International Advice re buying US shares

Hi guys,

I'm considering buying US shares for diversification and would very much appreciate your advice on the best way to do this. I've never bought US shares before thus the experience is very limited.

Let's say I'd like to invest approx. $40k AUD. I'm currently with cba and they seem to be able to do this via commsec. I'm not sure about the exchange rate they apply though and whether there are any better options in terms of commisions charged, exchange rates, etc.

Also, I'm considering whether to invest cash saved or create a $40k split for my PPOR home loan, repay it and reborrow to invest in shares. If I understand it correctly the interest on the borrowed money would then be tax deductible in such case. Is it worth doing so?

 

Yes, it's a good way to debt recycle.

 

I'd consider a EFT such as VTS.AX if you want diversification into the USA. Otherwise I'd say you are putting lots of eggs in one basket.

 

I have considered ETFs. However, at this stage I'm more interested in certain US shares.

 

Thanks Jess. Alternatively I'm considering whether it's better to invest in my spouse's name as she is a lower income earner. Thus, minimizing future CGT when we decide to sell.

 

After some googling looks like one of the easiest options is to go with commsec. Also, one of the cheapest I suppose. They've recently decreased their brokerage fee to 0.31% max.

 

If you look at the exchange rate,in us dollars that only gets you above mid 28k in US dollars,
and with the US markets,once you calculate the key stats,and make future plans on those past facts and the sometimes razor's edge market factors,why not just invest in ASX Llisted..imho..

 

@willair one of the reasons is the diversification because of the falling aud and it does not look like it's going up anytime soon...

 

I hope it works for you,i'm just saying find what works for i don't know many people that have made bucketloads from trading in the US markets,and that may be another problem value wise which way the aussie dollar goes,i try and target new listed companies on the asx and companies that through bad management media go into freefall and sometimes you potentially only learn from mistakes,but every now and again,do the numbers on a startup "BWX" on 40k with entry costs at $2.21..imho..

 

Just make sure you keep an eye on the AUDUSD chart - if that trend looks like changing, you'll want to get out. A winning US share can end up a loss if the currency doesn't play nice.

The currency factor means you've essentially got two trades on - a short AUD trade as well as your US shares.

 

Exactly right @Jess Peletier. Have to take into account those two factors.

 

US market is much more diversified, and so many more opportunities than our very limited market.

With a commsec account you transfer a fixed amount, at the current exchange rate. Obviously the rate can move against you so you will need to be prepared for that. You could make share gains, but that may turn into a loss via an adverse exchange rate. You may be able to hedge against that in buying AU stocks with US exposure.

Cost per trade is similar to Australia.

Make sure you fill out a W-8BEN so you don't get taxed extra.

Good luck!

 

Thanks @gman65! Have you used commsec for this? Do you know if their exchange rate is good enough to use?

 

Yes, I am with Commsec.. Their new platform is much better integrated into the existing website too, but is a bit different to normal commsec.

Well as an idea of conversion, right now they quote 0.7231 AUDUSD and a yahoo live quote is 0.7233. So quite good.

 

That's a very nice exchange rate.

 

@gman65 do you know if commsec has any conversion fee for currency exchange?

 

I have an Interactive brokers account open in which I buy/sell US shares. I think the Commsec account is fairly limited in what shares you can actually purchase.
On the bright side though I think the Commsec account will allow you to leverage US shares if purchased through their platform (not sure on this though) (and the Commsec Margin loan is expensive compared to others).

Also watch your income levels. Once they hit a certain level in the US, you will need to complete a US return. I don't think (I may be wrong) the W-8BEN form covers you once you go over a certain level of income.
You will also have to report any income earned (dividends/capital gains) in your Australian tax return and pay the required tax on it.

Blacky

 

Thanks @Blacky! What are the features of IB that you like most?

I've heard a lot of IB. Might need to do more reading about them.

 

I could open an account with them and purchase US stocks.
I could open an account with them online.
They are cheap.
Their platform is simple to use and their helpdesk is...helpful.

I dont do a lot of trades. Just make the odd purchase from time to time. I think I have made a total of 4-5 transactions in total.

Blacky