The US stock market is host to the best performing market indices across the globe. The US market is made up of two large exchanges, of which buyers and sellers can trade shares in US listed companies. The NASDAQ and NYSE are host to some of the largest corporations in the world, of which own 40% of market capitalisation across the world. This article will discuss why more and more Australian investors are moving to the US market and how you can invest in US stocks from Australia.
Why Invest in US stocks from Australia?
Before we get into how to invest in US stocks from Australia, its important to know why more and more Australian investors are moving to Wallstreet. Compared to the ASX 200, the US market has an vast abundance of companies operating in next generation industries. For example, the US market has a vast eco system of Electric Vechile and Hydrogen powered companies. Companies such as Tesla, Workhorse, Hyliion, Plug Power and NIO have made eye watering returns on Wallstreet. The US market also holds value for value investors looking for Goliath blue chips which have continued to perform over the past 10-15 years.
When compared to the Australian stock market, the difference in opportunity and growth is monumental. The industry diversification in the US stock market is unparalleled. With many niche and evolving industries available on the market, this allows for investors to bolster a strong investment strategy that can cover a vast range of industries. The ASX 200 lacks diversification at this level and therefore investors can find it hard to divise a smart investment strategy that can be hedged.
How to Invest in US stocks from Australia?
For many Australians, accessing the US market was a difficult task. Because of the long paperwork, high costs with commissions, and headache inducing process behind finding a viable broker. However, the eruption of technology, more specifically niche brokers, is allowing Australian investors to easily access the US market at a fraction of the cost.
It takes four steps for Australians to enter the US market. These include:
- Selecting your broker
- Creating your account
- Funding your account
- Picking your level of competence
Selecting your broker
Australian investors have quite a few US brokers to select. Some brokers include Stake, IG, CMC Markets, Saxo, Etoro, and the international accounts with the Big Four except ANZ. Finding the right US broker based on fees, securities they offer, and investing tools is crucial. From the US brokers above YIG views Stake as an attractive choice for three reasons. YIG does have a commission driven partnership with Stake. First, the platform is incredibly simple and easy to use. Users segway between their investments (dashboard), potential investments (watchlists) and the overall market activity (Wall St). The lack of excessive stimulation allows beginners to get their feet wet in the US market. Second, Stake charges zero commission. Lastly, Stake only offers shares and ETFs. In turn, users are not encouraged to trade with leverage or highly-risky securities. Instead, users can build a strong foundation in the basic US securities, shares and ETFs.
Creating and funding your account
Once you are set on a US broker, creating and funding your account is the next step. If you are looking to join Stake, follow this link and use our referral code YIG at registration to receive a free stock. If you want to read our partnership disclosure, then click here.
Picking your level of competence
However, investors must understand that ease of access to the US market does not guarantee financial gain. Investors should remember they are entering a new market. One that has a different economy, greater economic connections to the world, and different market drivers. For example, understanding the impact of presidential comments, Twitter posts, and Robinhood investors on the market is crucial. Knowing the ins and outs of the US market is only half the battle. The US market is enormous. Trading in an industry you feel competent in is a smart strategy. Attempting to trade the entire market could see you burn out and lose money.
Overall, Australians have never had more access to the US markets than now. The zero commission policy, simple registration process, and user-friendly interface makes the barriers to enter extremely low. The sheer size of the market, volatility, and investment opportunities make investing in the US market a no brainer. However, investors must understand that trading securities in the US market holds risk and access never guarantees capital gains.
We’ve partnered with Stake. Use our code “YIG” to receive a free stock when funding your new account.
— Stake (@hellostake) October 13, 2020
Stake is one of the leading US trading platforms for Australian and UK investors. Click hereto start trading US stocks with $0 commission on trades and a streamline trading experience. For more information on our referral program click here.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.