which is 0.5% of the amount you invest) is less or more than GBP/USD exchange rate.

I guess for long positions stick with the stamp duty, for the short term you may want to check the GBP/USD exchange rate first.
You need to decide which way you choose.

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That is a very good point as well, usually the bonds I am investing to, are short term like 1-3 or 1-5, so I need to try and see what it might be a better solution for me. :thinking:

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Remember there is no stamp duty on ETFs.

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:hushed: I love ETFs then, haha!!