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When it comes to investing, diversifying your portfolio is key. One way to do this is by buying stocks in different countries, including the United States.
Buying US stocks in Canada can be a great idea for investors looking to diversify their portfolio, gain access to stable and reputable stock exchanges such as the New York Stock Exchange, and gain access to a wider range of investment options.
Buying US stocks in Canada
The United States economy is one of the largest and most stable in the world. Investing in US stocks can provide stability and potential growth that may not be found in other markets.
Additionally, the New York Stock Exchange (NYSE) is one of the world’s most well-known and respected stock exchanges. This can provide peace of mind for investors, knowing they are investing in companies listed on a reputable exchange.
Buying US stocks in Canada can provide access to a wider range of investment options. The NYSE lists thousands of companies, many of which may not be available on the Canadian stock market. This can provide investors with more opportunities to find companies that align with their investment goals and strategies.
How to Buy US Stocks in Canada?
You can use some of Canada’s leading online stock trading platforms to diversify into investments other than Canadian stocks. Several online brokerage platforms allow Canadian residents to buy US stocks.
Some popular options include Questrade, TD Direct Investing, and Interactive Brokers. Once you’ve opened an account, you’ll need to transfer Canadian dollars into your account to use as buying power.
Keep in mind that when you buy US stocks using Canadian dollars, the brokerage will charge currency conversion fees. This fee can vary depending on the brokerage, so be sure to check their fees before making a purchase.
Another way to invest in US stocks in Canada is by buying mutual funds that invest in US companies. Mutual funds are a basket of stocks managed by a professional fund manager. They are a great way to diversify your portfolio and gain exposure to US companies without having to research individual stocks.
Why Invest in Us Stocks From Canada?
Investing in US stocks in Canada is an excellent way to build a diversified portfolio. The US stock market is known for its high liquidity making US stocks a potential source of investment income.
Another positive to buying US stocks in Canada is the ability to reduce your overall tax bill. Canada allows a foreign tax credit for taxes paid on dividends received from foreign investments, so you may pay less overall tax by investing in US stocks.
Additionally, many Canadian investors prefer to invest in US stocks due to the limited options available in the Canadian market. Canadian stocks are not as diverse as the US stock market and may not provide the same growth potential as US stocks. Investing in US stocks in Canada can provide access to a broader range of investment options.
With the development of online stock trading platforms, it has become easier for Canadian investors to invest in US stocks from the comfort of their own homes. These platforms provide easy access to US stocks and allow investors to trade quickly and efficiently.
Which Stock Trading Platforms Allow You to Buy Us Stocks in Canada?
Several stock trading platforms allow you to buy US stocks in Canada. The most popular ones include Questrade, TD Direct Investing, and Interactive Brokers
1. Questrade
Questrade is a Canadian-based online brokerage that allows you to buy and sell US stocks in Canadian dollars. They offer a variety of investment products, including ETFs, mutual funds, and options. Additionally, they provide a free practice trading account, which is excellent for beginners.
2. TD Direct Investing
TD Direct Investing is another Canadian-based online brokerage that allows you to invest in US stocks. They offer a variety of investment products, including ETFs, mutual funds, and options. They also offer a free practice trading account.
3. Interactive Brokers
Interactive Brokers is a global online brokerage that allows you to invest in US stocks. They offer a variety of investment products, including ETFs, mutual funds, and options. They also offer a free practice trading account.
Pros and Cons of Buying Us Stocks in Canada
Pros
- Diversification: Investing in various companies and industries can reduce your overall risk and increase your chances of earning a return on your investment. Diversifying your portfolio also helps to protect you against potential losses in one specific country or industry.
- Access to a larger market: The US stock market capitalization is around $40 trillion, making it a much more liquid market than the Canadian stock market. More liquidity means it is more stable and easier to get in and out of trades.
- Stronger currency: The US dollar is considered to be a stronger currency than the Canadian dollar. However, there is currency risk when converting back to Canadian dollars.
Cons
- Currency risk: Because the Canadian dollar and the US dollar fluctuate in value, there is a risk that the value of your investment may decrease if the Canadian dollar falls in value relative to the US dollar.
- Additional fees and taxes: Additional fees and taxes may be associated with buying US stocks in Canada, which can eat into your returns.
How to Buy US Stocks in Canada | Bottom Line
Buying US stocks in Canada can be a great way to diversify your investment portfolio and potentially earn higher returns. The US stock market is often considered to be more stable and diversified than the Canadian market, and many of the world’s top companies are based in the US, providing Canadians with a broader range of investment opportunities.
Additionally, the ability to invest in companies that aren’t available on the Canadian stock market can benefit Canadians looking to invest in technology or other cutting-edge industries.
However, it’s essential to be aware of the currency risk and additional fees and taxes, such as currency conversion fees, foreign tax credit, capital gains, and pay currency conversion fees that may apply.
