Investing in the US stock market is a major opportunity for UK investors, offering access to global tech giants, innovative companies, and high-growth sectors. However, many British investors make costly mistakes due to common myths and misconceptions.
From misunderstanding tax rules to overestimating currency risks, these errors can eat into profits and limit success. In this article, we’ll debunk seven common myths that UK investors believe about US stocks—so you can invest smarter and avoid unnecessary pitfalls.
1. “Investing in US Stocks Is Too Complicated for UK Investors”
The Truth: It’s easier than ever to invest in US stocks from the UK.
Many UK investors assume that buying US shares is a complicated process, requiring special accounts or advanced trading knowledge. In reality, investing in the US stock market is straightforward.
How to Buy US Stocks as a UK Investor:
- Most UK brokers (e.g., Freetrade, Hargreaves Lansdown, Trading 212, eToro, IG) allow you to buy US shares with just a few clicks.
- Fractional shares make it possible to invest in companies like Amazon (AMZN) or Tesla (TSLA) with as little as £10.
- Exchange-Traded Funds (ETFs) provide easy diversification without having to pick individual stocks.
The Takeaway:
If you can invest in UK stocks, you can invest in US stocks just as easily. The tools and platforms available today have removed the complexity.
2. “Currency Fluctuations Will Wipe Out My Gains”
The Truth: While currency moves impact returns, they’re usually minor in the long term.
The GBP/USD exchange rate fluctuates daily, and while this can affect your portfolio’s short-term value, history shows that over the long run, exchange rate movements tend to balance out.
Key Facts About Currency Risk:
- If the pound weakens against the dollar, your US investments become more valuable when converted back to GBP.
- If the pound strengthens, your returns may shrink in GBP terms, but strong US companies still deliver growth.
- Many top UK investors hedge currency risks naturally by keeping some investments in both GBP and USD.
If you are interested in knowing more about this, we did an article on how US Dollar affects my investment as a UK investor.
The Takeaway:
Currency swings are not a reason to avoid US stocks. A diversified portfolio helps manage any potential risks.
3. “US Stocks Are Overpriced Compared to UK Stocks”
The Truth: US stocks often appear expensive because they grow faster.
Many UK investors see the higher price-to-earnings (P/E) ratios of US stocks compared to UK stocks and assume they are overvalued. However, US companies—especially in tech—tend to have stronger earnings growth.
Examples:
- Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA) trade at higher valuations but have delivered massive growth over the past decade.
- UK stocks like BP and Lloyds Bank have lower valuations but have struggled to grow revenues and profits significantly.
The Takeaway:
A high P/E ratio doesn’t mean a stock is overpriced—it often reflects future growth potential.
4. “I Have to Pay a Lot of Tax on US Stocks”
The Truth: UK investors can minimise US tax with a simple W-8BEN form.
One of the biggest myths about US investing is that taxes will eat into profits, but this is largely avoidable if you take the right steps.
How UK Investors Can Reduce US Tax:
- The US government charges a 30% withholding tax on dividends paid to foreign investors.
- However, UK investors can reduce this to 15% by completing a W-8BEN form (most brokers provide this online).
- Capital gains tax (CGT) only applies when you sell a stock, and profits from US stocks are taxed in the UK, not the US. Once again, we did a little guide in how would be taxed gains in stocks / crypto investments.
The Takeaway:
By filling out a W-8BEN form, you avoid unnecessary taxes, making US investing just as tax-efficient as UK investing.
5. “US Stocks Are Riskier Than UK Stocks”
The Truth: The US stock market is more diverse and resilient than the UK market.
Some UK investors avoid US stocks due to concerns about risk, believing the market is too volatile. While it’s true that growth stocks can be more volatile, the US stock market is historically one of the best long-term investments.
Why the US Market Is Less Risky Than It Seems:
- The S&P 500 has delivered an average annual return of ~10% over the past 50 years, despite economic downturns.
- The US market is much larger and more diversified than the UK market, with dominant global companies in tech, healthcare, and finance.
- If you’re worried about risk, investing in ETFs like the S&P 500 (VUSA, CSP1) gives you broad exposure to the US market. You should have a look on some of the best ETFs for UK investors in the US Market.
The Takeaway:
The US stock market has a strong long-term track record, making it a ‘safe’ and profitable investment choice.
6. “The UK Market Is Just as Good as the US Market”
The Truth: The US market has outperformed the UK market for decades.
Some UK investors believe they don’t need to invest in US stocks because the UK market is just as strong. However, the numbers tell a different story.
Performance Comparison:
- Over the past 20 years, the S&P 500 has significantly outperformed the FTSE 100.
- The UK market is heavily weighted towards banks, oil, and mining stocks, which have seen slower growth.
- The US market is home to innovative, fast-growing companies that dominate the global economy.
The Takeaway:
If you only invest in the UK market, you’re missing out on the strongest-performing stocks in the world.
7. “I Should Wait for the Perfect Time to Invest”
The Truth: Market timing is nearly impossible—long-term investing wins.
A common mistake UK investors make is waiting for the “right” time to enter the US market. But research shows that time in the market beats timing the market.
Why You Shouldn’t Wait:
- Even if you invest at the “wrong” time, history shows that the S&P 500 recovers from every crash.
- Dollar-cost averaging (investing a set amount regularly) reduces risk and smooths out market volatility.
- Trying to predict market tops and bottoms almost always leads to missed opportunities.
The Takeaway:
The best time to invest is as soon as possible—long-term investors see the biggest gains.
The Smart Approach for UK Investors
The US stock market offers unparalleled growth opportunities, but misconceptions and myths prevent many UK investors from taking full advantage.
Key Takeaways:
✔ It’s easy to invest in US stocks—UK brokers make it simple.
✔ Currency risk is minor long-term—and sometimes even beneficial.
✔ US stocks outperform UK stocks historically—so don’t limit yourself.
✔ A W-8BEN form reduces US tax—it’s not as complicated as you think.
✔ Waiting for the perfect time is a mistake—long-term investing wins.
If you’re a UK investor looking to build wealth, ignoring the US market could be your biggest mistake. Start small, diversify, and take advantage of the world’s most powerful stock market today.
