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It’s inexpensive and easy to invest in US stocks from Canada. There are plenty of online trading platforms that give Canadians access to major international stock exchanges, including the New York Stock Exchange (NYSE) and the NASDAQ, where you can buy stocks in companies like Meta Platforms (Facebook), Netflix or Tesla. With so many stock trading platforms to choose from, which one should you choose if you want to invest in US stocks in Canada? And once you open an account, how do you buy US stocks? We break it down for you below.
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A couple of decades ago, investing in global companies was fairly costly. Today, most trading platforms allow Canadian investors to buy and sell in Canada, the US and other international markets for less than $10 a trade in brokerage fees (plus any applicable FX fees).
However, not all trading apps available in Canada offer access to US stocks. Before signing up to a new account or a broker, it’s important to check which countries and exchanges are accessible and what the associated fees are. Online stock trading platforms are arguably the easiest way to buy US stocks in Canada. By using a platform that offers access to US exchanges, you can deposit funds into your account and start trading US stocks.
Each platform works in a different way, however the same general rules apply as with buying Canadian shares. For example you’ll usually be charged a brokerage/commission fee and a foreign exchange (FX) fee when you trade US stocks. Brokerage fees or commissions might be higher on international trades, but not necessarily. They can be represented as a percentage of the value of the trade, or as a fixed amount. FX fees also vary by provider, and you may want to look for brokers that offer USD accounts so that you don’t need to pay to exchange CAD to USD every time you want to make a trade.
You can also invest in US stocks in Canada via exchange traded funds (ETFs) that hold US stocks. You can find out more about ETFs in our comprehensive guide.
There are many reasons for Canadian investors to own stocks listed in the U.S:
Our list of the best US stocks to buy
Aside from opportunities to profit, it’s important to have a diversified portfolio of stocks. This means investing in companies from a range of sectors as well as countries. If Canada’s economy slows down, stocks listed in another country can act as a buffer.
There are a growing number of Canadian online share trading platforms that offer access to international stock exchanges.
Here are some of the platforms that support US stocks in Canada:
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.
Make sure that you take the following features and questions into consideration when comparing the benefits of US share trading sites:
One of the key risks to be aware of when buying American stocks in Canada is that you may not have the same level of knowledge and expertise as you have when trading TSX stocks. 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 capital gains. Familiarize yourself with the tax treatment of your investments as soon as possible to avoid fining yourself on the wrong side of the Canada Revenue Agency (CRA).
Canadians are taxed on their worldwide income, not just their income from Canadian holdings. If you hold US assets, you are also responsible for paying withholding tax to the IRS (unless you are a US citizen or resident, in which case you are bound to other tax rules and should consult a tax specialist). Canada and the US have an agreement which means Canadians who hold US assets are required to pay 15% withholding on dividends and 10% withholding on interest. The CRA also allows you to claim a foreign tax credit for the foreign tax paid in order to avoid double taxation of the income.
Finally, unlike trading Canadian-listed stocks, you’ll be on the hook for exchange fees. Plus, many brokerages also charge a currency conversion fee on top of that. Make sure to factor the exchange rate into your investments when trading US stocks from Canada.
Investing in US stocks from Canada is a solid way to diversify your portfolio and gain exposure to US players across multiple industries. Plus, it’s easier than ever before to buy and sell US-listed assets through popular platforms. Before you get started though, you’ll first want to consider the tax implications, foreign exchange rates, and any fees you may incur for trading internationally. As with trading any assets, there is potential for gains as well as losses, so make sure you research the stock and industry before you buy in.
Here is Finder’s list of the 10 best TSX stocks to buy in December 2022, plus 10 bonus picks, generated by our unique algorithm.
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