How do I invest in the US stock market?

Thursday 24th January 2002 1 Comment

Q: I have been following the U.S. market for 2 years. I now want to invest online but have been having trouble finding information. What do I do regarding opening an account with a U.S based online trader? Will I then have to open a bank account in order to transfer money or could I do this through my existing bank? Are the sale of shares subject to capital gains in the U.S. if held by a New Zealander? How are the income tax issues sorted i.e when and where and how do I pay income tax on the hopeful gains?

A: The United States is where online trading started and brokers there are very good at helping anyone who wishes to open an account. As a foreign national you will have to hold cleared US$ funds with your broker before they will let you trade. The best thing to do is decide who you wish to trade with and just send them an email and ask exactly what their terms and conditions for foreigners are.

The three biggest and longest serving online brokerage houses in the US are:
- http://www.etrade.com/
- http://www.tdwaterhouse.com/
- http://www.eschwab.com/

As each have different requirements for foreigners, you are best to get your information directly from whomever you wish to trade with. The aforementioned online trading houses are all members of the NYSE.

Unfortunately I am not an expert on US tax law but here are some sites you may wish to visit to get a better idea of the ways foreign investors are taxed. You have income tax on dividends to consider as well as capital gains.
- http://users.erols.com/scambos/IBClaws.html
- http://www.dtonline.com/northamr/usa.htm

Comments from our readers

On 20 August 2011 at 4:14 pm Stock Market said:

very good post, i was really searching for this topic as i wanted this topic to understand completely and it is also very rare in internet that is why it was very difficult to understand thank you for sharing this. Regard Stock Market