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Buying US shares using GBP
Gianmarco M.
Posted: 12 September 2017 12:28:55(UTC)
#1

Joined: 12/09/2017(UTC)
Posts: 5

Hi,

I am new to investing and I have recently decided to invest in the stock market.

As a broker of choice I am using the Trading 212 platform, as they allow up to 10 trades per month for free. I have opened an account in GBP and bought some shares from the US market.

After some issues in trying to figure out how they calculate my profit/loss I have finally got an explanation.
They use the initial GBP value and the final GBP value. In this way, my profit/loss is highly influenced by the GBP/USD exchange ratio.

I will make an example for clarity:

1 bought 1 US share of ABC for 700 GBP, that at that time was 915.16 USD (GBP/USD 1.308).

One week later the share value has increased to 920 USD, but at the same time GBP/USD has raised to 1.327. Thus 920 USD are now 693 GBP.

Now, by calculating profit/loss using USD vale, there would be a profit of 5 USD, that would be 3,77 GBP.

However, by using the GBP, the P/L is 693 GBP (current value) - 700 GBP (initial value) = 7 GBP loss.

My question are:
Is this a common and fair way of calculating profit when trading with GBP on the US market?
Would it be better for me to just open an account in USD instead (to trade on the US market)?

Any suggestion is highly appreciated.

Best
GM
PaulSh
Posted: 12 September 2017 13:13:48(UTC)
#2

Joined: 02/12/2014(UTC)
Posts: 51

Thanks: 6 times
Was thanked: 90 time(s) in 47 post(s)
It's swings and roundabouts. Had the share price and currency movements been the other way around, you would have made a loss in USD but a profit in GBP.

One thing to watch with buying foreign shares in a GBP trading account is what sort of extra spread, if any, the platform adds to the interbank exchange rate.
Tim D
Posted: 12 September 2017 14:10:58(UTC)
#4

Joined: 07/06/2017(UTC)
Posts: 154

Thanks: 572 times
Was thanked: 194 time(s) in 93 post(s)
Gianmarco M.;51032 wrote:
I am new to investing and I have recently decided to invest in the stock market.

As a broker of choice I am using the Trading 212 platform, as they allow up to 10 trades per month for free. I have opened an account in GBP and bought some shares from the US market.


Interesting choices for a beginner. Are you actually planning on "investing", or more "trading"? And last I heard trading212 didn't offer ISA or SIPP accounts; are you aware of the tax advantages you're giving up by not using such vehicles?
Gianmarco M.
Posted: 12 September 2017 15:00:23(UTC)
#3

Joined: 12/09/2017(UTC)
Posts: 5

PaulSh;51037 wrote:
It's swings and roundabouts. Had the share price and currency movements been the other way around, you would have made a loss in USD but a profit in GBP.


Thanks for your answer.

Yes but it was in USD, I would not convert it back to GBP, as I do not plan to live in the UK forever.

PaulSh;51037 wrote:
One thing to watch with buying foreign shares in a GBP trading account is what sort of extra spread, if any, the platform adds to the interbank exchange rate.


They told me there is no extra spread nor charge for that.
Gianmarco M.
Posted: 12 September 2017 15:05:04(UTC)
#5

Joined: 12/09/2017(UTC)
Posts: 5

Tim D;51040 wrote:
[quote=Gianmarco M.;51032]Interesting choices for a beginner. Are you actually planning on "investing", or more "trading"? And last I heard trading212 didn't offer ISA or SIPP accounts; are you aware of the tax advantages you're giving up by not using such vehicles?


Hi Tim thanks for your answer. I am planning to keep my shares long term, but also to buy regularly when I have extra money, not sure what that makes me. You are correct, Trading 212 does not have any ISA nor SIPP, but I actually already have an ISA account with another broker.
Daniel P
Posted: 12 September 2017 18:07:18(UTC)
#6

Joined: 12/09/2017(UTC)
Posts: 1

Hi all,

Very interested in following this discussion I am a UK citizen and for a long portion of my lifetime have passively invested in and S&P Index but I eventually want to invest long term in US stocks and choose a viable platform in which to keep fees to a minimum and pretty much sit on.

I'm very wary of getting screwed by having a GBP account and have been trying to shortlist several US accounts that may work for me to deposit £ into and eventually purchase US stocks.

Gianmarco M. - Did you opt for a GBP account out of preference or did you too notice a lack of choice available for a UK citizen to setup a dollar account and go from there?

I'm looking into obtaining a US dollar account after weighing up both options but I have a lot of reading to do.

Are there any UK citizens on here that trade in USD account that can shed light on this at all?

I will be looking into finding some options and then making a comparison.

Thank you in advance,

Hedged Equity
Posted: 25 September 2017 11:42:15(UTC)
#8

Joined: 13/09/2017(UTC)
Posts: 3

It is swings and roundabouts. If the share price and currency movements been the other way round, it would have been a loss for you in USD but a profit in GBP. A thing which you should watch with buying foreign shares in a GBP trading account is what sort of extra speed, if any, that the platform adds to the interbank exchange rate.
Gianmarco M.
Posted: 02 October 2017 12:44:43(UTC)
#7

Joined: 12/09/2017(UTC)
Posts: 5

Daniel P;51047 wrote:
Hi all,

Very interested in following this discussion I am a UK citizen and for a long portion of my lifetime have passively invested in and S&P Index but I eventually want to invest long term in US stocks and choose a viable platform in which to keep fees to a minimum and pretty much sit on.

I'm very wary of getting screwed by having a GBP account and have been trying to shortlist several US accounts that may work for me to deposit £ into and eventually purchase US stocks.

Gianmarco M. - Did you opt for a GBP account out of preference or did you too notice a lack of choice available for a UK citizen to setup a dollar account and go from there?

I'm looking into obtaining a US dollar account after weighing up both options but I have a lot of reading to do.

Are there any UK citizens on here that trade in USD account that can shed light on this at all?

I will be looking into finding some options and then making a comparison.

Thank you in advance,




Hi Daniel,
sorry for not replying earlier as I was on Holiday.

Anyway, with Trading 212 you can open a USD account for free. Also, you have 10 free trades per month after that it is anyway very cheap compared to other brokers (2£+0.05%).
I have a GBP account that I am about to close to open a USD one and trade on the US market.

I have checked different services and this is the cheapest I could find for trading equities.

Hope it helps
Best
Stephen Lewis
Posted: 02 October 2017 13:20:57(UTC)
#9

Joined: 04/01/2016(UTC)
Posts: 3

Hi,

I trade in US shares in $US account with TD Direct(now owned by iii). The key thing to remember is that 30% tax is taken off US divis at source unless your broker gets you to sign a W8BEN form - not many brokers offer this and if not you will get involved in a complicated and probably costly exercise in trying to get tax back from UK HMRC.
Also remember that each time you buy and sell in GBP you will incur spreads of 1-3% dependent on broker and amount of deal. I never change back to GBP and always trade in US$
I see this as further diversification of currency. Advantages of US dealing of course is no stamp duty and dealing rates still very cheap at flat rate of £11.50 I believe. End of year tax forms provided by broker detailing dividends and sales and purchase for HMRC. I also find spreads much less on mainstream US shares than UK.
Gianmarco M.
Posted: 02 October 2017 13:31:54(UTC)
#10

Joined: 12/09/2017(UTC)
Posts: 5

Stephen Lewis;51650 wrote:
Hi,

I trade in US shares in $US account with TD Direct(now owned by iii). The key thing to remember is that 30% tax is taken off US divis at source unless your broker gets you to sign a W8BEN form - not many brokers offer this and if not you will get involved in a complicated and probably costly exercise in trying to get tax back from UK HMRC.
Also remember that each time you buy and sell in GBP you will incur spreads of 1-3% dependent on broker and amount of deal. I never change back to GBP and always trade in US$
I see this as further diversification of currency. Advantages of US dealing of course is no stamp duty and dealing rates still very cheap at flat rate of £11.50 I believe. End of year tax forms provided by broker detailing dividends and sales and purchase for HMRC. I also find spreads much less on mainstream US shares than UK.



Thanks Stephen for the info.
I can confirm that Trading 212 get you to sign a W8BEN form before commencing any trading on the US stock market. Do you know of how much less taxes you will be charged by signing this form?
They also told me they do not take any extra spread for the currency exchange but I am not sure about that.
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