How to buy US ETFs in the UK: investing and trading
Due to regulations, UK retail investors can’t buy shares in US-listed ETFs unless the fund has a KIID. But there’s another way to diversify – invest in UK-listed equivalents. Learn more below and find some UK alternatives.
Buying US ETFs in the UK: what you need to know
You might want to diversify your portfolio with assets outside of the UK or EU, in regions such as the US. You can buy shares in US-listed companies from the UK, but due to local and European regulations, you’re not allowed to purchase US-listed exchange-traded funds (ETFs) in the UK.
That doesn’t mean you can’t access US funds, though; a workaround is available. You can invest in UK-listed equivalents – as long as these have ‘UCITS’ in the name. This means the fund is fully regulated in the UK, enabling you to invest in a range of US stocks, indices and sectors. Additionally, you can trade most non-UCITS funds providing these have a key information document (KID).
Of course, this only applies to retail investors. If you want to trade ETFs listed in the US, you can, because you never own the underlying asset. And, if you’re a professional trader, you don’t need to stick to UCITS ETFs – you can trade or invest in any ETF.
What are UCITS regulations and what do they say?
UCITS regulations provide a regulatory framework that allows retail investors across Europe (including the UK) to invest in ETFs no matter where in the EU they’re domiciled. UCITS stands for ‘Undertakings for Collective Investment in Transferable Securities’.
Its main purpose is to allow fund managers to set up and market products across the continent without needing the regulatory approval of each individual EU member state, which would be extremely cumbersome. This also means retail investors can only buy shares in ETFs that adhere to this common framework.
While UCITS is an EU regulation, the UK government took steps to ensure the framework continues in the country post-Brexit.
What type of US ETFs can you buy in the UK?
You can buy all kinds of US-equivalent ETFs that are listed in the UK, including:
- The Vanguard S&P 500 UCITS ETF, which tracks the S&P 500 index
- Stock market index ETFs for the Dow Jones, such as the iShares Dow Jones Industrial Average UCITS ETF
- The iShares NASDAQ 100 UCITS ETF, an equivalent ETF to the NASDAQ
- US mid and large-cap equity ETFs, such as the L&G US Equity UCITS ETF
- Thematic US ETFs, like the Source Technology S&P US Select Sector UCITS ETF
3 steps to trading or investing in US ETFs from the UK
Decide whether you want to trade or invest
Determine whether trading or investing (or both) is best for your financial goals.
Remember, when you invest, you can only buy ETFs with ‘UCITS’ in the name. If you trade, you can take a position on any ETFs, including those listed in the US.
| Trading US ETFs | Investing in US ETFs |
|---|---|
| Speculate on the price of US ETFs | Buy and sell underlying US ETFs |
| Leverage your exposure – you’ll pay a fraction to get exposure to the full position size | Pay the full value of the ETFs you buy upfront |
| Gain or lose money faster due to leverage, as both profit and loss will be magnified to the value of the full trade | Potentially get back less than you put in because the value of ETFs can fall as well as rise |
| Trade ETFs listed anywhere in the world, including the US | Invest in UK or EU-listed ETFs with ‘UCITS’ in the name only |
| Trade tax-free with spread bets and offset losses with CFDs1 | Invest tax-free with a stocks and shares ISA1 |
| Take short-term positions | Focus on long-term growth |
| Hedge your portfolio when trading | Build a diversified portfolio |
| Trade without owning the underlying asset | Take ownership of the underlying asset |
| Receive no shareholder privileges | Gain voting rights and dividends (if paid) |
| Trade in both our spread betting account and CFD trading account | Invest in our share dealing account or with a ready-made Smart Portfolio |
Open an ETF trading or investing account
We offer more than 3000 ETFs to trade or invest in, all on the world’s best trading platform.2 You can invest in UK-listed ETFs from just £3 commission when you trade in your share dealing account three or more times in the previous month, or trade on any ETF commission-free with spread bets.3
Trading ETFs
- Create or log in to your trading account and go to our trading platform
- Click ‘ETFs’ and find the one you want in the list or use the search bar
- Choose your position size
- Click ‘buy’ or ‘sell’ in the deal ticket, depending on which way you think the market will move
- Open your position and monitor your trade
Investing in UK-listed ETFs
- Create or log in to your share dealing account and go to our trading platform
- Click ‘ETFs’ and find the one you want in the list or use the search bar
- Select ‘buy’ to open your investment position
- Choose the number of shares you want to buy
- Confirm your purchase and monitor your investment
Pick the US ETF you want to trade or invest in
Once you’ve logged into the online trading platform or app, you’ll need to search for the ETF you want to trade.
Log in to your trading account on the web platform, open your workspace and click on ‘ETFs’, found on the left side of the screen. Then, pick the ETF you want to trade.
On the mobile app, you’ll tap ‘markets’ at the bottom of the screen and then ‘ETFs’, which brings up a list of available ETFs for you to trade.
Similarly, once you’ve logged in to the web platform share dealing account, you’ll click on ‘ETFs’ on the left side and can then search for the one you want to invest in.
On the mobile app, you’ll select ‘markets’ at the bottom of the screen, then ‘ETFs’, where you can search for your chosen UK-listed ETF.
What are the main costs when buying US ETFs?
| Type of cost | About |
|---|---|
| Total expense ratio (TER) of the ETF | This isn’t a direct cost, but rather a percentage which shows the estimated expense of owning the ETF, covering charges like management fees. The TER depends on the ETF – you can find this out on the ETF’s fact sheet |
| Commission | Pay as little £3 on UK ETFs when you trade three or more times in the previous month3 |
| FX conversion | Trade or invest in UK-listed ETFs and you won’t pay FX fees. However, if you trade spread bets and CFDs on US-listed ETFs, you’ll pay a conversion fee |
Here’s how our ETF investing fees on our share dealing account compare to our competitors’:
| Cost | IG | Hargreaves Lansdown | AJ Bell |
|---|---|---|---|
| Best commission for US ETFs listed in the UK3 | £3 | £5.95 | £9.95 |
| Standard commission for US ETFs listed in the UK3 | £8 | £11.95 | £9.95 |
| How to qualify for the best rate | Open three or more positions in the previous calendar month | 20 or more trades in the previous month | N/A |
Best UK-listed US ETFs to watch
Buying US ETFs in the UK summed up
- Retail investors can’t invest in US-listed ETFs; however, you can buy shares in UK-equivalent ETFs with ‘UCITS’ in the name
- UCITS is a regulation that enables retail investors in the EU and the UK to invest in funds
- We offer more than 3000 ETFs to trade or invest in through our share dealing, spread betting and CFD trading accounts
- The main costs involved in buying US ETFs are the TER, commission and, where relevant, FX conversion
Sources
1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
2 Awarded ‘best finance app’ and ‘best multi-platform provider’ at the ADVFN International Financial Awards 2020.
3 Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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