With so many financial brokers offering advanced online trading platforms to their clients in this modern era, it is now quite easy to trade global financial markets using a single platform from almost anywhere in the world. In this modern era, aside from trading online being fairly easy, the process of opening brokerage accounts is even easier especially since it more or less happens exclusively online these days.
Due to the fierceness and rising competition among online global brokerage firms, and with traders being the major beneficiaries by having easier access to global exchanges at reduced trading costs, the options to access global financial markets for a trader based in the Middle East are now plentiful.
One sure way of investing in the United States stock market from Dubai would be to open an account with any of the locally – based brokers that can provide access to international markets online. Or you can even choose to simply open an account with any of the top online brokerage companies that are home to the major financial markets such as the United States.
Have it in mind that local brokers are able to offer a one – stop shop that can expand traders’ access beyond the GCC markets such as Dubai and Saudi Arabia to reach major global exchanges such as the NYSE and LSE. As long as these local brokers can provide competitive rates when it comes to execution costs, it would be ideal to link up with a local broker with international access rather than dealing with a foreign broker even though dealing with a foreign broker may have additional benefits such as access to better online platforms and better customer service.
Nonetheless, almost any broker with global coverage is expected to be able to provide access to the major international equity markets. Have it in mind that most brokers now allow clients to open accounts online, so there should be little stress in terms of setting up an account whether locally or abroad.
However, one crucial factor to consider is the fact that with a foreign broker, funds will have to be kept outside of the United Arab Emirates. And to some people this may carry an added element of risk, as most prefer to deal with local institutions.
Tips to Consider When Investing in the United States Stock Market from Dubai
Indeed trading stocks in the U.S. market is not only for American citizens. Even though U.S. stocks and bonds are regulated by U.S. law, there are no direct provisions prohibiting non – U.S. citizens from investing in the U.S. stock market and many investment firms offer a viable platform to international clients who wish to invest in U.S. stocks. Below are major tips to keep in mind to ensure success in this endeavour.
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Restrictions And Regulations
For your information, the Primary Goal of the Patriot Act, passed after the 9/11 terrorist attacks, is to prohibit organizations and individuals linked to terrorism from financing their illegal operations through American markets. It simply entails that brokerage firms are mandated by law to verify customer identities and report any suspicious account activity to the government. Note that these regulations, of course, do not have an effect on the vast majority of individual international investors. However, you should always make sure to work with a reputable international broker to ensure that you are complying with the array of ever – changing regulations that govern U.S. stocks.
Understand the Tax Implications Of U.S. investments
Since your country of residence is the United Arab Emirates, you are not subject to capital gains tax. It simply means that your brokerage firm will not withhold that tax from earnings on international investments. Nonetheless, most countries always mandate residents pay capital gains tax on money earned in foreign markets, so you may have to report the income and capital gains at home.
In addition, earned dividends tend to be taxed as income for non – resident foreign nationals. Non – resident foreign nationals in the United States are subject to a flat 30 percent tax rate on their income. Earned dividends, which come directly from the U.S. companies you invest in, are considered income. Also note there are some situations in which you may be subject to a lower rate, depending on any treaties your home country has with the U.S. and if the dividends are interest – related.
Choose the Right Broker
Have it in mind that most international traders will have no problem opening up an account and trading the US markets. However, as a non US citizen who has never invested in the US stock exchange, choosing the right stock broker can be very daunting. For beginners, you may end up choosing a broker who promises everything only to end up providing nothing. Also, it can be quite challenging to compare which broker is worthy and who is not.
Howbeit, one important factor you need to remember is that there are rules and regulations that govern the opening of a brokerage account if you are a non US citizen. So before you open an account, it is wise to consult with the brokerage firm. There are firms that will allow online applications while others will require paper filings. Also there are brokers who will demand for legitimate visa information and the W – 8BEN form among other requirements. However, Factors to Consider When choosing a brokerage firm include;
- Products offered: It is very pertinent to consider the type of products offered by the broker. This should go hand in hand with geography. For example the brokerage firm may offer access to top markets like the London Stock Exchange, NYSE and NASDAQ but not Japan and China. When it comes to products, look for a broker that allows you to trade with all US stocks as well as mutual funds, forex and futures among others.
- Security: This tends to be very important especially when it comes to your funds. One feature to analyze is the platform’s security. Does it have a valid SSL certificate or not? If you want to know whether a broker’s platform is secured with SSL, check the URL. It should start with “https” and not “http.” It is also important to consider what investor protection law you are under.
- Pricing: What is the broker’s minimum balance? Is there a minimum fee charged for every trade? What about withdrawal fees? Does the broker charge any inactivity fee? Learning more about pricing will help you select a broker who is favourable to your budget.
Avoid Trading Over activity
Note that checking in on your stocks once per quarter, such as when you receive quarterly reports, is huge. But it is hard not to keep a constant eye on the scoreboard. Have it in mind that this can lead to overreacting to short – term events, focusing on share price instead of company value, and feeling like you need to do something when no action is warranted.
Anytime one of your stocks experiences a sharp price movement, take your time to find out what triggered the event. Is your stock the victim of collateral damage from the market responding to an unrelated event? Has something changed in the underlying business of the company? Is it something that meaningfully affects your long – term outlook?
In the business of stock trading, rarely is short – term noise (blaring headlines, temporary price fluctuations) pertinent to how a well – chosen company performs over the long term. It is how investors react to the noise that really matters. This is the point where that rational voice from calmer times — your investing journal — can serve as a guide to sticking it out during the inevitable ups and downs that come with investing in stocks.
Plan ahead for shaky times
Note that all investors are sometimes tempted to change their relationship statuses with their stocks. But making quick momentary decisions can lead to the classic investing gaffe: buying high and selling low. Always write down what makes every stock in your portfolio worthy of a commitment and, while your head is clear, the circumstances that would justify a breakup.
Best US Brokerage Firms For Stock Traders in Dubai
Always remember you will have to do research on individual brokerages based locally before choosing to explore internationally. Some of the options listed below may allow you to invest in US stocks as a non – US investor.
According to reports, the TradeStation platform provides international accounts to a wide range of foreign citizens. You can access multiple markets across the world using the TradeStation Global service. As a Dubai resident, TradeStation will require documentation such as a passport, driver’s license, bank statement, or additional information to verify your identity. TradeStation offers commission – free trading for stocks, bonds, mutual funds, and ETFs.
Note that this brokerage supports a wide range of currencies, and it allows you to place trades and make withdrawals and deposits in different currencies. According to reports, the minimum to open an account with them is $0 and the fee for trading is $0.005 per share. This brokerage supports also dozens of different countries, including the United Arab Emirates. The documentation required to open a brokerage account is different for each country.
This brokerage is renowned for specializing in CFDs which are available in many different countries. Always remember that the primary product offered on eToro is a CFD. This is a complex financial instrument that comes with a high risk of losing money. You should not invest with this brokerage unless you understand the risk involved. Also note that they offer crypto currency and forex trading on this site. Nonetheless, with a CFD you actually do not own the underlying asset. You are simply investing in a derivative, which is something that derives a price from the value of the underlying asset. Even though the CFD is based on the price of the underlying stock/crypto currency, you do not own the actual asset itself.
Saxo Bank has many entities based on which region it is serving. The fees and services they offer vary based on what country you are in. This is a popular platform for forex trading as well. Saxo Bank is known to support 19 different currencies on the platform. This brokerage offers you access to over 35,000 different financial instruments based on numerous different assets. They work with over 300 different financial intermediaries, and this allows them to offer investment services in over 120 different countries. However, one common complaint about Saxo Bank is that they do have high minimum deposits required in most cases. They offer a variety of different investment vehicles including stocks, ETFs, forex, bonds, options, futures, CFDs and crypto currencies.
This brokerage provides commission – free trading, retirement accounts and most importantly international accounts for non – US investors. This brokerage participates with over a dozen foreign countries. These countries include; China, Hong Kong, India, Israel, Japan, South Korea, Macau, Malaysia, Mexico, New Zealand, Saudi Arabia, Singapore, Taiwan, United Arab Emirates.
As a resident of Dubai looking to invest in United States stock market, it is imperative to know that today you can trade at the NASDAQ and NYSE even though you don’t reside in the US. To make this possible, the first thing you ought to do is to choose the right broker. Always take your time while doing so in order to avoid scammers. Also make sure that you have a social security number or tax identification number. This will ensure that you keep trading as well as filing returns for any capital gains and dividends. Lastly, learn the best strategies to ensure your success.