Trading in US listed companies

2nd Feb by sach0704

2 comments 267 reads

This is my first post here and looking for advice/experiences of fellow traders. I have been trading in US listed companies through my UK ISA. There are no issues trading these. However, I want to ask the wider community about the exchange rate fluctuations between the GBP and USD. I would love to hear about your advice/experience in how you manage the exchange rate risk. Is there a better means of trading US shares either in terms of the platform to use or indeed a platform that offers a hedge against exchange rates. I definitively want to trade US shares in a tax wrapper so I don't end up paying capital gains tax in the UK. I am a UK citizen and live in the UK.

Your views please.

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About the Author

Sach0704

Premium Member

2 comments

BnB

2nd Feb

Professional wealth management firms don’t habitually hedge currency risk. And, even with 80% of my portfolio overseas, neither do I. UK-based dollar investors benefit from a natural hedge, whereby the dollar rises when volatility spikes, muting the effect of any downturn in asset values. Then you have a secondary hedge in the other direction, whereby the profits of U.S.-based exporters accelerate when the dollar depreciates, raising their dollar asset value. Directly hedging currency risk carries a trickle charge that ultimately depresses portfolio performance. Of course you can boost your profits by hedging opportunistically, but this is fraught with risk as even the most experienced currency traders get it wrong half of the time. My rule is only to hedge currency risk when the relevant currency pair is at extreme levels. For example, when GBP fell after the Liz Truss debacle. I made a nice profit then, and took the hedge off when GBP had recovered to within its normal trading range.

Carey Blunt

2nd Feb

I pretty much ignore it. Occasionally I will buy a UK listed company that earns in another currency and which I think will do well anyway and so the currency rates will give it a tailwind. The problem with currency is trying to predict it is too difficult and so I look for companies that will do well and which I really believe in. I then accept things like trading fees and currency risks as a necessary evil for buying a good company. If the company does well you won’t really notice currency issues.

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Trading in US listed companies

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Sach0704

2 comments

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