In recent times, there’s been a surge in interest among Zimbabweans about investing in foreign markets, particularly the stock markets of the United States and Canada.
This curiosity stems from a desire to diversify investment portfolios beyond local opportunities and tap into the economic strengths of these developed nations.
Here’s a primer for those looking to understand the basics of investing in these markets from Zimbabwe.
Understanding the markets
The United States stockmarket: Dominated by exchanges like the New York Stock Exchange (NYSE) and NASDAQ, the US market is the world’s largest by market capitalisation. It’s known for its depth, with thousands of companies listed, offering a variety of sectors from tech giants to energy corporations.
The Canadian stock market: The Toronto Stock Exchange (TSX) is the third largest in North America. It’s particularly noted for its significant representation in natural resources, financials, and increasingly, technology firms.
2) Why invest abroad?
Diversification: Investing in different geographic regions can reduce the risk associated with local economic downturns.
Access to global giants: Companies like Apple, Microsoft, and Shopify offer growth opportunities that might not be available in smaller markets.
Currency diversification: Holding stocks in USD or CAD can hedge against fluctuations in the local currency.
3) Steps to start investing:
- i) Educate yourself: Start with understanding basic investment concepts like stocks, bonds, mutual funds, and ETFs. Each of these investment options comes with risks and potential for upside.
It’s important to do research or conduct practitioners who understand these securities. Consider booking a consultation on my website on www.streetwiseeconomics.com.
Websites like Investopedia or beginner courses online can be very useful.
- ii) Choose a broker: Look for a brokerage firm that allows international investors. Canadian brokerages like Questrade or Wealthsimple are user-friendly for beginners and often have no minimum investment. Ensure they offer access to both US and Canadian markets.
iii) Open an account: You’ll need to go through the broker’s process for foreign investors, which might include providing proof of identity and address. This is known as Know Your Customers (KYC),
- iv) Fund your account: This can involve currency conversion, which might incur fees. Some platforms offer competitive rates for this.
- v) Research and select investments: Begin with established, large-cap companies which tend to be less volatile. Consider ETFs for broader market exposure with less individual stock risk. Consider booking a consultation on my website on streetwiseeconomics.com if you need detailed research and analysis of investment portfolio.
- vi) Understand the tax implications: There might be withholding taxes on dividends from U.S. companies, and you’ll need to understand how capital gains are treated in your local tax regime.
vii) Monitor and adjust: The stock market requires attention. Use tools provided by brokers for analysis or consider passive investment strategies like index funds for simpler portfolio management.
Tips for beginners:
Start small: Don’t invest more than you can afford to lose. Begin with what you’re comfortable with.
Dollar-cost averaging: Invest a fixed amount regularly to mitigate the risk of market timing.
Patience is key: Stock markets can be volatile. Long-term investment often yields better results.
Stay informed: Follow market trends, economic news, and corporate announcements related to your investments. If you want regular updates on the stock market, consider subscribing to my weekly newsletter via www.streetwiseeconomics.com
*For more personalised insights or to delve deeper into topics like international diversification or specific stock analysis, you can reach out to Isaac Jonas, a Canada-based economist and consultant at Streetwise Economics. His website is www.streetwiseeconomics.com and email: isacjonasi@gmail.com. Isaac shares regular insights via his social media handles and YouTube Channel (Streetwise Economics), focusing on the dynamics of the US and Canadian capital markets. His articles aim to educate and empower investors, but remember, these insights do not constitute investment advice. Always consider consulting with a financial advisor for tailored investment strategies.