How to buy and trade US shares in Australia

Five simple steps to buying US shares in Australia

• Open a share trading account
• Complete a W-8BEN form
• Understand the charges to buy US shares
• Other ways of trading US shares with IG
• Why invest or trade US shares?

Buying and trading US shares in Australia: the basics

When it comes to size, the Australian Securities Exchange (ASX) doesn't even crack the top ten in terms of market capitalisation on a global scale. This is not to say that the Australian market isn’t full of trading opportunities or solid long term investments – only that there are many other opportunities in larger, more diversified and mature global markets – particularly the US.

In fact, to give you some idea of this size differential – the NYSE, the Nasdaq, the OTCQX stock exchanges have a combined market capitalisation of around US$35.5 trillion. The ASX 200, by comparison, has a total market capitalisation of just AUD$1.82 trillion.

With that in mind, below we look at how Australian investors can get involved buying and trading some of the largest and most recognisable companies in the world.

Open a share trading account

To trade US shares or other international markets with us, first you need an IG share trading account. You can open an IG share trading account – and start taking advantage of our $0 commissions on US share trades – through our website or IG’s app in just a few minutes.

Better still, with an IG share trading account you will immediately gain access to:

• Over 11,000 global shares – including US shares
• $0 dollar commissions on US share trading
• Low currency conversion rates
• Mobile trading and around the clock support

Click here now to create an IG share trading account and start trading US shares today.

Buying and trading US shares with IG: Free commissions

After you’ve created an IG share trading account and signed into your share trading account you can start trading US and other international shares almost immediately.

For example, let’s say you were bullish on Apple’s prospects and you believed its stock would appreciate in value. To buy Apple shares, all you need to do is:

• Login to your My IG account online and click ‘add funds’ next to the account you’d like to deposit into
• Open IG’s share trading platform and type the name of the company’s stock or its ticker in the search bar. In this case you would search for ‘Apple’ or ‘AAPL’
• Select the amount of Apple shares you would like to buy
• Choose between a market order or a limit order. A market order means you will buy the shares at the current market price, while a limit order allows you to specify the minimum price at which you will sell, or the maximum at which you will buy, an asset.
• Confirm your share purchase

To learn more about the risks and benefits associated with market orders, click here.

Complete a W-8BEN form

Importantly, for individuals who want to deal in US equities from any of your IG accounts, you’ll need to complete a W-8BEN form first – a requirement for the American Internal Revenue Service (IRS). Non-individuals, joint account holders and US Citizen are also required to complete the appropriate US tax documentation.

Understand the charges to buy US shares with IG

While trading international shares like Apple, Facebook and Microsoft may open up new opportunities for Australian investors, it’s important to understand how the fees and charges differ from buying ASX listed shares.

Mind you, while trading US shares online incurs $0 commissions, trading over the phone incurs additional fees.

Moreover, while you will not incur a commission fee on US share trades, you will incur foreign exchange fees of 0.7%, on any international trade, from the moment you enter and exit your trade.

Finally, with US shares there may be additional charges and taxes for particular instruments that you trade that are charged by the particular market. We may also charge you a fee if we are required to perform a service on your behalf that is not set out in our product details. Additional charges may also arise from particular currency withdrawals.

To view a full list of our charges associated with trading US shares, click here now.

Other ways of trading US shares with IG

Mind you, investors don’t just have the option of buying and holding physical shares of US companies, you can also use Contracts for Difference (CFDs) to speculate on the price movements of an asset – in this case US shares – without actually owning the shares in question.

Three key benefits of CFD trading include:

• Access to leverage allows investors to gain greater exposure to the fluctuations of an underlying asset’s value than you would by purchasing the asset physically. This can magnify an investor’s gains but it can also magnify losses.

• The flexibility to trade markets long and short
• The ability to implement risk management strategies, such as hedging strategies or guaranteed stops

Finally, with IG’s share trading platform you can trade 70 key US stocks – including Tesla, Apple, Amazon, Netflix, Facebook and Microsoft after-hours. Specifically, trading pre- and post-market enables you to take a position on key US shares outside normal trading hours.

You'll find our extended trading hours markets labelled ‘All Session’, to distinguish them from the shares which can only be traded in normal US market hours.

Ultimately, trading on All Sessions equities enables you to take advantage of any opportunities that happen outside the main trading window – like volatility around US company earnings and news announcements.

You can take advantage of after-hours trading – with both CFDs and share trading – during the following times:

CFDs on All Session US shares

• 18.00 to 10.00 Monday to Thursday, and 18.00 Friday to 07.00 Saturday AEST

Share trading on All Session US shares

• 21.00 to 07:30 Monday to Thursday, and 21.00 on Friday to 07.00 Saturday AEST

Importantly, because CFD trading may not be suitable for every investor, click here to find out more about this unique product or open an IG trading account now.

Why invest or trade US shares?

Not only are US markets large in terms of total market capitalisation, but their impressive liquidity and the welcoming regulatory environment of US markets also often means that it is an attractive place for non-US companies to list. For example, Chinese technology giant Alibaba (BABA), which many position as a competitor to US-Amazon, is listed on the NYSE. Chinese search giant Baidu is also listed on the NASDAQ.

With the total US stock market valued at more than US$35 trillion, this highlights the United States’ military, cultural and technological dominance from the last half a century.

Indeed, when many people think of entertainment, they think Netflix (US$210 billion). Computers: Apple (US$1.61 trillion) and Microsoft (US$1.54 trillion). Online shopping: Amazon (US$1.49 trillion). Social networks: Facebook (US$663 billion). Cars: Tesla (US$280 billion).

In that sense, buying and trading US stocks gives investors access to the kind of global companies – global brands in terms of size, ambition and reach – that are difficult to find in other markets. Not only that, but as Alibaba’s and Baidu’s US listings show – not only do US markets attract some of the best companies from the United States – but from all over the world.

Underscoring the points above, another key reason that investors may be interested in buying or trading US stocks is for diversification. The ASX 200, for example is heavily weighted in Financial stocks (25.6%), Materials stocks (20.2%) and Health Care stocks (11.9%).

And though American markets have themselves recently become more weighted towards information technology – with the rise of global tech heavyweights Facebook, Amazon, Netflix and Google – by investing in US companies or indices, investors gain both sector and geographic diversification. Ultimately, this may represent an attractive prospect for Australian investors looking to gain exposure to sectors and/or companies that may not be well represented on the ASX or may be underdeveloped in Australia.

Finally, in terms of performance, the S&P 500 – one of the most closely watched US benchmarks which tracks 500 large-cap US companies – has handsomely outperformed the ASX 200 over the last decade.

According to S&P Dow Jones Indices, over the last decade the S&P 500 has delivered 12.84% average annual returns over the last 10 years. The ASX 200, by comparison, has returned 7.06% annually over the last decade.

While past results are never an indicator of future performance, the above illustrates the power of corporate America and why investors have historically been drawn to US markets.

As Warren Buffett recently said: ‘Never, ever bet against America.’