STOCK MARKET INVESTMENT
The United Kingdom (UK) may be the sixth largest national economy in the world, but it houses the world’s largest financial center alongside New York. In fact, London is one of the largest cities in the world and with the highest city gross domestic product (GDP) in Europe. This makes the UK a very important financial hub for international investors.
The London Stock Exchange has a market capitalization of over $6 trillion, making it the third largest stock exchange in the world. There are around 3,000 companies from over 60 countries listed on the exchange, including those from Africa, China, Latin America, Europe, and Asia.
Benefits & Risks Investing in the UK
Investing in the UK may be safer than many emerging and frontier markets, but there are still many risks that investors should take into account. Some benefits of investing in the UK include:
- Financial Hub: London has one of the most advanced financial markets in the world next to New York, which makes the securities market a very stable and liquid one for investors looking for exposure outside of the United States.
- Blue Chip Stocks: The UK houses many of the largest blue chip companies in the world, ranging from Rio Tinto to BP to GlaxoSmithKline, which makes investing in the region less risky than other financial markets around the world.
Some risks to investing in the UK include:
- Service Economy: The UK’s economy is made up of over 70% services, which is common among developed countries. While this can mean more stability, changes in consumer credit and commodity prices can quickly cause problems.
- Political Risks: Britain threatened to leave the European Union in 2016, which introduced a high-level of political risk to its economy. Scottland has made similar threats to leave the United Kingdom. These kinds of threats could lead to economic volatility.