Going global

By ALICIA WYLLIE
Updated: 19:00 EST, 18 June 2002

EVEN as we celebrate the Jubilee, investment experts say it is wise to move away from the UK stock market. Going global rather than just sticking with British companies is likely to bring better rewards.

James Dalby of Bates Investment Services, a nationwide firm of independent financial advisers, says: 'Investors and advisers feel comfortable investing in UK firms, and perceive global markets as more risky. But diversifying abroad is actually a cautious strategy as investors are exposed to a variety of stock markets rather than being concentrated in just one.

'British shares account for 10% of the world's stock market capitalisation and investment portfolios should reflect this more. We would usually recommend that about 40% of a portfolio is enough exposure to the UK.'

But even most companies that we regard as British do not rely on our economy: they have gone global too. Energy company BP, for example, gets little more than 30% of its turnover from the UK.

The importance of overseas companies and the world economy is clear, not only in the stock market, but in our daily lives. Many goods come from other countries, and investing overseas enables us to buy into the firms that make them.

John Ross, senior portfolio strategist at Fidelity Investments, says investors should also diversify abroad because UK firms do well only in certain economic climates. He says: 'The UK stock market has a lot of banks, utilities, and energy and pharmaceutical companies. These tend to be defensive and usually do well when economic growth is weak. But when growth picks up, the UK tends to underperform markets that have more economically sensitive companies.'

History proves the point. For example, despite shaky markets in the past two years, five-year total investment returns from America's Dow Jones index are more than 50% while those from the FTSE 100 are almost 20%. Even the French market has done better, paying almost 40%. But steer clear of picking just one overseas market. Dalby says: 'Nobody can accurately pick which investment market will perform the best. That is why the global approach can pay off.'

This approach is winning support among investors. Both Fidelity and Foreign & Colonial report bumper sales of their global investment funds this year. Roddy Kohn of Kohn Cougar, a Bristol-based independent financial adviser, says: 'There are some excellent global funds available. Fidelity has to take first place with its WealthBuilder and MoneyBuilder Global funds. But I am also a fan of global investment trusts, such as Foreign & Colonial investment trust and Witan.'

Dalby agrees - 'These funds won't shoot the lights out when markets surge, but they shouldn't fall off a cliff when markets slip, either.'

Ian Hunter has been investing globally for more than five years. The 41-year-old managing director of a printing company regularly puts money into the Foreign & Colonial and Witan investment trusts. He says: 'I started to invest in the stock market because I believed it would provide better returns than building societies. While the value of my investments has fallen in the past couple of years, I have still made money over the five years.'

Ian, who lives in Burnham on Sea, Somerset, with his 37-year-old girlfriend Sally Barnett, does not claim to be an expert investor. My financial adviser recommended F&C and Witan. I feel safer having my money spread round the globe. It gives me the opportunity to make money whichever market is performing best without putting all my eggs in one basket.'

Fidelity funds require at least £500 or a regular savings scheme for £50 a month or more. WealthBuilder has an initial charge of 5.25% and an annual management fee of 1.5%. MoneyBuilder's charges are nil and 1.96% respectively. F&C's share plan requires a minimum of £250 or regular savings of at least £50. It charges 0.2% to buy the shares, plus stamp duty of 0.5%. Investors also pay 0.2% when selling.

Witan's share plan takes a transaction charge of 1%, stamp duty of 0.5%, and a 1% fee when selling. There is an annual fee of 0.17%, plus a performance fee of 0.024% of the trust's value. The plan requires a £500 lump sum or savings of at least £50 a month.