May 15, 2021 12:59 AM

Investing in Canadian stock from the USA

Investing in foreign markets offer risks but also good opportunities to increase wealth. The Canadian markets provide a good place to practice international trades.

/ Published 2 years ago

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Looking beyond the USA for stock investment opportunities means doing the research necessary to make good choices. When it comes to having a more global perspective, an investor needs an understanding that other countries’ stock markets do not perform the same or have the infrastructure the USA markets do. Though foreign markets have much more risk than USA markets, many opportunities exist as well. At times the world economy calls for considering foreign investment and these stocks can add value and increase diversification in a portfolio. One foreign stock market to safely practice international investment in Canada’s Toronto Stock Exchange (TSX).

Investing in Canada

Edward Jones states that it believes in TSX especially in its TSX Composite Index. It has tagged opportunities in the energy sectors for a segment of its investors’ portfolios. In an analyst sheet for the growing legalized cannabis industry Edward Jones stated:

“We would consider any investment in the marijuana industry to be speculative. We prefer investors to gain exposure to the health care and consumer staples sectors through companies with a proven track record and a larger sales base.”

Edward Jones known for its proven track record of providing monies even through the Great Recession to its investors remains a conservative investment firm. By supporting Canadian markets with its analyst sheets with its level of conservative money practices tell investors Canada has a high potential of making money for USA investors.

Canadian stock markets have been getting much attention in the news since recreational marijuana became legalized. Startup markets have much more risk than established markets. Edward Jones policies invest in established markets.

The fact they made an analyst sheet makes the point it expects some companies in the recreational marijuana market to become fully established and potential good investments. Edward Jones has not determined which companies yet. It believes that the recent licensing in 2013 means more time needed before seeing what firms will rise to the top. It does recommend several sectors in its analyst sheet for investors that it considers normal risk.

Ways to invest in the TSX

International investing continues to gain ground as investors from all walks of life discover how the global economics.  (Photo by Joseph Morris via Flickr. CC by 2.0.)

Knowing that a significant conservative investment firm has published documents for their investors on the more speculative aspects of the TSX means USA investors should look.

The following lists paths to invest in the TSX market from the USA:

  1.       Buy the TSX stocks directly from Canada
  2.       Contact a brokerage firm and ask if they buy Canadian stock for investors
  3.       Check the professionally managed mutual funds for TSX options
  4.       Check the exchange-traded funds at a brokerage house for TSX options

Recommendations from conservative investment houses for portfolios advise one-third of stock can be international. An investor can request that a percentage of stock come from the Canadian stock exchange.

Be aware

If a Canadian stock lists on the USA market exchanges then the purchase becomes just like one does with USA stock. The advantage of this type of Canadian stock investing gives investors the same framework used in regulation and financial disclosure as American stocks. If not listed on the USA stock exchanges investing in TSX markets becomes more complicated.

Another route to invest in Canadian stocks is mutual funds. Investing in Canadian mutual funds may affect taxes. It depends on how the company gets classified. If classified as a passive foreign investment company, there may be USA tax obligations. A good company selling such mutual funds should tell a USA investor that. Then a financial advisor can inform a person of strategies to lessen that burden.

The IRS has several positions it can take on these type of investments in other countries. It depends on the political climate and what has gone on with an investor and the IRS before determines how it becomes applied. Presently the pattern has been to deal with the taxes upon distribution or when Canada taxes the money. If a person buys a stock within the Registered Retirement Savings Plan of Canada the USA does not tax it. A person doing an RRSP must have Canadian citizenship.

Many investors choose the ETF method of investing. Determine if the foreign company does the over-the-counter exchange (OTC). Many of the Canadian stocks appear on the OTC. Emerging markets in other countries may have intense volatility, but by using ETF groupings, one can lessen the risk. Check with major brokerage firms such as Vanguard and Schwab for ETF Canadian stock. Check if the ETF classifies as a passive foreign investment company since it will affect USA investor’s taxes.

Conclusion

Investing in Canadian markets has the potential of increasing wealth. It takes more awareness and more understanding of the market. As more USA investors and brokerage firms invest in TSX the path will get smoother, options clearer and what gets taxed or not clarified. Many experts have determined investment in TSX markets for USA investors became a good vehicle for growing wealth.

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