With American stock markets and major indices trading at record highs, investors and traders outside of the United States are pondering whether they can take advantage of this momentous opportunity. The short answer is: Yes!
Globalization has not been in vain, particularly with regard to the major financial exchanges. There used to be a time when only foreign currency exchange (forex) traders could actually tap the international markets; everyone else was either relegated to the sidelines or forced to go through individual brokers who charged high commissions and were difficult to get a hold of. Thankfully, globalization and Internet technology these days make it easy for investors from all corners of the world to trade security instruments on Wall Street.
High net worth investors who are already working with a financial planner or a money manager in their countries of origin should contact their retained professionals to figure out the correct strategy. If you are not a citizen or resident of the United States and you are not yet working with a financial professional, you should strongly consider opening an account with a local broker whose platforms allow exposure to international markets.
Convenience, ease of taxation and localized customer service are the most important reasons for you to consider opening an account with a local broker. However, if you are an experienced investor or a fast learner, choosing one of the major retail brokers in the United States may work out better for you in terms of reduced brokerage and currency exchange fees.
Retail online brokerage houses such as Schwab and E*TRADE make it easy for overseas investors to open accounts. While some of the registration process is done online, foreign traders must be prepared to print, sign and authenticate some documents, which should be sent via mail or courier to the U.S. It is very important to fill out a W8-BEN form from the Internal Revenue Service (IRS); this is the document that establishes the investor as a special, non-resident taxpayer.
Once all documents have been accepted, the next step is to fund the account; this is usually done by means of a wire transfer. Some retail brokerages may require their foreign clients to open bank accounts with specific banks in their home countries; this is typically done to facilitate deposits and withdrawals as well as reporting to the respective financial regulators.