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Looking to buy shares from US companies such as GameStop, Facebook or Tesla? Luckily, these days it’s inexpensive and easy to invest in US companies from South Africa, once you know what to do.
As of 2021, there are at least a dozen online trading platforms in South Africa with access to Wall Street’s New York Stock Exchange and NASDAQ, however there are some big differences when it comes to costs and features. Read on to find out more.
- Compare brokers in South Africa with access to US stocks
- Open your account by providing ID
- Fund your account by transferring money from your bank account
- Search and select the shares you want to invest in and start trading
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Compare US trading platforms
Compare share trading accounts that trade US stocks
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Not all brokers or trading platforms provide access to global stock exchanges, so if you want to buy and sell US shares, you’ll need to find one that offers the service for a cost effective brokerage fee.
Why invest in US stocks?
There are many reasons for South African investors to own stocks listed in the US. In the last decade, Wall Street’s S&P500 index has delivered returns of around 103%, while South Africa’s equivalent the JSE returned around 7.64% for the same period.
US stock markets also offer a greater diversity of companies than is available in South Africa. The New York Stock Exchange and the NASDAQ are the two largest stock exchanges in the world in terms of market capitalisation. Many of the world’s biggest global growth companies, such as Facebook, Amazon, Apple, Netflix and Google (FAANG) are listed in the US.
Profit aside, holding a diversified stock portfolio is also safer. This means investing in companies from a range of sectors as well as countries. So, if South Africa’s economy were to slow, stocks listed in another country such as the US can act as a buffer.
A couple of decades ago, investing in global companies was fairly costly. Today, many online trading platforms allow South African investors to buy and sell shares in the US and other international markets for less than R100 per trade in brokerage fees. There are even a few that scrap the brokerage fee altogether.
However, not all trading apps in South Africa offer US stocks. Some only offer South African shares or they may charge additional high fees for the service. Before signing up to a new account or broker, it’s important to check which countries are on the books and what the associated fees are.
Each platform works in a different way, however, the same general rules apply as with buying South African shares – with a few additional considerations. For example, you’ll be charged a brokerage fee and a foreign exchange (FX) fee when you trade shares. Brokerage fees are sometimes higher on international accounts and there may additional costs such as an inactivity fee.
Alternatively, you can invest in a portfolio of US stocks via exchange traded funds (ETFs). You can find out more about ETFs in our guide or check out our ETFs guide.
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There are a growing number of online share trading platforms that offer access to international stock exchanges. Some platforms offer international accounts that are separate to their South African trading accounts, such as EasyEquities, while others such as IG are fully integrated on the one platform.
Here are some platforms that allow US share trading in SouthAfrica:
- IG Share Trading
- eToro
- CMC Markets
- Saxo Capital Markets
- CommSec International
- Interactive Brokers
Zero brokerage trading accounts
Several share trading platforms now offer zero brokerage fees when you trade US stocks. This commission fee is what you’re usually charged by your broker every time you place a trade and can range anywhere from R0 to R500 per transaction.
Thanks to the growing competition, some brokers have removed this fee altogether, and instead, charging a small foreign exchange fee to convert ZAR to USD. Here’s a list of zero brokerage trading platforms for US stocks as of 2021:
- eToro
- IG
- CMC Markets
It’s important to note that although you don’t pay commissions to trade using these platforms, it doesn’t mean they’re free. You’ll still need to pay a currency conversion fee to exchange ZAR to USD, which is typically charged as a percentage of your deposit. You may also have to pay ongoing account fees, a fixed spread or commission fee based on a percentage of the spread, and a “custody” fee, which is sometimes waived if you meet a minimum number of trades per year.
South African apps must use a US-based custodian to hold your US shares. An annual custody fee is typically charged as a percentage of your holdings.
How do I compare trading platforms?
Make sure that you take the following features and questions into consideration when comparing the benefits of US share trading sites:
- How much is brokerage? Compare the fee each company charges every time you place a trade on US stocks. Be aware that this will be different to broker fees for JSE-listed stocks.
- What’s the exchange rate? Exchange rates vary from platform to platform and this will partly be used to offset low broker fees. Check what these are first.
- Will you need to pay a monthly fee? Some platforms require you to pay a monthly fee in order to keep your account running or to access certain features.
- How is market data displayed? Check how up-to-date the market data offered by each platform is — being able to make trades based on current information is critical.
- How many international markets can you access? Some platforms offer access to a few key international markets while others let you buy and sell shares on a much larger number of exchanges.
- How easy is the platform to use? Is it fast, simple and convenient to execute a trade and monitor market performance?
- What trading options are available? Is the platform just online or can you also place trades over the phone? Are flexible options like limit orders available to let you take advantage of market fluctuations?
- Are education and research resources available? Trading shares is complex, so does the platform offer the necessary tools to increase your investment knowledge?
- Is customer support available if you need it? How can it be accessed and when?
Compare US trading sites
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Pros
- Access different investment opportunities. Trading via US stock exchanges allows you the freedom to take advantage of investment opportunities that are not available in South Africa.
- Increasingly more affordable. As a growing number of online share trading platforms compete for market share, brokerage fees are becoming more affordable.
- Diversify your portfolio. If all your investments depend on the performance of one national economy – i.e. South Africa’s – is your portfolio really as diverse as you think? Buying international shares protects you against having all your eggs in one basket.
Cons
- Brokerage fees. You’ll need to contend with potentially higher brokerage fees whenever you place a trade on an international share market.
- Exchange rates. The ZAR-USD rate fluctuates frequently which might negatively impact your investment.
- Additional fees. International trading accounts are sometimes subject to fees that South Africa-only platforms are not, such as inactivity fees and exchange fees.
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What are some of the risks?
One of the key risks to be aware of when trading US shares is that you may not have the same level of knowledge and expertise as you have when trading JSE shares. Investing in an area, industry or country which you know little about is always risky, so it always pays to make sure you know what you’re getting yourself into.
Another factor worth considering is the tax implications of international trading. You don’t want to make any mistakes when declaring your income and find yourself on the wrong side of SARS, so familiarise yourself with the tax treatment of your investments as soon as possible.
Frequently asked questions
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Yes, many platforms offer a free trading platform to allow you to test the features they offer with demo accounts.
Important information: Powered by finder.com. This information is general in nature and is no substitute for professional advice. It does not take into account your personal situation. This information should not be interpreted as an endorsem*nt of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for most investors. You do not own or have any interest in the underlying asset. Capital is at risk, including the risk of losing more than the amount originally put in, market volatility and liquidity risks. Past performance is no guarantee of future results. Tax on profits may apply. Consider your own circ*mstances, including whether you can afford to take the high risk of losing your money and possess the relevant experience and knowledge. We recommend that you obtain independent advice from a suitably licensed financial advisor before making any trades.
