The US stock markets have a market cap of more than 100 times that of Bursa Malaysia, and it is not surprising that many locals would look to invest internationally as well as locally. Investing in foreign stocks can be beneficial for investors in Malaysia. It will lead to a diversification of your portfolio and help manage currency fluctuations, among other things, but is not without risk.
In this article, we will be discussing the different ways to buy US stocks from Malaysia, and why you should start penetrating the foreign stock market.
Table of contents
How to Start Investing in US Markets
There are two easy ways for you to start investing in the US stock market. One way is to use a foreign broker. The other way is to use a local brokerage firm that provides foreign stock trading facilities. This choice is step 1 in the process.
Fortunately, most brokers should be able to help you process the opening of a CDS account when you open the trading account.
Use an International Broker
One way to purchase a foreign share is to open a trading account with an international broker that will allow you to buy foreign stocks. For instance, you can open a nominee account with a broker that will help you trade in foreign stocks.
A nominee account is a type of account in which a stockbroker holds shares belonging to the clients, making buying and selling of those shares easier. With a nominee account, brokers will hold the stocks for you, but as you pay for the securities, you will retain the ownership rights.
Once you have an account with an international broker or stock trading platform, you can move on to choosing the US stocks you would like to buy or sell, and action your decision directly on the platform. When you wish to withdraw from these platforms or brokers. usually it is a simple process of request, and then the forwarding of funds back to your Malaysia account in the same way as a local broker.
Use Local Broker With Foreign Stock Trading
Another way for you to purchase foreign shares is to open a global trading account in Malaysia associated with the local investment banks and security firms. In this way, your money will be invested overseas, but the location of assets are local.
Most Malaysians will opt to trade using a local broker as it provides convenience when you want to take your funds out in the same currency. The pricing of the US stocks will remain in USD. Once the local broker account is opened, the process works in the same way, that you make your request, and the action on the buy or sell is completed directly.
YOUR CAPITAL IS AT RISK
What Is the Minimum Budget?
If you are thinking about investing in the US stock market, the first thing that you need to have is sufficient capital. But how much is enough? What is the minimum budget requirement for you to invest in the US stock market?
Before you start investing, you need to at least have $200 (RM950) to $1,000 (RM4,750) to get started. If you’re starting with less than $1,000 (RM4,750), it’s fine to buy just one stock and add more positions over time. If you’re starting with a small amount, some brokerages may allow you to purchase partial shares. Besides, in the United States, you can buy just one single stock, or even a partial amount of one stock with some platforms. However, in Malaysia, investors need to buy a minimum of 1 lot, which is equivalent to 100 shares.
Be sure to never invest money in stocks that you will need in cash, as despite the high liquidity provided by US stocks, there is always time to withdraw back to your account. Besides, investors are advised to keep the level of risks to a comfortable level, and never invest more than you can afford to lose. That way, you can be sure that your risk is appropriate and your general finances are not at risk.
There are many stockbrokers available in Malaysia that provide US stock market trading. Thus, you need to do your research on the best stock broker that will perfectly fit your investment profile.
Best Brokers to Buy US Stocks from Malaysia:
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Take a lookIG: Over 16k stocks to trade
Take a lookAs a new trader, you need to choose the right online trading platforms or broker to work with. Using the wrong broker could make a big dent in your investing returns. Thus, having a good broker will help you in your investment journey. Below is the list of brokerage firms and their fee structures for your online stock trading in Malaysia.
Why You Should Invest in the US Stock Market
US Market Efficiency Brings Opportunity
One of the primary benefits of investing in the US stock market is the chance to grow your money. Due to its currency value versus Malaysian ringgit having increased by more than 7% in 1 year this gives you appreciation in currency as well as the market.
Over time, the US stock market tends to rise in value at better rates than others, due in part to the flow of global capital going back into the top weighted companies over time, of which many are listed on US stock markets. Pension funds, ETFs, and many other Countries will buy US equities and debt, and the more money flowing in to those markets, usually creates value increases. The size of the markets and the amount of capital inflows allow the market to function very well, and efficient markets help create opportunity.
With the higher global demand demand for US stocks worldwide than local exchanges, this means more liquidity, and fairer pricing. It also would mean that buys and sells can take place faster, which reduces the spread in the bid and ask price. Stock markets are highly efficient when there is a lot of volume, and the US markets are both more liquid, and better capitalised than any other in the world.
Diversification
The US stock market investment has the benefit of providing diversification. With a different political and economic scene than Malaysia, investors will still have US stocks to buffer when the Malaysian stock market is not doing well. There is also diversification in the sheer number of stocks and shares available to buy and sell on the US stock markets.
The main two US stock markets are the NYSE (New York Stock Exchange), and the NASDAQ (National Association of Securities Dealers Automated Quotations). The Bursa Malaysia has 982 listed companies with a total value around $436,538 million USD. The two US stock exchanges have more than 4266 listed companies with a total value over $49,653,000 million USD. That is a market capitalisation of more than 100 times bigger than Bursa Malaysia, despite having just more than four times the number of companies.
Building a diverse stock portfolio is usually seen as a better way to manage risk than to have too much concentrated in one area. You should also try to find things that you know and are comfortable with to value them better. If you struggle to find the right company, you can buy a basket of stocks in the same sector, or with an ETF that is also available on the US stock market.
This is a group of stocks collected together by a fund, and traded collectively on an exchange. If you want to buy the S&P500 or the NASDAQ for example you can use some ETFs including SPY (the S&P 500 basket), or the iShares Nasdaq 100 UCITS ETF which covers Nasdaq100.
Growth Opportunities
There is a reason why most of the world’s largest companies are located in broader markets like the US or China. The market size in these countries is significantly larger, providing companies long runways to grow. Because most Malaysian companies have a limitation on how much they can grow locally, the US stock market will provide you with more growth opportunities with globally operating companies.
When there is more capital going in to these companies like we see with above example of market capitalisation sizes, this means those companies have more options as to how and where they want to grow. Growth for the company should provide growth to the shareholder. When you invest in US stocks, or any other stocks, you own part of that company and so should decide on your choices as if you are buying a piece of that company.
YOUR CAPITAL IS AT RISK
Conclusion
As an investor, finding ways to diversify your portfolio is essential. Investing in the US stock market will not only help you in that, but it can also help you gain more profit. The S&P500 index of US stocks has increased by more than 70% over the last 5 years whilst KLCI has decreased. Past performance does not guarantee future results, but the trend for US stocks to outperform many other global markets has been strong for some time.
The process of investing in US stocks from Malaysia can be very simple, with accounts available with local and international brokers able to help.
After opening an account, your US share trades can be made almost immediately, and safely on the right trusted platforms. Before you start, remember to prepare yourself with the right trading knowledge and do not risk more than you can afford. Remember also to choose the right broker for you to mitigate the risk and loss of your investment.
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