How To Buy (US) Shares In Australia: A Beginner's Guide

Investing overseas, particularly in the world's largest market, provides opportunities for diversification and long-term wealth generation.

The U.S. stock market is among the most aggressive and attractive markets worldwide. Many global and evolving companies with high growth potential list themselves on U.S. exchanges.

This blog discusses how to buy U.S. shares in Australia, like Apple shares, stock-investment tips, and compares the top online brokers to get started for beginners.

If you still need a share trading account, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

Buy Australian & international shares with unlimited commission-free trades. (No brokerage)

(eToro Service ARSN 637 489 466 promoted by eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Capital at risk. Other fees apply. See PDS and TMD)

1. What Is So Attractive About The US Stock Market?

There are plenty of reasons why investors worldwide are keen to invest in U.S. stocks.

Market Cap

The U.S. stock market is the largest, most impressive liquid, and most efficient globally, making up around 50% of stock market capitalization. Its welcoming governing environment attracts non-US companies to get listed.

For instance, the NYSE lists the Chinese tech giant Alibaba (BABA), which gives solid competition to Amazon.

Invest In The Top Global Companies

The U.S. stock market gives you access to some of the biggest global companies from other countries, including:

• Entertainment - Netflix (USD 210 billion)

• Computers - Apple (USD 1.61 trillion) and Microsoft (USD 1.54 trillion)

• E-shopping: Amazon (USD 1.49 trillion)

• Social Media Networks: Facebook (USD663 billion)

• Automobiles: Tesla (USD280 billion)

Innovation

As many innovative companies are listing them on the U.S. market, you can invest in these emerging companies and obtain higher long-term returns.

Fractional Investing

Another benefit of investing in U.S. stocks is that you get to buy a portion of the stock. It is helpful for investors who don't have enough money to purchase expensive shares in prominent companies like Apple or Amazon.

Portfolio Diversification

Investing in a range of U.S. firms or indices from Australia gives you geographic and sectoral diversification. If one sector doesn't perform well in a year, you could still get returns from another market. It helps you spread the risks across various stocks and ensure safe returns.

Moreover, it is a lucrative prospect for Aussies who want exposure to companies or sectors that may be underdeveloped in Australia or need to better representation on the ASX.

Stable Returns

Regarding performance, the S&P 500 has outperformed the ASX 200 over the last decade. As per S&P Dow Jones Indices, the S&P 500 has delivered average yearly returns of 12.84% in the previous ten years, whereas the ASX 200 has returned 7.06% yearly in the last ten years.

Though the past results do not guarantee future performance, it indicates the dominance of U.S. markets that makes investors historically drawn to it.

2. What Is The S&P 500?

The Standard and Poor's 500 (S&P 500) was introduced in 1957 and track the performance of the 500 largest publicly traded U.S. companies. These companies constitute around 70% of the stock market in the U.S.

Australian investors who want to diversify their investment portfolio with U.S. stocks can either buy stocks of companies on the S&P 500 list or invest in an S&P 500 index fund on the ASX.

Australia's S&P 500 index fund represents the most recognizable and well-established companies traded on the Nasdaq or the New York Stock Exchange.

These companies have large market capitalizations, and many are market leaders in the most prominent industries of the U.S. economy. As the S&P 500 index is market-cap-weighted, companies with higher market caps make up a significant percentage of the portfolio.

3. What Are The Best US Stocks To Buy Now?

The S&P 500 comprises the 500 biggest global companies giving you broad exposure to the U.S. equities market.

Some of the market leaders listed in the S&P 500 index are:

• Alphabet (GOOGL)

• Apple (AAPL)

• Disney (DIS)

• Amazon (AMZN)

• eBay (EBAY)

• Microsoft (MSFT)

• Facebook (F.B.)

• Netflix (NFLX)

• Twitter (TWTR)

• Tesla (TSLA)

4. Pros And Cons Of Investing In The S&P 500

Before investing, it is worth considering the pros and cons of buying U.S. stocks:

Pros:

• Get exposed to the most influential and stable companies representing a large global equity market share.

• Benefit from the long-term competitive performance of stocks that expects to record positive long-term growth.

• The S&P 500 offers higher share diversification than the S&P/ASX 200. You can instantly diversify your portfolio by buying stocks of leading global companies.

• Ease of investing in the S&P 500 index fund. You don't require researching to pick the best-performing stocks and get the freedom from timing the market.

• Reduce your investment risks, as S&P 500 companies are usually more resilient in market downturns and crashes.

Cons:

• The S&P 500 includes only stocks of large-cap companies in the U.S. companies. You don't get exposure to small-cap or mid-cap stocks that grow fast than their large-cap counterparts.

• Another drawback of trading in U.S. stock from Australia is the conversion fee that exposes you to currency fluctuations that could take up a large chunk of your return. 

• When investing internationally, you need to consider the exchange rates. The value of the Australian Dollar compared to the U.S. Dollar can vary, which can impact your investment value when buying and selling.

5. Can Anyone Trade US Stocks?

There is no citizenship requirement to own shares in a U.S. company. It implies that anyone can trade or invest in the U.S. stock market.

However, brokerage firms may require additional documentation from international investors, including legitimate visa information, tax documents, and proof of identity, to comply with their internal rules. They accept paper filings instead of online application forms to open a stock trading account.

Furthermore, overseas investors must deal with taxation issues to trade/invest in U.S. stocks. Usually, non-residents pay a 30% tax on their investment income, typically withheld at the source by the brokerage firm.

Foreign investors must provide the W-8BEN tax form when working with a web-based brokerage account. It enables them to access their accounts from anywhere and at any time.

Not being a U.S. resident shouldn't keep you from investing in U.S. stocks. Please be aware of additional requirements you need to fulfil. A reputable broker familiar with overseas investments can help ensure your investments comply with applicable laws and help you through the investment process.

If you can't find a broker, you can get the help of foreign financial institutions to open brokerage accounts and access U.S. stock exchanges.

6. How To Invest In U.S. Shares?

Before starting the investing procedure, here are a few things to remember:

• Note that you deal with an overseas exchange with different tax implications. As U.S. stocks do not subject to the Australian dividend imputation system, you can't receive franking credits from U.S. dividends.

• U.S. shares are subject to Australian capital gains tax. You need to show the sale proceeds on your tax return if you earn profit from the stock sale.

• As U.S. stocks are traded in USD, you must convert your AUD into USD before buying your U.S. shares.

• The U.S. has multiple exchanges, such as the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotation System (NASDAQ), and the Chicago Mercantile Exchange (CME).

• Brokerage houses operated by the big four banks charge you as much as $59 for each trade you make. However, if you choose trading apps, you will not incur commission charges. 

Follow The Five Simple Steps To Invest In The S&P 500:

Step 1: Select A Trading Platform

Compare brokers/stock trading platforms based on the below features to find the right one for your needs.

• The facility to trade online – website or mobile app.

• Commission fee

• Tradable assets

• Quality of information offered, such as research and market reports.

• Facility to make fractional investments in expensive stocks.

• Ease of investing

• Minimum transaction amount

If you still need a trading account to buy US shares, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

The trading platform also offers extensive trading features, social trading tools, and copy trading to imitate the trades of other famous traders.

The fantastic thing about eToro is that you can buy Australian & international shares with unlimited commission-free trades. (No brokerage)

(eToro Service ARSN 637 489 466 promoted by eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Capital at risk. Other fees apply. See PDS and TMD)

Step 2: Open And Fund An Account

Complete the application form with your details and submit it with supporting documents (driving licence or passport) for details verification. Next, sign up to create a share trading account and link a bank account for funding.

Usually, online brokers that offer U.S. stock accept payments only in U.S. dollars. So, you must deposit AUD into your account and pay a conversion fee to the broker.

Step 3: Research The Investment Options

Analyze the market and choose the shares you want to invest in. The U.S. stock market comprises three exchanges where NYSE and NASDAQ are the biggest.

NYSE lists only blue-chip companies, such as Berkshire Hathaway, Citigroup, Visa, UnitedHealth, etc., while NASDAQ comprises only tech companies, including Apple, Tesla, Amazon, Meta, etc.

You can't invest directly in the S&P 500 companies; you can buy an index fund that tracks the S&P 500 or through an exchange-traded (ETF) or mutual fund that tracks the S&P 500.

The S&P 500 index fund exposes you to the top constituents of the S&P 500. It is a great way to add instant diversification to your stock portfolio at a low price. Several ETFs give Aussie investors simple and easy access to all the S&P 500 shares or specific shares of the S&P 500.

• iShares S&P 500 ETF AUD (ASX: IVV) is an ASX-listed ETF that tracks the S&P 500 Index. 

• The BetaShares Nasdaq 100 ETF (ASX: NDQ) tracks the NASDAQ 100.

You can compare available options to select the best ETF based on their historical performance, expense ratio, and constituting shares.

ETFs that track the S&P 500 in Australia:

• iShares S&P 500 ETF (IVV)

• BetaShares S&P 500 Equal Weight ETF (QUS)

• ETFs S&P 500 High Yield Low Volatility ETF (ZYUS)

• SPDR S&P 500 ETF Trust (SPY)

• Vanguard S&P 500 ETF (VOO)

Step 4: Make The Investment

Once you have decided on a suitable investment based on your research, it is time to buy it on the trading platform.

Enter the respective symbol of the ETF or index fund in the search bar, specify the buying quantity with a market order, or use a limit order, place the stop loss, and complete the purchase.

The ideal duration for the trade settlement is two business days from the date of buying or selling an ETF.

Step 5: Monitor The Performance Of Your Investment

Your work doesn't end with completing the purchase. You must check your investment periodically to ensure it aligns with your objectives.

7. Can I Buy U.S. Shares On Commsec?

Yes. Commonwealth Bank of Australia (ASX: CBA) operates Commsec, a major trading platform in Australia.

CommSec charges between USD19.95 and USD29.95 as brokerage fees for trades worth $10,000 and 0.31% of the total traded value above that amount.

The platform also charges an exchange fee of 0.6% USD on the currency conversion.

8. Can I Buy US Stocks Without A Broker?

Yes. ASX investors can buy U.S. stocks from the brokerage platforms of the four major Australian banks. Remember, the fees are steep compared to some trading apps offering commission-free service.

To find out how I can invest $10000 in the USA, you can consider opening a trading account in any of these banks:

• Commonwealth Bank of Australia (ASX: CBA) - Commsec trading platform. 

• National Australia Bank Ltd (ASX: NAB) - NABtrade platform 

• Westpac Banking Corp (ASX: WBC) - Westpac Share trading platform

• Australia and New Zealand Banking Group Ltd (ASX: ANZ) - ANZ Share Investing trading platform. 

Here is a quick breakdown of the commission charged by the Big Four for investing in U.S. stock from Australia.

9. Can I buy S&P 500 in Australia?

Do you want to know which broker is best for the S&P 500? Here is the comparison chart of brokers that provide you with the facility to invest in U.S. stocks:

International Share Trading Platforms To buy U.S. Stocks:

10. How Do I Open A US Stock Account?  

You need to open an overseas share trading account with an online broker that offers international shares.

As part of the application process, you must fill out an application form and fund your account with a minimum deposit of USD$10. Present ID proof documents for the identity verification process.

The exact application procedure varies among brokers, so make sure you go through the account opening guidelines of each broker, so you should be fine.

11. What Is The Minimum Amount To Buy US Stocks?

You usually need a minimum deposit of USD$10 to fund your account. According to U.S. regulations, day traders must have at least $25,000 in their trading account to perform day trading.

12. Do I Need To Pay Tax On US Stocks?

You must pay income tax, capital gains tax, and dividends if you own stocks overseas.

As per U.S. regulations, Australian investors who want to trade in U.S. securities must fill out a W8BEN form. It will help them avoid paying a 30% withholding tax on stock sales and only 15% on dividends.

You can get the W8BEN form from your online broker. If you don't submit this form, they will hold 30% dividends and 30% stock sales proceeds.

However, keep the following things in mind:

• Due to the Double Tax Agreement, you must declare your foreign income on your yearly tax return to the Australian Taxation Office. However, you can avoid double taxation by claiming an overseas income tax offset for your tax in the U.S.

• As stocks are capital assets, you must declare a capital gain or loss on your yearly tax return and pay CGT when you profit from the sale of U.S. stocks. 

13. How Much Does It Cost To Buy U.S. Shares?

Usually, overseas brokers don't charge any commission on trades. However, you may have to pay other fees to buy American stocks in Australia. Some of the fees include the following:

• Transaction fees

• Foreign exchange (F.X.) fee

• Currency conversion fees that consider the AUD-USD fluctuating rate

• Annual or monthly trading account maintenance fees. Brokerage fees vary between platforms, and most will have a different fee for overseas investment.

• Inactivity charges if you don't trade in 6 months or a year.

It is essential to carefully read the fine print before opening an account with a broker to avoid unplanned expenses.

14. How To Buy Apple Shares In Australia?

The process of buying an international share is almost in all trading platforms.

Here is how you can buy Apple shares via an I.G. share trading account:

.

• Step 1: Open I.G.'s share trading platform

• Step 2: Sign in to your My I.G. account online 

• Step 3: Click 'add funds' next to the account you would like to deposit into

• Step 4: Type the name of the company's stock or its ticker in the search bar. To buy stocks of Apple company, type Apple or 'AAPL' in the search bar. To know how to buy Tesla stock in Australia, type Tesla or TSLA in the search bar.S

• Step 5: Specify the number of Apple stocks you want to buy

• Step 6: Choose between placing a limit or a market order. 

• Step 7: Confirm your stock purchase

15. Tips For Buying US Stocks In Australia

Have you been considering trading in the U.S. market? Ensure you do your research and make investment decisions based on your circumstances.

Here are a few tips to assist you in your purchase:

• Tip 1: Start small, as it helps you manage your risks.

• Tip 2: Understand how trading in USD works before investing in U.S. stocks.

• Tip 3: Determine your risk factors and set a limit order for stock purchase or sale. Those with a low-risk tolerance should consider ASX-listed iShares S&P 500 ETF and the BetaShares Nasdaq 100 ETF that tracks the U.S. market. You won't need to sign up for an overseas share trading platform to trade on the ASX and reduce the risk of currency fluctuations and investment in an unknown market.

• Tip 4: Research the U.S. stock market before deciding how and where to buy the stock. It includes market trading hours, trading rules, tax implications, etc.

• Tip 5: Based on where you live and the type of U.S. exchange you invest in, look for a trading platform that lets you set up alerts to notify you when the stock price reaches a specific price point.

• Tip 6: Analyze the market and follow its movements and trends, as it will help enhance your possibilities to earn a profit from investing in U.S. stocks from Australia. Most brokers offer advanced charting and research options, real-time news and updates, and more advanced features to help users make informed decisions.

• Tip 7: If you need more clarification, seek professional advice. 

16. Conclusion

So, we have seen that investing in the S&P 500 and S&P 500 index fund is similar to trading on the ASX. It is a great way to diversify your stock portfolio and grow consistent wealth over time.

Ensure you learn the basics of investing, trading hours, taxation rules and regulations, and compare the best investment platforms to make the most of your investment.

If you still need a share trading account, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

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