31 Jan How can you pay for US Shares?
How can you pay for US Shares?
When you buy U.S. shares you need to settle this in U.S. Dollars. As an Australian, you probably only have Australian Dollars. The traditional way of buying U.S. shares is to open an account with a broker who has access to U.S. markets. That broker will operate in one of two ways:
1. You’ll need to send them USD before you can buy a share. This will require you to go to your bank and instruct them to convert your AUD to USD and send it to the broker. The banks will charge a transaction fee of around $35 for this, but this cost is insignificant compared to the fee hidden in the exchange rate.
Have you ever noticed that the exchange rate which the bank gives you is different to the exchange rate that you see quoted on TV? This difference is what the bank is charging you to exchange the currency and it can be as much as 3 to 5%. But once you do this, you’ll have USD available to buy U.S. shares with.
2. Your U.S.-enabled broker might direct debit your Australian bank account, as they do when you buy an Australian share. In this case, the information above about charging a hidden fee in the exchange rate will apply every single time you buy or sell a share. Capital 19 has revolutionised this space, offering its clients fair and transparent pricing. Once your account is open, you’ll need to fund it with Australian Dollars. You can then elect to transfer as much of these Australian Dollars into U.S. Dollars as you like. This transfer is done at a true wholesale exchange rate. This means the rate you’ll get will be the same as the rate you’ll see advertised on TV, with no hidden fees.
This is an excerpt from the book ‘An Australian’s Guide To Investing In U.S. Stocks‘ by Matthew Jones.