International Investing: Should You Go Global with Your Portfolio? 

The appeal of overseas markets has grown steadily over the past decade for many UK investors. Globalisation, digital trading platforms, and the rise of multinational funds have made it easier than ever to buy and sell international stocks with just a few clicks. 

But beyond convenience, the main driver is diversification.  

Relying solely on one domestic market, such as the UK’s FTSE 100, can limit exposure to the world’s fastest-growing industries, from US tech to Asian manufacturing. By investing internationally, investors can open the door to a far wider pool of opportunities and give access to brand-new sectors and industries at different stages of development. 

That said, venturing abroad introduces new variables such as currency movements, differing regulations, and local taxation. So, is international investing worth it for your portfolio, and how can you manage the risks? 

What is international investing? 

International investing refers to buying assets, such as shares, bonds, ETFs, or funds, listed on markets outside your home country. For UK investors, that might mean holding US companies on the NASDAQ, European manufacturers on the DAX, or emerging-market firms in India or Brazil. 

Whereas domestic investing focuses on home-market performance and the pound sterling, global investing involves foreign economies and currencies. This means your returns can be influenced by multiple economic cycles, interest rate policies, and exchange rates. 

Many investors gain exposure indirectly through funds and ETFs that track international stock markets, rather than buying individual foreign shares. These collective vehicles simplify access to diverse regions while reducing the administrative burden of managing multiple overseas holdings. 

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What are the benefits of international investing? 

Diversification

Diversification is often cited as one of the biggest benefits of international investing. By holding assets in different geographic regions, investors can reduce reliance on any single economy. So, if the UK experiences a period of slower growth, strong performance elsewhere, such as in the US or India, can help offset local volatility. 

A globally diversified portfolio may therefore be better positioned to withstand regional downturns and benefit from growth wherever it arises. 

Discover top tips to diversify your investment portfolio.

Reduced home bias

Home bias describes the tendency to invest primarily in domestic companies.  

While familiar brands can feel more comfortable, over-concentration can limit potential returns. UK markets, for instance, are heavily weighted towards financials, energy, and consumer staples, with limited exposure to fast-moving technology or biotech sectors. 

Expanding internationally can help reduce this bias, giving investors access to markets with different economic drivers and compositions. 

Access to fast-growing sectors and markets 

Some of the most dynamic areas of the global economy, such as renewable energy and artificial intelligence, are led by companies based outside the UK. Through global investing, investors can gain exposure to these emerging sectors and to regions experiencing rapid industrialisation – particularly in Asia and Latin America. 

Accessing these markets can also provide participation in themes that may shape future growth, from green infrastructure to digital innovation. 

Potential currency gains

Exchange rates can add an additional source of return (or risk).  

If the sterling weakens against the currency of your overseas holdings, the value of those assets may increase when converted back into pounds. Conversely, a stronger pound can reduce returns from abroad. 

Some investors hedge currency exposure with specific financial instruments, while others accept this volatility as part of a long-term global diversification strategy. 

Broader investment opportunities

The international stock market offers a huge range of opportunities. Thousands of listed companies operate across diverse economies, from established blue chips in developed markets to up-and-coming enterprises in emerging ones. This broader universe means investors can tailor portfolios to their interests – whether that’s sustainable energy, consumer growth, or healthcare innovation. 

Explore the IG Academy beginner’s guide to investing.

What are the risks and challenges? 

Currency and exchange rate risk

Currency movements can significantly impact investment outcomes. Even if a foreign share rises in its local currency, adverse exchange-rate shifts may erode those gains once translated into sterling. Exchange rate volatility can be influenced by factors such as interest-rate policy, inflation, and economic data. 

While currency fluctuations are an inherent part of international investing, understanding their potential impact can help investors set realistic expectations. 

Geopolitical and regulatory differences

Every market operates under its own political climate and regulatory environment. Elections, policy changes, or shifts in trade relations can influence company earnings and investor sentiment. In addition, accounting standards, transparency rules, and investor protections differ between jurisdictions. 

This means that researching local regulations or investing through globally diversified funds can be an effective way to navigate such differences. 

Tax implications and withholding taxes

When investing abroad, dividends or capital gains may be subject to different tax treatments or withholding taxes depending on the market. Some countries have double-taxation treaties that reduce the amount withheld, but requirements vary and can change over time. 

Investors may wish to consider these factors when comparing domestic and overseas returns. 

Remember: Tax laws are subject to change and vary from country to country. 

Limited information or lower liquidity 

In smaller or emerging markets, company disclosures may be less comprehensive, and trading volumes may be lower than on larger exchanges such as London or New York. This can make it more difficult to analyse financial statements or to sell positions quickly during periods of volatility. 

Accessing such regions via ETFs or funds can help improve liquidity and transparency while still offering exposure to local growth potential. 

International vs domestic: finding the right balance for you

The balance between domestic and international exposure is a personal decision that depends on your goals, time horizon, and risk appetite. 

Domestic holdings often provide familiarity and ease of access, as investors understand local companies, currencies, and regulations. The UK market also tends to offer consistent dividend yields, which may appeal to income-focused investors. 

However, incorporating international investing can provide complementary benefits, particularly exposure to higher-growth economies or underrepresented industries at home. Combining both can create a more balanced and resilient portfolio. 

While there’s no single ‘correct’ allocation, many global investors blend local stability with overseas opportunity, adjusting weightings over time as markets evolve. 

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How to choose the right international stocks

Selecting the right international stocks depends on a mix of research, diversification, and personal goals. Key considerations include: 

• Understand the fundamentals: Examine company performance, valuation ratios, and competitive positioning. Global financial websites and research tools can help compare firms across regions. 
   
   
• Assess regional exposure: Developed markets such as the US, Europe, and Japan may offer stability and transparency, while emerging markets can offer higher growth potential but greater risk. 
   
   
• Check market access: Not all shares are available directly on UK platforms. Using ETFs or funds can make investing abroad simpler by offering exposure to a basket of securities. 
   
   
• Consider the long-term outlook: Broader trends such as population growth, the energy transition, and technological innovation can influence which markets perform well in the years ahead. 

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Our final thoughts 

International investing provides access to a world of opportunity beyond domestic borders. By looking overseas, investors can diversify portfolios, gain exposure to innovative sectors, and potentially reduce dependence on the UK economy. 

At the same time, global exposure introduces unique challenges, from currency fluctuations to differing tax systems. Understanding these dynamics can help investors decide how global investing fits within their broader strategy. 

Ultimately, going international can enhance resilience and opportunity, provided it’s approached with an awareness of both the benefits and the risks involved.