Why Invest in US Listed Securities?
You probably realize the importance of saving for the future, after all, you never know what kinds of financial emergencies or expenses may come up. You may also know that investing can provide you with a greater potential return on your money. But, with certain economic and political conditions, such as the Greek Debt Crisis and the crash of the Chinese Stock Market, you may be fearful of placing your money in your local stock exchange.
If you’re looking to invest for the future, the US Stock market may be the right place for you. Here’s why opening a US brokerage account may be the right move for you:
1. You can create a globally diversified portfolio
Diversification means not putting all your eggs in one basket. When you invest in US listed securities, you have access to US stocks and ETFs as well access to global ADRs (American Depository Receipts).
This means that, whether you’re a loyal Apple customer who wants to buy shares of your favorite brand or you’re looking to diversify your investment strategy, the US stock market offers a unique opportunity for you. In addition to owning companies like Apple and Coca-Cola, investors can own ADRs of companies like Alibaba, Baidu, and PetroBras.
If you’re not up for the task of picking your investments one by one, you can invest in ETFs (Exchange traded funds), which are baskets of different stocks grouped by industry, country, region, or asset class. For example, an investor could purchase an ETF comprised of healthcare stocks or technology stocks. Investors can also invest in ETFs that compile stocks of other countries besides the US. For example, an investor could buy the CSI China Internet Krane Shares ETF (KWEB), which seeks to measure the performance of the investable universe of publicly traded China-based companies which are in the Internet and Internet-related sectors. Another example is the Australia MSCI iShares ETF (EWA) which is comprised of Australian equities and seeks to track the underlying Australian Stock Exchange.
Diversification isn’t just about the ability to buy global brands and indexes. If you’re an international investor, investing in the US provides you with the opportunity to diversify the currency you hold. In today’s economic environment, many countries are choosing to devalue their currencies relative to the dollar. Two recent examples are China and Brazil. Investors in these countries have seen dramatic declines in their purchasing power and may wish to manage their currency risk by choosing to utilize a US brokerage account to invest in ETFs of major global currencies.
2. The Market is relatively liquid
Liquidity refers to the ease at which an investor can sell their shares. Liquid markets, like the US market, help investors to manage their risks because they have the ability to enter and exit positions in an orderly, systematic fashion.
3. The Market is efficiently regulated and transparent
When you invest through the US Stock Market, the companies you invest in and the broker you invest through are both subject to regulations put in place to protect individual investors.
US Exchange listed companies, companies whose stocks you would buy, are required to be registered with the US Securities and Exchange Commission (SEC), the independent US government agency charged with regulating securities markets in the US.
As mentioned earlier, all brokers that offer trading in US listed securities are required to register with the Financial Industry Regulatory Authority (“FINRA”), which monitors brokers conduct.
Further, regulation requires that all trades be reported immediately, providing transparency for investors.
4. Account Protection
Beanstox’s brokerage service provider, DriveWealth is also a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org
Build a Portfolio for Your Future
When it comes to putting money aside for the future, your US brokerage account can be one of the most valuable tools available to you. It provides you with the means to diversify your currency holdings and invest in stocks, fixed income products, ETFs, and ADRs of global companies. Your brokerage account also provides you with the ability to put your money to work in a market that has efficient regulations, which facilitates transparency and ultimately helps you, the investor, better manage your risk and investment strategies. Make your money for you by investing in US listed securities.
Assess the Risks before You Begin
Before beginning any investment strategy, investors should be aware of the inherent risks involved. All equity investments carry risk. Positive returns are not guaranteed as investments can decrease in value due to economic conditions in the underlying market.
- Investing in the stock market has the potential to offer greater returns when compared to a traditional savings account, but an investor should understand that risk potential is also increased. Positive returns are not guaranteed. Traditional savings accounts are often deemed to be “safer” than brokerage accounts because they are insured by the FDIC and cannot lose money.
- All investing carries risk. Past performance is not indicative of future returns, which may vary. Investments in stocks and ETFs may decline in value, potentially leading to a loss of principal. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. There are also risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities. These risks include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country’s currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises