Where do you start with US shares

[webbm00]

So I want to get more US exposure in my portfolio. Where do I start?

[tjh290633]

You could start with looking at F&C IT, which has a lot of US exposure.

TJH

[TUK020]

Another option is the L&G Global 100 ETF.
Significant % US companies
Very low costs

[monabri]

ETFs from the likes of Vanguard/ iShares. But what are you looking for in your exposure to US funds? To gain more exposure you might simply dump a load of money in Microsoft or Tesla or.......

[SalvorHardin]

North American Income Investment Trust is worth a look. Quite popular amongst HYPers who are happy to invest overseas via funds.

Operating companies. America (and Canada) offers investors companies which have no equivalents in the UK. Such as the technology majors (Apple, Google Microsoft), railroads (Canadian Pacific, Union Pacific) and global media (Disney). Maybe even Tesla!

Also the Canadian banks, which still pay dividends and are better run than British banks

[webbm00]

But what are you looking for in your exposure to US funds? To gain more exposure you might simply dump a load of money in Microsoft or Tesla or.......

At the moment I want to at least broaden my understanding of other markets as it feels like the UK is on a slow dive into oblivion which may be a bit dramatic but some global diversification probably would help

North American Income Investment Trust is worth a look. Quite popular amongst HYPers who are happy to invest overseas via funds.

Operating companies. America (and Canada) offers investors companies which have no equivalents in the UK. Such as the technology majors (Apple, Google Microsoft), railroads (Canadian Pacific, Union Pacific) and global media (Disney). Maybe even Tesla!

Also the Canadian banks, which still pay dividends and are better run than British banks

I think maybe some companies that fill sectors I have no coverage with UK stocks. Consumer electronics being one of them.

What I don't know is are there the equivalent of GARP or high yield shares in the US markets that are similar to the UK, what websites are good for screening and research and what do I need to know about holding US shares in an ISA

[Alaric]

what do I need to know about holding US shares in an ISA

It would be necessary to choose a provider that offers US shares.

You will likely need to fill in and file with the provider a form known as W-8 BEN. This reduces the withholding tax on dividends from 30% to 15%

It isn't allowed to hold foreign currency in an ISA so everything has to be converted to or from Sterling. ISA providers may vary on how competitive their rates and charges are for this.

You probably won't be allowed to purchase US quoted ETFs.

[monabri]

If you want to buy individual US shares then you will need to complete the W8-BEN form as Alaric mentions. The form is a short declaration and if you Google it and view images, there are completed examples.

Not a tax expert but it might be preferential to hold individual US shares outside of an ISA ( other Lemons might wish to advise). Holding individual US shares in an ISA...you will still pay the "withholding" tax so any dividend paid will have a nibble taken out of it. The tax treatment, I believe, is different/more favourable if held in a SIPP.

Alternatively, you might decide to buy a basket of shares by buying shares in an Investment Trust ( SalvorHardin mentions NAIT above but there are others). If you are interested in that route then swing by the AIC website. https://www.theaic.co.uk/

Another alternative would be to buy a basket of US shares using an ETF from the likes of Vanguard or iShares ( other options available but I believe these 2 are pretty well known & discussed - refer to the Passive investment board).


As another alternative, you might decide to go for investment in the World globally ( which means a reasonable percentage of your money goes into the US but some is invested in other countries). An example would be an investment in Vanguard's all world tracker...VWRL ( being probably the one discussed the most frequently although others exist). This would buy you approx half your money into the US and the rest spread globally).

United States 54.43%
Japan 7.74%
United Kingdom 4.27%
Switzerland 3.09%
France 2.67%
Canada 2.61%
Hong Kong 2.57%
Germany 2.40%
Australia 1.81%
China 1.75%

Note, the 4.27% in the UK ..an indication of the significance of the UK market! ( and I agree with you about the UK!).

If you wanted to up the ante in exposure to emerging countries, Vanguard offer their VFEM fund https://www.hl.co.uk/shares/shares-sear ... arkets-etf

All these collectives ( ITs, ETFs, and others) allow you to invest globally, widely and fairly cheaply ( especially via the ETF route).

[SalvorHardin]

What I don't know is are there the equivalent of GARP or high yield shares in the US markets that are similar to the UK, what websites are good for screening and research and what do I need to know about holding US shares in an ISA

American shares in general don't yield as much as British shares (or at least that the popular HYP shares did before the lockdown). As a rule American investors are more likely to invest for capital growth than income. A major reason is that for American taxpayers dividends are taxed twice, once at the corporate level and then again when the individual receives them (we have moved to this recently with the extra tax on dividends received by private invesstors). Double taxation has been a big driver pushing companies to retain cash, rather than paying it out, and also buying back shares (more tax efficient than paying dividends).

What America does have that Britain doesn't is the "dividend aristocrats". Income-seeking Americans place great store on this group of companies which are in the S&P500 AND have increased their dividends in each of the past 25 years (or longer). Whilst Britain does have some companies with a similar record, the idea doesn't hold much sway amongst the investment community. Currently there are just over 50 such companies. One such is Procter & Gamble, which has paid dividends since 1892 and increased its dividend in each of the last 56 years.

https://en.wikipedia.org/wiki/S%26P_500_Dividend_Aristocrats

There are some American companies which pay extremely large dividends (over 10%). Caution is needed as these tend to operate in extremely volatile sectors such as mortgage REITs. Extreme caution is needed with mineral and oil & gas royalty companies which tend to be wasting assets because their royalities will cease at a future date. Years ago I came across a royalty trust which yielded roughly 35% - there were a lot of excited income seekers talking about it. Many of them didn't realise that the company was due to be wound up in just over 3 years when the royalty expired.

Seeking Alpha is a good website for American shares (both research and gossip). They have a screener (I don't use screeners so I can't comment on its usefulness).

https://seekingalpha.com/screeners

[BrummieDave]

Another entry point into "Where do you start with US shares" is to understand where and how stocks are traded and indices managed in the US.

We frequently hear and read US terminology about stocks without possibly understanding what is meant. I have suggested a few times that people should read and understand what the "Dow, S&P and NASDAQ" are, and how they are different, then drill down to the most popular tracked indices, Dow 30, S&P 500, and NASDAQ 100, and understand those to.

These two links may help:

https://www.fool.com/investing/general/ ... aq-an.aspx

https://www.investopedia.com/ask/answer ... %20average.

After digesting this, the whole subject of individual shares, ETFs and other collectives such as ITs, can be explored within a defined, understood, context.

[Wizard]

Following on from the excellent points made above I think you may want to start by thinking about some practicalities. Specifically, what type of account will you use to invest in US Shares and as others have said completing a W-8BEN form. I use Hargreaves Lansdown and they will not allow you to buy US shares if you have not completed a W-8BEN within the last three years. But it is not a difficult form to complete so that is not an issue. If you are planning to buy shares which pay any sort of meaningful dividend and you have a SIPP you may want to buy them in that. Outside a SIPP the W-8BEN form will reduce US dividend withholding tax to 15% I believe, but in a SIPP it reduces it to zero.

[Alaric]

Outside a SIPP the W-8BEN form will reduce US dividend withholding tax to 15% I believe, but in a SIPP it reduces it to zero.

I believe there is a conditional on that, which is that the custody arrangements of the platform for US Stocks segregate SIPP holdings from the rest. Perhaps market pressure ensures all the major players do this.

[Wizard]

Outside a SIPP the W-8BEN form will reduce US dividend withholding tax to 15% I believe, but in a SIPP it reduces it to zero.

I believe there is a conditional on that, which is that the custody arrangements of the platform for US Stocks segregate SIPP holdings from the rest. Perhaps market pressure ensures all the major players do this.

I was not aware of that, but then I only use HL. In that case it would be best to specifically check with the broker you hold a SIPP with if you are considering that route.

[PinkDalek]

[I use Hargreaves Lansdown and they will not allow you to buy US shares if you have not completed a W-8BEN within the last three years.

Do they restrict it to precisely 3 years or do they follow the IRS position?:

Expiration of Form W-8BEN.

Generally, a Form W-8BEN will remain in effect for purposes of establishing foreign status for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect.

https://www.irs.gov/instructions/iw8ben

I ask as we were caught out once, a few years back, where a broker did not apply the 'to the end of December position' and a quarterly dividend suffered 30% withholding. Paper forms having been lost in the post somewhere or other.

[Wizard]

[I use Hargreaves Lansdown and they will not allow you to buy US shares if you have not completed a W-8BEN within the last three years.

Do they restrict it to precisely 3 years or do they follow the IRS position?:

Expiration of Form W-8BEN.

Generally, a Form W-8BEN will remain in effect for purposes of establishing foreign status for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect.

https://www.irs.gov/instructions/iw8ben

I ask as we were caught out once, a few years back, where a broker did not apply the 'to the end of December position' and a quarterly dividend suffered 30% withholding. Paper forms having been lost in the post somewhere or other.

They show my current W8-BEN as expiring on 31st December 2020 and I am pretty sure I did not fill it in on New Years Eve. SO I think they must apply the ruling as you describe it above. I had just assumed it ran for three years from signature, so new info for me, thanks.

[Lootman]

There are some American companies which pay extremely large dividends (over 10%). Caution is needed as these tend to operate in extremely volatile sectors such as mortgage REITs. Extreme caution is needed with mineral and oil & gas royalty companies which tend to be wasting assets because their royalities will cease at a future date. Years ago I came across a royalty trust which yielded roughly 35% - there were a lot of excited income seekers talking about it. Many of them didn't realise that the company was due to be wound up in just over 3 years when the royalty expired.

Seconded. A good example of a royalty trust with a British flavour is BPT. This is the royalty vehicle for BP's oil production from its Prudhoe Bay project in Alaska. The current dividend yield is an eye-popping 40%.

But its share price is at an all-time low and will inevitably go to zero. Best considered as an annuity. Could be effective as a tax vehicle for converting capital into income, but clearly not a long-term growth holding.

One other vehicle to be wary of are partnerships. These aren't always obvious at first sight since they have symbols just like ordinary shares and trade in the same way. However they are taxed differently. You get a K-1 form, often months after other tax documents arrive, and it is quite a task to figure out how to split up the cashflows into dividends, depreciation, return of capital and so on. I'd recommend avoiding them. Some are quite large and well known companies like Blackstone (BX) although I believe BX has recently changed to a normal corporate structure.

[webbm00]

If you want to buy individual US shares then you will need to complete the W8-BEN form as Alaric mentions. The form is a short declaration and if you Google it and view images, there are completed examples.

Not a tax expert but it might be preferential to hold individual US shares outside of an ISA ( other Lemons might wish to advise). Holding individual US shares in an ISA...you will still pay the "withholding" tax so any dividend paid will have a nibble taken out of it. The tax treatment, I believe, is different/more favourable if held in a SIPP.

Alternatively, you might decide to buy a basket of shares by buying shares in an Investment Trust ( SalvorHardin mentions NAIT above but there are others). If you are interested in that route then swing by the AIC website. https://www.theaic.co.uk/

Another alternative would be to buy a basket of US shares using an ETF from the likes of Vanguard or iShares ( other options available but I believe these 2 are pretty well known & discussed - refer to the Passive investment board).


As another alternative, you might decide to go for investment in the World globally ( which means a reasonable percentage of your money goes into the US but some is invested in other countries). An example would be an investment in Vanguard's all world tracker...VWRL ( being probably the one discussed the most frequently although others exist). This would buy you approx half your money into the US and the rest spread globally).

United States 54.43%
Japan 7.74%
United Kingdom 4.27%
Switzerland 3.09%
France 2.67%
Canada 2.61%
Hong Kong 2.57%
Germany 2.40%
Australia 1.81%
China 1.75%

Note, the 4.27% in the UK ..an indication of the significance of the UK market! ( and I agree with you about the UK!).

If you wanted to up the ante in exposure to emerging countries, Vanguard offer their VFEM fund https://www.hl.co.uk/shares/shares-sear ... arkets-etf

All these collectives ( ITs, ETFs, and others) allow you to invest globally, widely and fairly cheaply ( especially via the ETF route).

From the brick wall I had hit I knew this question had a lot of tails

I've found the W8-Ben form on the EQi site but the withholding tax makes a difference on the dividend received. But as US shares typically are lower yielding this make less difference and I'm ok with lower yield shares as long as the TR is good

I had dismissed ITs for UK shares but hadn't thought of them as a way of getting US (or world) exposure with less difficulty. The Vanguard All World Tracker looks like exactly what I want. Top 10% holdings are:
Microsoft
Apple
Amazon
Alphabet
Facebook
and 56% US shares

[monabri]

Have a look at VEVE too. Slightly higher holding of US and cheaper too....

Generally

VWRL = VEVE + VFEM in the ratio of 9:1.

Or , if you want S&P500, have a look at VUSA.

All, these are ETFs run by Vanguard.

[gryffron]

I've found the W8-Ben form on the EQi site but the withholding tax makes a difference on the dividend received. But as US shares typically are lower yielding this make less difference and I'm ok with lower yield shares as long as the TR is good

You may well find that you don't have the choice. Most of the UK discount brokers will ONLY allow you to buy US stocks after you have submitted a valid W8BEN. That's because it would make their admin more difficult to have to track customers who have and who haven't separately.
(Doesn't apply to UK based funds tracking US stocks)

BTW: Whilst I accept it may be more tax efficient to keep your US stocks outside an ISA, actually reporting foreign dividends on your tax form can be a right pain, and can be avoided completely by keeping them in an ISA/SIPP.

Gryff

[Aminatidi]

If you want a simple life just buy VWRL or VWRP if you want the accumulating version.

Keep in mind if you're holding these unwrapped you may need to look into any Excess Reported Income issues but if you're inside an ISA just crack on.