HOW TO INVEST: Outside Of USA (Non-US Resident)

TL;DR

Non-U.S. residents can access the U.S. stock market through brokerages such as Firstrade, eToro, and DEGIRO, subject to country eligibility and tax or regulatory restrictions. Firstrade offers zero commissions, a $0 minimum balance, and ownership of underlying assets for approved countries, while eToro uses CFDs rather than direct stock ownership. Read on to compare eligibility, ownership, and CFD risks before choosing a platform.

Transcript

• How's it going today, guys? Welcome back to the channel, hope you're having a great day so far. So in this video today I'm going to be answering one of the questions that I've been getting on almost a weekly basis for the last two years and I apologize it's taken me this long to make this video. What we're going to be talking about today is how t... Read More

Key Insights

• 👍 Firstrade is the recommended choice for non-U.S. residents due to its zero commissions, no minimum balance, and availability to investors from approved countries.
• 😒 eToro allows trading in various assets, but it uses CFDs, which are speculative and come with higher risks. Only investors from certain countries can participate.
• 💗 DEGIRO is a growing brokerage platform that offers different options for investors, depending on the country. Investors should understand if they are buying stocks or trading CFDs.
• 🔬 The main challenges for non-U.S. residents investing in the U.S. stock market are regulatory and taxation issues.
• 😚 Investing in CFDs should be approached with caution, as they are a pure speculation and a high percentage of people end up losing money.

Questions & Answers

Q: How can a non-U.S. resident invest in the U.S. stock market?

A non-U.S. resident may invest through brokerages that accept investors from their country, including Firstrade, eToro, and DEGIRO. Before choosing one, confirm country eligibility and whether the platform provides ownership of the underlying stocks or exposure through CFDs.

Q: Why is Firstrade recommended for non-U.S. residents?

Firstrade is the speaker’s number-one choice because it charges zero commissions and has a $0 minimum account balance. Eligible international investors can open an account without being U.S. residents and without a Social Security Number or Tax Identification Number.

Q: Which countries are approved for Firstrade international accounts?

The listed approved countries are China, Taiwan, Hong Kong, Macau, Japan, Mexico, New Zealand, Singapore, South Korea, and Israel. The speaker says the limited list reflects tax considerations and participation agreements.

Q: Do international investors own the stocks they buy through Firstrade?

Yes, investors using eligible Firstrade international accounts own the underlying assets. They are not purchasing CFDs when they invest through those accounts.

Q: What is the main difference between Firstrade and eToro?

Firstrade provides ownership of the underlying assets for eligible international accounts. On eToro, the speaker says stock trades use CFDs, so investors speculate on prices without owning the actual stocks.

Q: What is a CFD?

A CFD is a contract for difference, a derivative whose price is derived from an underlying asset such as a stock. It provides no ownership of that underlying asset and is described as a speculative investment vehicle.

Q: What risks does the video identify with trading CFDs?

The video describes CFDs as pure speculation and cites an Investopedia article stating that 66% of people who buy or trade them lose money. The speaker does not recommend them and advises researching derivatives and understanding their risks before trading.

Q: What should investors consider before using eToro or DEGIRO?

For eToro, investors should verify whether their country is among the roughly 60 participating countries and understand that the platform uses CFDs as described in the video. With DEGIRO, the investment structure depends on the country: customers may buy underlying stocks in some places and CFDs in others, so they should confirm what they are purchasing.

Summary & Key Takeaways

• Firstrade is a recommended brokerage for non-U.S. residents to invest in the U.S. stock market, with zero commissions and no minimum account balance.

• eToro is a popular trading app available in many countries, but it uses Contracts for Difference (CFDs) instead of owning the underlying assets, which comes with higher risks.

• DEGIRO is a growing brokerage platform that offers both options of buying the underlying stocks or trading CFDs, depending on the country.