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Buying US Stocks in Canada
Find out how to buy US stocks in Canada in 4 steps, plus the platforms with the lowest fees when you trade US stocks.
Buying US stocks in Canada in 4 steps
- Compare brokers with access to US stocks
- Open your account by providing your personal information
- Fund your account by transferring money from your bank account
- Search and select the stocks you want to invest in and start trading
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Buying US stocks in Canada
A couple of decades ago, investing in global companies was fairly costly. Today, many trading platforms allow Canadian investors to buy and sell shares in Canada, the US and other international markets for less than $10 a trade in brokerage fees.
However, not all trading apps available in Canada offer access to US stocks. Some only offer Canadian shares or they may charge additional high fees for the service. 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 a platform that offers US stocks 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 Canadian shares – with a few additional considerations. For example you’ll be charged a brokerage fee and a foreign exchange (FX) fee when you trade shares. Brokerage fees are sometimes higher on international accounts and there may additional costs such as an inactivity fee.
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.
Why invest in US stocks from Canada?
There are many reasons for Canadian investors to own stocks listed in the US. In the last decade, Wall Street’s S&P500 index has delivered annualized average returns of around 14.1%, while Canada’s equivalent the S&P/TSX index returned around 6.9% for the same period.
US stock markets also offer a greater diversity of companies than what is available in Canada. The NYSE and NASDAQ are the two largest stock exchanges in the world in terms of market capitalization, and also offer some of the most lucrative opportunities in the world. Many of the world’s biggest global growth companies, such as Facebook, Amazon, Apple, Netflix and Google (FAANG) are listed in the US.
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.
Which trading platforms allow you to buy US stocks in Canada?
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:
Online stock trading platforms for buying 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.
How do I compare trading platforms to start investing in US stocks?
Make sure that you take the following features and questions into consideration when comparing the benefits of US share trading sites:
- How much is the brokerage fee? 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 TSX-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 of buying US stocks in Canada?
Pros
- Access to different investment opportunities. Trading via US stock exchanges allows you the freedom to take advantage of investment opportunities that are not available in Canada.
- 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. Canada’s – is your portfolio really as diverse as you think? Buying international shares protects you against having all your eggs in one basket.
Cons
- 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 CAD-USD rate fluctuates frequently which might negatively impact your investment.
- Additional fees. International trading accounts are sometimes subject to fees that Canada-only platforms are not, such as inactivity fees and exchange fees.
What are some of the risks of buying US stocks in Canada?
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).
Buying US stocks in Canada: Taxes
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.
Bottom line
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.
Frequently asked questions on buying US stocks in Canada
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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