If you’re looking to invest in shares, you don’t have to limit your portfolio to Australian companies. Today there are plenty of online trading platforms that give you access to many major international stock exchanges, including the New York Stock Exchange and the NASDAQ in the USA.
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Not all brokers or trading platforms provide access to global stock exchanges, so if you want to buy and sell US shares, you'll need to find one that offers the service for a cost effective brokerage fee.
Why invest in US stocks?
There are many reasons for Australian investors to own stocks listed in the US. In the last decade, Wall Street's S&P500 index has delivered returns of around 103%, while Australia's equivalent the S&P ASX200 returned around 6% for the same period. Meanwhile, the New York Stock Exchange and the NASDAQ, both based in New York, are the two largest stock exchanges in the world in terms of market capitalisation, offering some of the most lucrative opportunities in the world.
A couple of decades ago, investing in global companies was fairly costly. Today, many trading sites allow Australian investors to buy and sell shares not only in Australia but also in the US and other international markets. This means you can access major global growth companies that aren't available in Australia, such as the world's biggest tech companies – Facebook, Amazon, Alphabet, Netflix and Google (FAANG).
How can I invest in US stocks?
You can invest in international stocks through a select range of trading apps, full service brokers, online share trading platforms and exchange traded funds. However not all of the options provided in Australia offer a US share trading feature. Before signing up to a new account or a broker, it's important to check which countries are on the books and what the associated fees are.
Online share trading platforms are one of the easiest ways to buy US-listed shares. By using platforms that offers US stocks such as Stake, IG Share Trading, CMC Markets, CommSec International Share Trading and Saxo Capital Markets, you can deposit funds into your account and start buying and selling shares.
Each platform works in a different way, however the same general rules apply as with buying Australian shares – with a few additional considerations. This means that you'll be charged a brokerage fee and or an exchange fee when you trade shares. Brokerage fees are sometimes higher on international accounts and there may additional costs such as an inactivity fee.
There are a growing number of Australian online share trading platforms that offer access international stock exchanges. Some platforms offer international accounts that are seperate to their Australian trading accounts, such as CommSec, while others such as IG are fully integrated on the one platform.
Here are some of the platforms that allow US share trading in Australia:
Make sure that you take the following features and questions into consideration when comparing the benefits of USA share trading sites:
How much is brokerage? Compare the fee each company charges every time you place a trade on US stocks. Be aware that this will be different to broker fees for ASX-listed stocks.
What's the exchange rate? Exchange rates vary from platform to platform and this will partly be used to offset low broker fees. Check what these are first.
Will you need to pay a monthly fee? Some platforms require you to pay a monthly fee in order to keep your account running or to access certain features.
How is market data displayed? Check how up-to-date the market data offered by each platform is — being able to make trades based on current information is critical.
How many international markets can you access? Some platforms offer access to a few key international markets while others let you to buy and sell shares on a much larger number of exchanges.
How easy is the platform to use? Is it fast, simple and convenient to execute a trade and monitor market performance?
What trading options are available? Is the platform just online or can you also place trades over the phone? Are flexible options like limit orders available to let you take advantage of market fluctuations?
Are education and research resources available? Trading shares is complex, so does the platform offer the necessary tools to increase your investment knowledge?
Is customer support available if you need it? How can it be accessed and when?
What are the pros and cons to investing in US shares?
Access different investment opportunities. Trading via US stock exchanges allows you the freedom to take advantage of investment opportunities that are not available in Australia.
Increasingly more affordable. As a growing number of online share trading platforms compete for market share, brokerage fees are becoming more affordable.
Diversify your portfolio. If all your investments depend on the performance of one national economy - i.e. Australia’s - is your portfolio really as diverse as you think? Buying international shares protects you against having all your eggs in one basket.
Brokerage fees. You’ll need to contend with potentially higher brokerage fees whenever you place a trade on an international share market.
Exchange rates. The AUD-USD rate fluctuates frequently which might negatively impact your investment.
Additional fees. International trading accounts are sometimes subject to fees that Australia-only platforms are not, such as inactivity fees and exchange fees.
One of the key risks to be aware of when trading US shares is that you may not have the same level of knowledge and expertise as you have when trading ASX shares. Investing in an area, industry or country which you know little about is always risky, so it always pays to make sure you know what you’re getting yourself into.
Another factor worth considering is the tax implications of international trading. You don’t want to make any mistakes when declaring your income and find yourself on the wrong side of the ATO, so familiarise yourself with the tax treatment of your investments as soon as possible.
Frequently asked questions
Nabtrade allows access to the New York Stock Exchange, AMEX, NASDAQ, London Stock Exchange, Xetra, the Hong Kong Stock Exchange, the Australian Securities Exchange and Chi-X.
Yes, many platforms offer a free trading platform to allow you to test the features they offer.
No. This feature is not available with this type of account.
Kylie Purcell is the investments editor for Finder. She has a background in business and finance news and has previously worked at SBS, Your Money, Switzer Group and CCTV in Beijing. She specialises in cutting through messy financial jargon so that others don't make the same investment decisions that she did in her misguided youth. When she's not writing about the markets you can find her bingeing on long blacks.
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