In an interconnected global economy, limiting investments to domestic markets might mean missing significant growth opportunities. For UK investors, expanding horizons beyond the FTSE can increase returns, provide additional stability, and unlock access to innovative sectors under-represented in the British market.
1. The importance of diversification in global investment
Geographical diversification is an important principle of sound investment strategy. According to the Office for National Statistics, The percentage of UK shares held by overseas investors increased again to 57.7 per cent, making it a new high. This is to show that international players already recognise the value of cross-border investments. When UK markets face headwinds from domestic economic factors or political uncertainty, investments in markets with different economic cycles can offset losses. This principle works because global economies rarely move in perfect synchronisation. For example, growth in Asia might coincide with contraction in Europe. Also, certain sectors like technology or healthcare have stronger representation in markets outside the UK. So, by accessing these international opportunities, investors working with experienced wealth managers who have expertise in global investments can build more balanced portfolios that are in line with long-term growth trends.
2. Identifying high-growth international markets
Emerging markets continue to have compelling growth prospects due to favourable demographics, increasing urbanisation, and expanding middle classes. According to the International Monetary Fund, advanced economies are expected to grow 1.8 per cent in 2025, while emerging markets and developing economies are projected to grow 4.3 per cent. The Asia-Pacific region, particularly markets like India and Vietnam, are attractive opportunities, with India’s economy expected to grow 6.5-6.8 per cent in the 2024-25 fiscal year.
3. Understanding foreign exchange risk and mitigating it
Currency fluctuations can impact returns from international investments. When the British pound strengthens against foreign currencies, returns from overseas investments might be diminished when converted back to sterling. But investors can manage currency risk through strategies such as currency-hedge funds that neutralise exchange rate movements, by maintaining diverse currency exposure to avoid overconcentration, or bystrategic timing of currency conversion based on macro trends.
4. Legal and tax implications of international investments
UK investors have to understand tax considerations when investing internationally. Foreign dividends are usually taxed as income, while capital gains on overseas investments fall under UK capital gains tax rules. Tax treaties between the UK and other countries can help prevent double taxation, but withholding taxes in foreign jurisdictions can still have an impact on net returns. This is why it’s important to have tax-efficient investment structures and professional guidance.
5. Practical steps to begin investing internationally
For those new to international investing, starting with globally diversified funds or ETFs can give them a simplified entry point. These vehicles provide instant diversification across multiple countries and sectors, often with lower fees than actively managed alternatives. More experienced investors might want to consider direct investments in foreign equities through international trading platforms or investment trusts focused on specific regions or themes.
When adding international elements into your investment strategy, you can build a better portfolio designed to capture global growth opportunities while potentially lowering overall risk through broader diversification.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
