In this video I'm going to show you, how you as a Kiwi can own a part of your
favorite companies especially when they're in the US
so make sure you stick to the end, hey guys, it's Dan here and welcome to my
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for those that have lived in New Zealand for a while would know that there aren't
many options available when it comes to investing
in the US stock market, yes you've got the NZX 50, the
ASX 200 maybe some overseas ETFs but you got to know there's a much bigger
stock market world out there this is a chart showing the percentage
that each major stock market has of the world's total stock
capitalization, there you have the Australian stock market taking up only
around 1.8%, so just imagine how small
the New Zealand market really is and if you're a fan of technology you'll
realize how many different companies can be interconnected
just take the iPhone for example, the first company that'll come to mind is no
doubt apple but think about the components of the
iPhone, starting from the outside you've got the front camera, the rear
camera, the casing, the display then for the inside you've got the audio
the battery, the processor the various chips in there, how many
suppliers are involved in making just one product and this is
only one of Apple's many products, now that really puts things
into perspective my point is if you see Apple as the only
company related to the iPhone then you're missing out on huge
opportunities, likewise if you see New Zealand as the only stock market
you ever want to invest in then you're really missing out
anyhow i'll go over some of the most popular platforms used in New Zealand
that can help you invest in the US, I'll briefly go over what they offer and what
their fee structures are like then i'll introduce some foreign brokers
as well and then do a similar overview so you can decide which one
works best for you, so first up is Hatch, Hatch is a Kiwi Wealth platform that
gives Kiwis access to over 2 900 u.s listed companies and over 500
ETFs Kiwi Wealth is owned by Kiwi Bank's
parent, Kiwi Group Holdings Limited, so it is a 100%
NZ-owned and operated entity they are
partnered with DriveWealth, which is a US third-party provider
of the underlying investment infrastructure, Hatch only offers
US-listed shares though so if you have a NZ portfolio
you won't be able to aggregate it under this platform
the main advantage that Hatch offers is the ability to buy fractional shares
this is very handy when you want to invest in say Amazon
Tesla, Google which have very expensive share prices
for dividend paying shares, you will still receive them based on the fraction
you own the caveat with this is that you won't
get any voting rights with your fractional shares
unless your fractional purchases have accumulated to be over one share
in that case your voting right is proportional to the number of whole
shares you have, pricing is pretty transparent
you pay a 0.5% fee every time you exchange your NZ
dollars to US dollars and likewise when you exchange back for withdrawals
and for every order you will be charged a flat fee of $3 USD
up to 300 shares, then incremental increases
of $0.01 per share onwards, so for orders of 301 shares
you will get charged a fee of $3.01
and for 302 shares $3.02 so on and so forth
as you're buying shares in the US you will be required to fill out a W-8BEN tax
form and Hatch will take care of this for you
for initial fee of $1.50 and $0.50 yearly fee for tax filing
purposes the second platform is Sharesies, which
is probably the most popular share trading platform for the average
investor in NZ right now at the moment though they don't offer
access to any of the US- listed companies but you are able to
invest in a few US funds they are in the process of making
US shares more accessible so definitely keep an eye out for this
they're planning to offer more than 2500 US-listed companies and more than
900 ETFs you can subscribe to the email updates
on how they're progressing if you're interested
these US funds on offer are basically managed by Smartshares a member of the
NZX group there are currently only 6 US funds
offered on Sharesies by Smartshares these 6 funds are ETFs
offered in the US but have essentially been
repackaged by smartsheets so kiwis can access them
much easier Sharesies have a monthly subscription fee
if your portfolio is over $50 NZD
from there you will be charged $1.50 every month for value up to
$3000 and $3 every month for over
$3000 on top of that there is also a transaction
fee for buying and selling companies on Sharesies so they take 0.5%
as commission when you make a trade up to $3000
and for trades over $3000, the first
$3000 would be at 0.5% and the remaining would be
charged at 0.1% but the good thing is you don't need to
worry about exchange rates as these are all
based in NZD similar to Hatch
Sharesies also provide the option of trading fractional shares
for ETFs no transaction fees are charged but one thing you need to be careful
about investing in these ETFs is that you will be charged a yearly
management fee, this fee is usually shown at the very
end of the details section and it's basically a fee charged for managing
that fund if you look at the funds in more detail
though you'll see that Smartshares charge a much higher management fee
compared to what has been charged for the actual underlying ETF for
example the Smartshares US large value ETF, a 0.51%
fee is charged but the actual ETF which has the ticker
simple VTV by vanguard charges only 0.04%
this is due to the additional costs related to bringing that
US-domiciled ETF to NZ, so if you don't want to pay this difference in
cost then you should consider using other
brokers that offer direct access to the underlying ETF
and that means when Sharesies do offer US-listed ETFs
there's a pretty good chance that you'll be able to access the Vanguard Etf
directly currently Sharesies do not require
you to fill out an overseas tax form as you're really just buying products
offered in NZ but in the near future when they do
offer US shares you may be required to fill out that
form and also just make sure you pay attention to any changes
to the fee structure as well there are other local platforms but i won't be
going over them in detail for this video as most of them only really offer US
funds as opposed to individual company shares
and they don't really have the intention to at this point in time
the closest is probably ASB Securities but appears to be that you can
only trade in overseas markets excluding Australia
via phone and the phone brokerage rates aren't exactly economical
okay let's move on to foreign brokers the first one I want to talk about is
closer to NZ and it's called Stake
it is an Australian-based platform which offers more than 3500 US stocks
and ETFs, they're also partnered with DriveWealth which is the same partner that
Hatch uses as discussed earlier Stake also comes
with a mobile app which is a plus compared to Hatch and Sharesies you'd
have to log in via a browser the main advantage with Stake is the
zero-commission trading which is quite popular among foreign
brokers so you basically pay no additional fees when making trades and
they also offer fractional shares which is great
however there's also a monthly subscription structure
you've got the starter pack, unlimited pack and the black pack
right now they're doing a special so when you sign up today you'll have the
unlimited pack for free until next January and
unless you pay the monthly fee after that
you will be switched back to the starter pack if you have over $30,000
then you'll have the black pack for free until next January, while I do
think for most people the starter pack is probably sufficient
as you aren't likely to be trading on a daily basis
and if you're a long-term investor where your investment horizon
is a few years out, you really only need market orders as you're not too worried
about whether you buy shares at $50 or $49, in terms of funding your
account the default method is using online banking via POLi
Stake charges a 1% exchange rate fee for every deposit and
withdrawal and for your first time Stake will also
charge a $5 fee for the US non-resident tax form
the other fee that you need to be careful of is the express or regular
transfer fee, the default option is the express option which is 0.5%
and you'll be able to see your funds
just after a few hours so at the time of the screenshot it was
about 12 a.m on Friday in New York and as you can see it would be in your
account by 9 am on the day just before the market opens, for regular
it will take at least a day if you don't want to use POLi, then you
can use your bank or another FX remitter to make direct transfers
now there are also US brokers that you can use and one of the best
and most well-known brokers that is fairly easy for foreigners to use
is TD Ameritrade, it was named the best overall broker in the 2020 Online
Broker Review by StockBrokers.com for two years straight now
it has a very comprehensive platform which includes a lot of educational
resources retirement planning information and
access to third party research etc, it caters for a wide range of investors
from beginners to serious traders, you can make trades via your mobile devices
by the web or if you're a serious trader then you may consider downloading their
Thinkorswim desktop application which provides
tools for analyses and strategy testing unsurprisingly for stocks listed on the
US exchange you get commission free trading and they also have a long
list of commission-free ETFs which you can invest in and there are
many other products that you can check out
such as futures, options, bonds etc now for funding the account these are
basically via international wire transfers
between the broker's bank and your bank these usually take around
a couple of business days to clear, TD Ameritrade doesn't charge you a
fee for deposits but depending on who you bank with in NZ
these fees can vary for wire transfers on top of that
you have the exchange rate fees to consider as well the downside with
TD Ameritrade is that when you make withdrawals
they charge a flat fee of $25 US dollars all right so we've gone over pretty
quickly some of the platforms currently available to NZ that allow you
to invest in shares and funds in the US, so let's do a quick
recap, for fractional shares all apart from TD Ameritrade offer fractional
shares fractional share trading has definitely
become a lot more popular enabling small retail investors to
invest in expensive stocks which they couldn't afford to before but
it all depends on what your goal is when you own a part of a company
some people don't like fractional shares because they enjoy being a real owner of
the company and the voting rights that come with
that ownership but having that option is definitely convenient
second is the subscription fee, Hatch and TD Ameritrade don't charge a monthly
subscription Sharesies charge up to $3 NZD
a month if your portfolio is over $3000 otherwise a
$1.50 a month Stake offer 3 different types of
packages, the starters pack which is free the unlimited pack which is $9 USD
and black pack which is $19 USD
which offers a lot more if you're more serious about your trading
third is commissions, Stake and TD Ameritrade both
offer commission-free trading, Hatch offers $3 USD flat fee for
trades involving 300 shares or less
and $0.01 for every additional share thereafter
Sharesies offer a regressive structure so for the first
$3000 a 0.5% fee is charged
for every dollar after that it's charged at 0.1% so the
commission rate decreases as the amount increases
next is exchange rate fees, Sharesies does all transactions in
NZD so no FX fee with Hatch, you're
charged 0.5% every time you exchange deposit
and withdrawals, with Stake this is 1%
with TD Ameritrade this will vary with the bank you use
but banks are usually much more expensive, last but not least, other fees
that you need to be aware of are the tax form fees which both Hatch
and Stake charge at this point we don't know about
Sharesies yet but they could charge this fee when they start offering you a
shares for TD you'll need to fill out the form
yourself so there's no additional fee so it all depends on what works best for
you, it'll depend on how often you plan to deposit
withdraw funds into and from your account what kind of investor
you want to be, whether you're an investor who invests once a year or you
want to invest periodically every month, every fortnight etc or you
want to be a more active investor and you want access to analyst resources
research etc then you may want to consider a bigger
platform, i hope this overview has helped answer some of the questions you may
have about investing in the US from NZ, any questions
feel free to get in touch with me via Linkedin or email
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see you next time