Particularly after Brexit, many people are asking why they should bother to invest in the United Kingdom. Others are thrilled to see the British becoming more independent. Whatever side of the fence you are on, it helps if you understand the basic laws of investing. They are best summarized as buy low and sell high.
Great Britain is not a good place to buy most mass products from. Why? Their prices are high. Their food quality is low. Unless you are buying specialty aerospace or highly skilled professionals, you will be losing out. However, Great Britain is a great place to sell stuff to. The UK pound is one of the most inflated currencies in the world. That means that British citizens have a lot of buying power relative to most other countries. When you invest in the UK, you should be thinking about the selling side of the equation. Being a mass market retailer investor is much better than being the shopper for exclusive British coffee. You will benefit when your investments are highly denominated in selling to British consumers. They have a lot of buying power because of their inflated currency. You benefit if you are selling. You lose if you are buying.
UK land prices are also high. UK real estate is not good to buy. You get small plots for huge prices. Your goal as an investor is to be thinking about what will maximize profit. Your profit is maximized when your purchases are low priced, and your selling price is highly priced. A great investment in the UK would be serving as a tropical fruit importer. UK households pay highly for exotic fruit. They have a strong currency. The shrewd business person would buy up oranges in Florida, California, and Latin America. They would then ship them up to the UK and make a mega profit. Companies that do that sort of thing will give higher returns on investment in the UK.
Be the investor who is selling to people in the UK. Or invest in companies that are. UK people need food, shelter, clothing, and water. One of the challenges in greater London is the high cost of living. Companies that try to solve the problem are worth investing in.
Many investors make the mistake of buying what is popular or trending. They buy from the UK because it is popular. This is expensive. The wiser business person buys quality products from unpopular locations overseas, and then sells to the place that has a high price level. The shrewd importer does better than the consumer addicted investor.
The UK is known as being one of the major banking centers of the world. They have lots of capital that can buy stuff. Do not compete with these rich people in buying stuff from the UK. Get rich yourself by selling to these rich banking people.
As an investor, the goal is to lower your expenses, and raise your revenue. You raise your revenue by selling to rich people in the UK. You lower your expenses by getting supplies from abroad. Do that, or invest in companies that do that to get huge returns.
David Milberg is a financial analyst in NYC with nearly 3 decades of experience in the finance industry. He is a long-time owner of Milberg Factors, a factoring and finance company with locations in New York, California, and North Carolina.