A reader has asked: I want to invest in a dollar-based ETF from the UK. How do you do it?
The answer here is thankfully quite simple, you need a stockbroker that offers access to ETFs.
Thankfully, we have a comparison table of stockbrokers that provide access to ETFs here.
In order to. buy USD ETFs in the UK you will need to:
- Open an account with a stockbroker that offers ETFs
- Deposit funds in either GBP or USD
- Choose which ETF you want to buy
There are a couple of things to be mindful of though.
There are costs for converting GBP into USD.
Some brokers do conversions at the mid-rate, others charge a percentage of the transaction about. Around 0.5% is fair for a small transaction. But if you are converting or buying more than £10,000 of this ETF it may be worth using a currency broker to convert your GBP into USD beforehand then sending the USD to your broker instead of getting them to do the conversion.
However, take into account that converting funds externally will take time, maybe a few days. So you will have to weigh up how price sensitive you are about what is more important.
You will have USD currency exposure to consider
Most people don’t think about this but, if you buy a USD denominated ETF and the USD and the USD is devalued against the GBP, you are going to lose out. So, for example, if USD is worth 10% less than GBP after you have held the USD based ETF for a month and the price has gone up by 5%. If you were to sell, you would actually be down 5%, rather than up 5%.
However, as many fund managers will tell you in the great debate over active versus passive investing for the long term isn’t about market timing, it’s about long term capital growth.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.