Should I Use a Local Broker Or a US Broker to Buy US Stocks?

I am a Singaporean, currently working as a trader in a hedge fund. I regularly contribute my investment ideas in my personal blog, and some of my investment ideas are US stocks.

This is a frequent questions asked by my readers:
Is it cheaper to buy US stocks through a US broker? Or should we buy through local (Singapore) brokers?

There are a few concerns before you make the decision. And the concern is NOT just commission.

If you trade with a local broker, most likely they have an account with a US broker. So when you place a trade, your trade goes to the US broker directly. Of course the local broker will not do this for free, so they will CHARGE a middleman fee. You pay your trades on T+3 date.

If you trade with a US broker, you WAIVE off the middleman fee automatically, so you end up paying a lower commission. But you have to deposit your money into your US broker account first before you trade, you pay on T date. You CANNOT move your funds to and fro US to Singapore frequently, because this will incur a lot of wiring fees.

I trade using a local broker, because sometimes I see opportunity in US stocks, sometimes I see opportunity in Asia stocks. If I trade with a US broker, and decide to overweight Singapore market and underweight US market in my portfolio, I will need to wire my money from US to Singapore, incurring unnecessary wire fees.

Speaking from my own experience, its always GOOD to allocate a portion of your portfolio into US stocks; because the international investment community classified them as developed market, while stocks from Singapore and other Asia (Malaysia, Hong Kong, Indonesia) are classified as emerging markets. Whenever there is bad news in US, emerging markets fall the HARDEST! Even though there may be no problem in emerging market in the first place. Investment community believes that if US economy has a problem, then emerging markets will suffer more. Though I DO NOT AGREE with that, but this is how the market reacts.

If you had notice during this subprime turmoid, many Singapore stocks are down 30% - 50%, while US index is barely down.

And when you buy US stocks, ALWAYS buy gold ETF as well. You do not want to exposure yourself to unnecessary foreign exchange risk. You do not want the situation whereby your US stock is up 10%, but USD is down 12%, ends up your US investment is still down 2%. I believe USD will continue to fall in the mid-term, so by buying gold you hedge some of your currency risk.

Then the next question will be asked:
Then shouldn't we just avoid US stock since USD is expecting to fall in the mid-term?

From my view, most of the BEST stocks in various sectors come from US.
In the oil drilling sector, the best stock to invest is Transocean Inc.
In the oil exploration sector, the best stock to invest is Exxon Mobile.
In the technology sector, the best stocks are Google and Apple.
In the mining sector, the best stock is Freeport McMoran.

Like it or not, most of Asia companies are still NOWHERE compared to those counterparts in US. If you want to invest in the best stocks in your FAVOURITE sector, high chance they come from US.

Reuters - New York Attorney General Andrew Cuomo, who last week began investigating short-selling abuses in the stock market, is now taking a hard look at whether credit-default swaps are being used to push down share prices, a person familiar with the probe told Reuters Friday.

Stock Market Timing Trend Trading Etf Trading System
World S Best Stock Trading System
Free Ultimate Full Lace Wig Enter Today

Investing in the Stock Markets

You have recently decided to start investing in the stock market, but you don't have any idea how it works, so you're doing a lot of research, but do you know what kind of investor you are?

There are a broad range of stocks available to invest in, and ideally, you want to pick the stocks that best match your investing style. What is your investing style you may ask yourself? Well, if are you interested in short-term growth with higher risks, than you may want to look at penny stocks. If you would rather not take as much of a risk, but allow your investment to grow over time, you may want to consider some type of income stock, which sometimes can even pay a dividend on the shares that you own. A dividend is a profit sharing incentive offered by some companies on the shares of their stock to help make up for the slower growth those stocks experience.

If you wish, you can invest in technology stocks, such as Google, or Yahoo, hoping to be a part of the next dot-com rush by maybe finding a company that will experience some explosive growth, or you can invest in health care stocks like Johnson and Johnson. Technology and health care stocks are known as sector stocks, one of the many available investment options that are available to you as an investor. Other types of sector stocks may include Public Utilities, Mining stocks, or even Pharmaceutical stocks.

You can find stocks that are cyclical in nature, their price is affected by what is happening in that industry, and if that industry is doing well as a whole, then those stocks will perform better and experience more growth, whereas if that industry is performing poorly, the stocks will reflect that and now show as much growth. The automobile industry is a good example of a cyclical investment, as consumers have more money to spend due to a good economy, they may decide to purchase a new vehicle, but when times are tough, they may choose to just repair the old vehicle.

There is also another classification of stock, which goes beyond growth, income, cyclical, or sector. Here we are talking about Preferred stock and Common stock. Some of the differences between the two are that in most cases, if a dividend is offered on the stock, a preferred stock dividend is pretty constant in the amount that is paid to the investor, meaning that the payout will not rise and fall as much as the dividends that are paid out on a share of common stock, which may fluctuate higher or lower.
If the company declares bankruptcy, and the assets are liquidated, those that hold preferred stock will be paid back before those that hold common stock, but in some cases, all the investors could loose their money.

Picking a stock can take some time as you see, and it requires a lot of research, but one of the first steps you want to look at is what do you want to achieve, and armed with that knowledge, you will soon find an investment option in stocks that best suits your needs.

For more information on Stocks and investing in stocks, visit http://www.firecreeksystems.com and read about the various options that are available to you as an investor.

Business

Free Pick Stocks Like Warren Buffett Jk Lasser
The Stocks Robot Responsible For Creating 86
Stock Market Chat Chat About Stocks Investment Ideas And The Economy