The US stock market is the biggest in the world and the listing domain of globally-renowned companies including Apple (AAPL:NASDAQ), Nvidia (NVDA:NASDAQ) and Amazon (AMZN:NASDAQ), which makes the market an extremely attractive proposition for UK-based investors. The US equity market’s sheer size means it is highly liquid and offers investors greater scope for diversification than other regional markets. Just because the US market is home to the world’s largest companies doesn’t mean profits are guaranteed - even the most valuable stocks can shed value. But what you can count on is that America’s stock market is awash with opportunities.

A big decision you’ll need to make is whether to invest in the US market directly or opt for an actively managed fund, where a market professional will manage your investments and make decisions on what to buy and sell. In return for his or her expertise, you’ll pay a fee and to justify the expense, the fund should outperform its stated benchmark at the very least.

GOING WITH THE PROS

Investing in the US stock market needn’t be complicated nor expensive and UK investors are blessed with an array of actively-managed US funds to choose from for their ISA or pension, with portfolios specialising in large cap, mid cap and small cap stocks or pursuing growth, value or income strategies.

A useful starting point is AJ Bell’s list of Favourite funds. Selected by investment specialists for the value they offer to investors, among other characteristics, the list’s trio of US actively managed selections includes Artemis US Select (BMMV510), a capital growth ‘best ideas’ fund managed by the experienced Cormac Weldon alongside Chris Kent, Artemis US Smaller Companies (BMMV576), also managed by Weldon alongside Olivia Micklem, and JPM US Equity Income (B3FJQ26), a £3.2 billion fund managed by David Silberman and Andrew Brandon.

Single-country investment trusts trading at discounts to NAV (net asset value) include JPMorgan American (JAM), North American Income Trust (NAIT) and Baillie Gifford US Growth (USA), as well as JPMorgan US Smaller Companies (JUSC) and Brown Advisory US Smaller Companies (BASC).

PICKING YOUR OWN STOCKS

Buying US shares is as simple as investing in the UK and investment platforms including AJ Bell enable you to buy stakes in US giants such as iPhone designer Apple, Elon Musk-steered electric vehicles company Tesla (TSLA:NASDAQ), the world’s biggest retailer Walmart (WMT:NYSE) and entertainment giant Walt Disney (DIS:NYSE).

Keep in mind that if you are looking to buy US investments in any account other than a SIPP, you’ll need to complete a W-8BEN form. As well as allowing you to deal in US shares, this form lets you benefit from the US Internal Revenue Service (IRS) treaty rate, which lowers the withholding tax for qualifying US dividends and interest from 30% to 15%.

There are two US-based stock exchanges: the NYSE and the NASDAQ, which are the world’s biggest and second biggest exchanges respectively and follow the same opening times. Unlike many stock exchanges around the world, neither the NYSE or the NASDAQ closes for a lunch break, so buying and selling takes place from the opening bell at 9:30 am through to the closing bell at 4:00 pm.

For risk-averse, time-poor investors, it may make sense to invest in funds rather than individual stocks, since funds allow you to cost-effectively build a diversified portfolio and outsource the monitoring of individual company news flow and performance to professionals, for whom picking stocks is their day job. You’ll also avoid the extra dealing costs of constructing a portfolio for yourself. By investing even a few hundred pounds in a fund you can get exposure to far more companies and indices than you could by putting money into the market directly.

One downside of the funds route is that by spreading your eggs across numerous baskets, you’ll reduce the positive impact that a group of winning investments might have had on your total wealth compared to if you had all your portfolio invested in just a handful of stocks, but the decision really depends on your risk appetite and the time you have available to research the market and monitor individual shares. 

DISCLAIMER: AJ Bell, referenced in this article, owns Shares magazine. The author (James Crux) and editor (Tom Sieber) own shares in AJ Bell.

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