Take an independent look at investing in US

The giant United States economy appears slowly to be gaining its

footing after the global financial meltdown, even though a shrunken euro will not make exporting to Europe easy.

Inflation is at a 44-year low. Federal Reserve Board Chairman, Ben Bernanke, forecasts 3.5 per cent annual growth, largely endorsed by the Organisation for Economic Co-operation and Development which predicts 3.2 per cent for this year and next.

Retail sales increased for seven consecutive months until May, which dipped 1.2 per cent. Retailers reported first quarter profits up 26 per cent on last year.

Employment in the US is rising, albeit at an average 140,000 jobs a month for the quarter March-May. Yet President Barack Obama has ducked taking the tough decisions to reduce the massive US deficit unlike George Osborne with his challenging Budget last week.

Some companies will inevitably benefit from a second stimulus package and a new energy programme, both of which will precede the November elections.

Interest rates will be kept down – currently 0.25 per cent – and Congress is likely to keep propping up the mortgage and housing markets.

Mr Obama's anti-BP rhetoric shows he was badly advised. This is a global multinational. Rather than rail against the UK, he should realise the company employs 22,000 American workers to 10,000 British and 39 per cent of its stock is UK-owned.

Leeds stockbroker Jonathan Baker of Charles Stanley recommends selling European equities and investing in the US: "Low interest rates should allow high-quality US companies to expand with growth stocks continuing to trade at low valuation levels in comparison with their more cyclical peers."

Taking the collective fund approach reduces volatility and risk.

The "passive" route is to save through a tracker fund which seeks to replicate the constituent parts of a published stock market index.

The Dow Jones Industrial has oscillated between 8,146-11,205 in the

past year but in the prior 12 months had fallen to 6,547.

The S&P 500 has shown similar movement from 879-1,217 but down to 676 in the previous year.

There are several tracker funds, with HSBC and Legal & General the best known. One of the newest in the UK is Vanguard which tracks the S&P Total Market with a low annual 0.20 per cent charge plus the

stockbroker's dealing fee (such as 12.50 online or 20 postal or

telephone with Alliance Trust).

One investment trust – Edinburgh US Tracker – undertakes the same work. Over five years, it has turned 100 into 122.94.

The alternative "active" investment approach is to choose a managed fund. Unfortunately, many underperform as they stick too closely to one of the indices and fail to fully research the potential, full market which can be difficult with over 5,000 stocks. This makes their higher charges (often five per cent initially and up to 1.5 per cent annually) difficult to justify.

Since 2008, stockbrokers Bestinvest say: "The global market shocks have thrown up many stock-picking opportunities. Active fund managers now seem more able to beat the US indices."

It tips M&G American A but gives its dog prize to Invesco Perpetual US Equity. But there is hope of a turnaround for the latter fund.

Lipper research for the Yorkshire Post reveals the top performing unit trusts and open-ended investment companies over five years to the end of May:

n Newton US Opportunities A Acc, up 78.2 per cent;

n Schroder US Mid Cap Acc, up 64.2 per cent;

n BlackRock US Opportunities Acc, up 57.1 per cent;

n GAM North American Growth Acc, up 45.6 per cent;

n Gartmore US Growth Return Acc, up 45.1 per cent.

While the average fund achieved 23.4 per cent growth, it also discloses the poor performers over the same period:

n Legg Mason US Equity (down 24.3 per cent); Franklin Mutual Shares (down 4.8 per cent);

n Invesco Perpetual US Equity (down 2.42 per cent).

For the investment trust sector over five years, the two stars according to AIC using Fundamental Data are:

n F&C US Smaller Companies, up 48.9 per cent;

n JP Morgan American, up 45.4 per cent.

Other investment trusts specialising in smaller firms did not have

F&C's success: Renaissance US Growth (up 17.5 per cent), JP Morgan US Smaller Companies, formerly called Discovery (up 16.8 per cent) and North Atlantic Smaller Companies (up just 1.5 per cent).

One key way to enter the US market and drastically reduce volatility is by drip-feeding money on a regular basis, preferably monthly. Many providers offer this approach, such as F&C accepting from 50 and JP Morgan from 100, both monthly into an ISA or pension scheme and for a child plan at 25 and 50 respectively.

If trying to create a US portfolio – perhaps for a personal pension – by purchasing shares directly, rather than through a fund, dealing charges can be expensive, even if tempting, such as Warren Buffett's Berkshire Hathaway. They can be one per cent plus 45 to 50 per transaction which includes an overseas custody charge.

JP Morgan US Equity Income is one of the funds tipped by Leeds-based Martin Payne of stockbrokers Brewin Dolphin. Currently returning 3.3 per cent annually, he says, "The fund aims to outperform the S&P 500 index over a full market cycle, deemed as three to five years." The manager seeks undervalued companies with durable franchises and strong management.

Payne also recommends both Neptune US Opportunities – a 625m growth-orientated fund with relatively concentrated portfolio of around 50 stocks – and JP Morgan American Investment Trust. The latter has a large cap bias and borrows about 15 per cent to gain acquisition opportunities, called "gearing".

There is no gearing but an attractive eight per cent discount to asset values with F&C US Smaller Companies, also backed by Payne.

He likes its relatively diversified portfolio.

AXA American Growth Trust which targets stocks of above average profitability, management quality and growth prospects, is Mr Baker's tip. He says: "The Trust will deliver far better returns than anything we are likely to see in the eurozone." He also likes the F&C US Smaller Companies fund.

Finally, it is fascinating to compare US presidents on their wealth. According to Atlantic magazine, Bill Clinton has amassed US$38m (26m) and George Bush Sr $23m. Yet this palls by comparison with George Washington, the first president.

With rates adjusted to the present, he was worth $525m, receiving two per cent of the state budget in 1789.

Other rich presidents included Jefferson with $212m, Roosevelt $125m, Andrew Jackson $119m and James Madison with $101m. In modern times, Lyndon Johnson secured $98m, Nixon $15m, Reagan $13m, Gerald Ford $7m and Jimmy Carter $7m. Mr Obama is so far worth $5m.