Can Canadian Citizens Invest In The US Stock Market?

Do you want to invest in American companies such as Tesla, Netflix, or Facebook as a Canadian? Luckily, investing in US firms from Canada is now an affordable and simple option if you have some knowledge on what you’re doing.

So can Canadian citizens invest in the US stock market? Yes, Canadians can trade in the stock market in the United States. Though investment options in the United States are governed by US legislation, there are no specific rules excluding Canadian citizens from investing in the stock market.

Stock Market

Several online trading sites provide Canadians with access to big international stock markets, such as the New York Stock Exchange and the NASDAQ in the United States. 

Which Trading Platforms Allow You To Buy US Stocks In Canada?

An increasing number of online stock trading sites in Canada have access to international stock exchanges.

Here are some of the platforms that allow Canadians to trade US stocks:

  • Interactive Brokers 
  • TD Direct Investing
  • CIBC Investor’s Edge
  • Scotia iTRADE
  • Wealthsimple

Investing in US Stocks From Canada

Investing in international corporations was once prohibitively expensive. However, many trading platforms now give Canadian investors the option to buy & sell stocks in Canada, the United States, and other international markets for no more than 10 dollars per transaction.

One of the most convenient ways to buy US-listed stocks is via online share trading platforms. You will deposit funds to your account and begin buying and trading stocks using a service that offers US stocks.

Each platform operates differently, but the same general rules exist when purchasing Canadian stocks – with a few exceptions. When you trade shares, for example, you’ll be paying a trading commission as well as a foreign exchange (FX) fee. For overseas accounts, brokerage commissions are often more significant, and there could be extra charges such as an inactivity charge.

Exchange-traded funds (ETFs) that carry US stocks are another way to invest in US stocks in Canada.

Non-US investors may have to jump through several additional hurdles before investing in US stocks. Foreign owners and owners of assets in the United States are exposed to a slew of US legislation established to protect the country’s interests. Non-U.S. buyers should use an overseas stockbroker to guarantee that they follow the laws that regulate U.S. stocks and bonds.

Identity Requirements for Non-U.S. Citizens

To conform to their particular rules, certain brokerage companies may require non-US residents to produce additional forms of identity papers. This may include passport information, a valid Social Security card, or a Certificate of Beneficial Owner for Tax Withholding and Reporting in the United States form (also called a W-8BEN). Non-U.S. residents may also be required to send paper applications rather than web applications to open accounts for certain brokerages.

Opening a Brokerage Account

A foreign stockbroker will assist buyers who are new to the stock market in the United States with their portfolios. Brokerage companies will help you with ensuring that your investments are compliant with all applicable rules. 

A trader in the United States may therefore be familiar with the intricacies of the American equity exchange. Some brokerage firms specialize in supporting international investors. 

This service is provided by every stock brokerage company in Canada, including all bank-owned brokers. They typically have a deal with a US broker to conduct transactions on US exchanges and potentially keep shares for them, but this is not always the case. 

Many US guidelines must be followed when it comes to properly identifying the investor; the US is trying to ensure that Americans should not open accounts in Canada to escape the IRS. For the ordinary consumer, though, this isn’t a huge deal since the brokerage firm does all of the messy details.

Why Invest In US Stocks From Canada?

There are many advantages of owning stocks traded in the United States for Canadian buyers. The S&P500 index on Wall Street has returned about 14.1% annually over the last decade, while the S&P/TSX index in Canada has returned about 6.9%. 

Also, the capital exchanges of the United States have a more comprehensive range of companies than those in Canada. The NYSE and NASDAQ are the world’s two biggest stock markets by market capitalization, and they still deliver some of the most profitable investment options. 

The United States is home to several of the world’s most successful global growth firms, including Facebook, Amazon, Apple, Netflix, and Google (FAANG).

Aside from the profit potential, it’s essential to have a well-diversified investment portfolio. This entails spending in a variety of industries as well as countries. Stocks listed in another country will serve as a hedge if the Canadian economy slows down.

What Are The Risks Associated With Buying US Stocks In Canada?

An important thing to keep in mind when purchasing US stocks from Canada is that you do not have the same degree of experience and skills as when selling TSX stocks. Investing in a sector, market, or country you aren’t as familiar with is often dangerous, so make sure you understand what you’re getting yourself into.

The tax implications of foreign trade are another thing to remember. When it comes to reporting your earnings and capital gains, you don’t want to conduct any mistakes. To avoid being fined by the Canada Revenue Agency, familiarise yourself really well with the particular tax treatment of your savings as soon as possible (CRA).

Finally, unlike trading stocks listed in Canada, you would be responsible for exchange fees. On top of that, several brokerages charge a currency exchange fee. When exchanging US stocks from Canada, remember to take the exchange rate into account.

Conclusion

Investing in US stocks is a great way to diversify investments and gain exposure to American companies in various industries. Furthermore, buying and selling US-listed assets via popular platforms is simpler than ever before. However, before you get started, think of the tax implications, foreign exchange rates, and any fees you may pay while dealing internationally. As in every asset, there’s an opportunity for profit and loss, so do your research before investing in the US stock market from Canada.