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If you want to invest in shares, you don’t have to limit your portfolio to New Zealand companies. 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.
This guide explains the different ways you can invest, the pros and cons of investing in US shares, and how to find the best US share trading platform for your needs.
Stake
1. Compare online share trading platforms with access to US stocks
2. Open your account by providing your name, contact details and proof of ID
3. Fund your account by transferring money from your bank account
4. Search for and select the shares you want to invest in and start trading.
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.
There are many reasons for New Zealand investors to own stocks listed in the US. 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 access to a diverse range of companies.
While trading on the NZX allows you to invest in roughly 200 companies and ETFs, trading on the US stock market offers access to over 3,500 investments.
A couple of decades ago, investing in global companies was a costly exercise. Today, many trading sites allow New Zealand investors to buy and sell shares not only in New Zealand but also in the US and other international markets.
This means you can access major global growth companies that aren’t available in New Zealand, such as the world’s biggest tech companies – Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google) – the ‘FAANG’ shares.
The main downside of investing in US shares is the cost. Not only might you have to pay higher brokerage fees than you would if buying NZ shares, but you’ll also have to pay to convert NZD to USD. This currency conversion fee is wrapped up in the exchange rate the share trading platform offers – so check the current mid-market exchange rate to work out the markup.
You can invest in US shares through a broker or via an online share trading platform that provides access to US markets. However, not all of the options provided in New Zealand offer a US share trading feature. Before signing up to a new account or a broker, it’s essential to check which countries are on the books and what the associated fees are.
It’s also important to be aware that there are several different ways to gain exposure to US investments. These include:
There is a growing number of New Zealand share trading platforms that offer access to international stock exchanges. Some platforms offer international accounts that are separate to their New Zealand trading accounts, while others are fully integrated on the one platform.
Depending on your investment goals, you might want to look for a platform that specialises in providing access to US stock markets. These include:
Other platforms allow US share trading in New Zealand and also provide access to global markets. These providers include:
Each platform works in a different way, but the same general rules apply as with buying New Zealand shares – with a few additional considerations. This means that you’ll be charged a brokerage fee and an exchange fee (for converting NZD to USD) when you trade shares.
Brokerage fees are sometimes higher on international accounts and there may be additional costs such as an inactivity fee.
Make sure that you take the following features and questions into consideration when comparing the benefits of USA share trading sites:
Just like any other type of investing, buying and selling US stocks comes with a range of risks attached. The biggest issue to be aware of is the potential to lose some or all of your investment, but there are other specific risks when trading US shares.
One of the key risks to be aware of is that you may not have the same level of knowledge and expertise as you have when trading NZX shares. Investing in an area, industry or country which you know little about is always risky, so it 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 IRD, so familiarise yourself with the tax treatment of your investments as soon as possible.
Finally, you’ll also need to consider the cost of trading. Brokerage fees, currency conversion fees and exchange rate fluctuations can all affect your ability to make a profit.
Investing in US shares from NZ allows you to invest in a much larger range of companies and ETFs than if you only invest on the NZX. It also allows you to buy shares in some of the world’s best-known companies and diversify your portfolio beyond New Zealand’s shores.
That said, make sure you’re aware of the risks involved before trading on US markets. You’ll also need to compare brokers and online trading platforms to find the right share trading provider for your needs.
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