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How to buy international stocks in Canada
Invest in global stocks by following this simple guide.
Thinking of investing in global shares? It’s easier and cheaper than you may think and there are plenty of options to get started. Investing in the global share market is a lot like investing in the Canadian market, however you’ll need to find the right stock broker or online trading platform.
This guide will explain what to look for in an international share trading account, how to open one and what to do with the account once you’ve opened it. Read on to learn more, or start with the basics of share trading if it’s new to you. If you already know how to buy international shares, you can simply compare brokers and open an account.
Buy international shares in 4 steps
- Compare brokers with access to global stocks
- Open your account by providing ID
- Fund your account by transferring money from your bank account
- Search and select the shares you want to invest in and start trading
How to invest in international shares
Here are two of the easiest ways you can access global shares from Canada: you can invest directly in shares listed on global exchanges – such as Facebook and Apple – by using a broker with an international share trading platform or you can buy units in a global-themed exchange traded fund (ETF) or mutual fund.
There are many different account options to choose from, and it’s worth comparing them like you would any other financial product. Consider:
- Brokerage fees
How much commission does the account charge for the execution of a trade? There may be flat rates, percentage rates or even no brokerage fees at all.
- Access to markets
Which international markets does the account let you trade on? The big ones are the US markets like the NYSE and NASDAQ, which most providers will allow you to you access, but not every account will let you trade everywhere in Europe and Asia.
How long does it take for a transaction to be executed? Timeliness can be important when trading internationally.
- The buffer
How big is the buffer? Most international share trade orders will have a ‘buffer’ applied to them by the share trading platform provider. The buffer is a percentage of the order value, which is added onto the cost of the order to protect the provider from currency fluctuations while the trade clears, ensuring that they don’t lose money on routine trades.
- Exchange rates
How much of a cut does your provider take? When converting currencies, the provider may take a cut in the form of a percentage fee on currency converted. With big trades this can be a significant amount.
- Signup fees
Does the provider charge any fees for opening an account with them? The benefits they offer may not always be worth it.
- Research tools
What investment research tools are available? Are you seeing real time market information or is there a delay? Are the research tools free to use or do they cost extra? It’s a lot easier to buy low and sell high when you’ve done your research, rather than relying on luck alone.
- Customer service and access
Does your provider have a share trading mobile app, or desktop access only? Can you contact the provider outside of business hours? What are your options for getting in touch with them? Are they known for being helpful or not so much? When you open an international share trading account you’re using a service and you should expect a certain level of customer assistance.
Do you have to spend more than you want, or not as much as you want? One of the main restrictions to look out for when choosing an account is the presence of limits, which may be minimums or maximums that apply. You may not be able to make trades above or below a certain dollar value.
Step 2: Open your account
Once you’ve decided on an online broker, you can open your share trading account. If you already have a bank account with that provider then you can usually sign in via their online banking portal. If not, you will have to open a new account. To open an international share trading account you’ll generally need to meet the following eligibility criteria:
- Be 18 or over
- Have an Canadian residential address
- Have a mobile number
As part of the application process you will typically need to provide:
- Personal photographic identification (for example your drivers licence, passport)
- Your Social Insurance Number or business registration number if applicable
When opening the account you’ll be asked to choose whether you’ll be trading as an individual, with a joint account (for example, with your partner), as a company or organization or on behalf of a trust. Because share trading has income and tax implications you must provide details of your income and occupation. Along with your personal information, you may be required to disclose the source of your income and the origin of your financial position.
After you’ve provided your personal details, you’re up to the account set-up stage. This involves providing the details of your linked bank account, setting up financing options if applicable and choosing from the various options that may be available. Once you’ve confirmed everything and double checked your details, you’re ready to load your cash management account and start trading.
Already have a share trading account?
Usually providers will require that you open one account for local shares and a separate account for international shares. If you already have a local account, you can open an international one in just a few quick steps. Simply follow the steps within your platform for adding an international account and link it to your regular account.
Step 3: Fund your account and start trading
If you want to start trading right away, you’ll need to make sure you have enough funds in your linked international account to execute the trades, plus any broker fees that will apply. Remember that when you transfer funds into your linked foreign currency account you’ll usually have to pay a foreign currency conversion fee, so it’s best not to be transferring funds in and out of the account on a regular basis. It can take a few days for your funds to be loaded into the cash account, so keep this in mind when you decide you’d like to make a trade.
Once you’ve set everything up, you can trade online through your new international share trading account. Expect to see a dashboard with features such as current share prices and changes over time and options to buy, sell or research. With the big banks and other trading accounts geared towards beginners, you may find tutorials and introductory material to help acquaint you with the available features.
When trading shares, you can choose to do it domestically or internationally.
Trade shares listed on Canadian stock exchanges. Trade within certain business hours and access only Canadian investment options, which make up about 2.7% of the global market. Major Canadian stock exchanges include the Toronto Stock Exchange (TSX), Montreal Stock Exchange (MSE) and Canadian Securities Exchange (CSE).
Trade shares from global markets around the world 24 hours a day, subject to local market hours, including big global brands and household names. Gain access to more options, but also experience more risks and challenges.
International stock exchanges include the New York Stock Exchange (NYSE), London Stock Exchange (LSE), the National Association of Securities Dealers Automated Quotations System (NASDAQ) and many others.
Compared to domestic trading, there are both advantages and disadvantages to trading shares internationally.
Advantages of international share trading:
- Gain access to a wider variety of investment options.
- An internationally diversified portfolio can help protect you from the downturns of the Canadian market.
- You can trade 24 hours a day rather than only within set business hours.
- More buyers: The actual value of your shares depends on how much you can sell them for. When trading internationally, there may be a larger number of different interested buyers and you might find it’s easier finding a buyer.
Disadvantages of international share trading:
- Exchange rates can fluctuate and can significantly hurt (or help) your return on investment.
- Foreign policy can affect your returns. It’s possible that changes to another country’s foreign policies, local instability or other issues can impact the value of your investment in ways beyond your control. This is a largely uncontrollable risk.
- Taxation and related issues may be more complicated when trading international shares.
Making big trades? Look for lower exchange rates, research tools that allow you to make more reliable investments and flat broker fees rather than percentage rates. Where applicable, it may be worth accepting higher flat fees in exchange for lower percentage rates. Avoid low maximum limits which might constrain your trading.
Making a lot of small trades? You may want to avoid flat fees that take a big chunk out of the potential profits of each trade and stick to percentage rates that will cost you less. Low maximums are less of an issue, but high minimums might be a problem.
How will you diversify your portfolio? Not all accounts will give you the same options. Plan what kind of trades you want to make and consider whether a given account will let trade ETFs and if you are able to do forex trading through the same platform.
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