Why trade US stocks in NZ?
By volume and size, the US market remains the world's largest stock market, making up close to 40% of the stock market capitalisation of global exchanges. It's also where the largest and most dynamic companies are listed – think of brands such as Apple, Nike, Disney, Starbucks, Amazon and Google.
It's likely that the next Apple and Microsoft will also be listed there. Big new tech firms – including Uber and Alibaba – are recent listing in the US.
How can I buy US stocks in NZ?
Getting involved in the US markets requires a broker that can place orders on your behalf. It's no different to how you would invest locally.
However, historically, for most Kiwis (and, generally, anyone outside the US) it's been very difficult to access the US stock markets – there was lots of paperwork, high costs and many complications.
However, times have changed. Thanks to the advent of technology and niche online share-trading platforms such as Stake, it's now simpler and more affordable than ever to trade on the world's biggest market.
Who trades in US stock markets?
The US is home to finance moguls from all over the world. One of the most well-known investors is Warren Buffett, who has a net worth of US$88 billion. Buffett is an avid investor and believer in the US markets.
However, it's not only the big end of town that invests in the US market. According to a recent Gallup Poll, over half of American adults (55%) have money invested in the US stock market. Due to the size of the opportunity, and the introduction of new ways to access the market, it's becoming easier for those outside the US to get involved as well.
Buying your first investment in the US stock market
So, you've made the decision to trade in the big markets. That's the first step. However, like all brokerage accounts, getting set up is one thing, making investments is another.
The key is to remember that investing is investing – in other words, it's the same no matter where you are. The world's largest investment funds invest in different markets all the time, so they can capture the opportunities as they present themselves.
The pros of investing in the US
Investing in US markets allows you to access a much larger range of investment opportunities compared to what's available in New Zealand. Adding shares from the US to your portfolio can do wonders for diversification, but it's important to do your research and understand the company you're investing in.
The cons of investing in the US
If you're investing overseas, the fees can add up. Brokerage fees can vary between platforms and most will have a different fee for investing abroad compared to locally. Research is imperative to investing overseas as you may not have the level of understanding of companies overseas as you do for companies at home (i.e. Walmart VS Woolworths). Another factor to consider when investing internationally is the exchange rates. The value of the NZD compared to USD can vary, which can impact the value of your investment when you are buying and selling.
5 tips for buying US stocks in NZ
Here are some tips that you can consider when trading in the US market. But, bear in mind that you should do your own research and make investing decisions based on your own personal circumstances.
- Start small – always make sure you manage your risks
- Understand USD – when investing in the US, you are trading in US dollars. Understand how that works for you, and possible exchange-rate losses and gains
- Know your risk – determine your own risk factors. Where possible, it may be good to set a limit order for buying or selling shares
- Knowledge is king – although investing is generally universal, there are nuances that you should try to understand. For example, times that the market is open, trading rules, tax implications. Reading and speaking to others is a great way to get up to speed
- Seek advice – if you are unsure, always seek the advice of your professional advisers