TRADING
HOW TO INVEST IN THE NEW YORK STOCK EXCHANGE & NASDAQ FROM JAPAN
Are you willing to invest an extra Yen from your balance? The stock market can be a great way to grow your wealth over time, and the New York Stock Exchange (NYSE) and the NASDAQ are two of the world's largest and most well-known stock exchanges. So whether you're a seasoned investor or just starting, US Stocks can be a great way to diversify and grow an investment portfolio. This article describes how to invest in them from Japan.
Buying US Stocks in Japan: Top Trading Apps
Can I Buy US Shares from Japan?
Many Japanese asked if it is possible to invest in US stocks as non-US citizens. Stocks and bonds are regulated by US law, yet, you do not have to be a US citizen to trade in the US stock market; in other words, you may buy US shares being a Japanese citizen. No specific laws prohibit non-US citizens from investing in the different US stock markets like NYSE (New York Stock Exchange) or Nasdaq. Many investment firms cater to international clients.
New York Stock Exchange and Nasdaq: The two most popular markets for investors in Japan
Based on the mythical Wall Street, the New York Stock Exchange (NYSE) is the most extensive in the world by market capitalization where shares and bonds of the titanic North American corporations are traded. Suppose a saver from Japan invests in stocks or bonds listed on the New York Stock Exchange. In that case, he/she is investing in the historically strong US Dollar and diversifying his investments with the most traded financial instruments worldwide.
Giant American Corporations' stocks are the most sought-after financial assets. Below we list some of the most popular stocks of these two Stock Markets, starting from the ones that trade on NYSE:
Berkshire Hathaway: An investment corporation owned by the legendary investor Warren Buffet.
Alibaba Group: China's e-commerce giant, owned by Jack Ma.
Visa: Largest provider of credit cards in the world.
Johnson & Johnson: An industrial colossus that produces articles of mass consumption.
J.P. Morgan Chase: Diversified Financial Group.
Exxon Mobil: World's largest oil and gas producer.
Walmart: Number 1 supermarket chain worldwide.
Procter & Gamble: Another mass consumption industrial giant.
Mastercard: Provider of credit cards worldwide.
Walt Disney: The well-known entertainment and content company is listed on the NYSE.
Among the Nasdaq's most popular stocks are the tech giants:
Apple: The company that revolutionised the mobile business by creating the iPhone needs no further introduction.
Meta: Another one that doesn't need an introduction: The largest social network worldwide, owner of Facebook, Instagram and WhatsApp.
Amazon: The most popular eCommerce platform in the United States and the world.
Netflix: Application of series and movies with the most significant number of subscribers worldwide.
Google (Alphabet): The Well-known tech giant, we only need to mention that Google's shares are called "Alphabet" on Nasdaq.
Tesla: Elon Musk's vision.
These are unfinished lists of the most well-renowned shares; many internationally recognised companies and brands are available to invest in. A rounded way of investing is to invest in the S&P500 index, which groups the top 500 companies that are part of the New York Stock Exchange and the Nasdaq.
S&P500: The Index that Best Expresses the two largest Stock Exchanges jointly
Standard & Poor's 500 Index, also known as S&P500, is one of the most extensively respected stock market indices in the United States (The other one is the Dow Jones). In addition, the S&P 500 is considered the most representative index of the US real economy.
The index is based on the market capitalisation of 500 large companies that issued shares on the NYSE or the NASDAQ markets. The S&P500 represents approximately 80% of the entire capitalisation of the United States Stock Market. The S&P Dow Jones Indices rating agency determines the S&P500 index components and their weighting. It differs from other indexes in the United States financial markets, such as the Dow Jones Industrial Average or the Nasdaq Composite index, in the diversity of the items that make it up and its weighting methodology. It is by far the most invested stock index globally. Many people consider it the trend marker of the North American economy; if the S&P500 goes up, the economy is doing well.
Investing in a financial instrument replicating the S&P500 Index is an excellent way to invest in a good portion of the North American economy through the shares of its corporate giants.
The New York Stock Exchange (NYSE) is an iconic financial institution on Wall Street in New York City. The picture of the NYSE captures the grandeur of the imposing building that houses the exchange, with its neoclassical facade and columns that evoke a sense of power and stability. The institution proudly waves the American flag on the building's exterior, emphasizing the NYSE's importance to the American economy.
What is the minimum amount to invest in US Shares from Japan?
The minimum amount required to invest in US stocks can vary depending on the brokerage firm you choose. Some brokers have no minimum investment requirements, while others may require a minimum deposit of 200 US Dollars or more. You don't have to be a millionaire to buy US Stocks; almost everybody can access an investment in the US Stock market.
Additionally, it is indispensable to note that while you can purchase fractional shares, some brokers may have restrictions on the minimum amount you can invest in a single stock.
It is always a good idea to compare the fees and minimum investment requirements of different brokerage firms before deciding where to invest your money. The alternatives that we presented before are very accessible.
How to Open a Trading Account to Invest in the New York Stock Exchange from Japan
Opening an investment account with an Online Broker is a process that is completed online and requires:
First, choose the broker that best fits your investment goals.
Upload an ID and a proof of address (electricity, water bills, etc.), through the Broker's App or via email.
Make sure to choose the right base currency of the account. With some brokers, changing it once you open the account can be painful. Trading Accounts may be based in US Dollars (USD), Euros (EUR), Pound Sterling (GBP), Swiss Franc (CHF), Australian Dollar (AUD) as the base currency. Practically all of them offer the option in US Dollars or Euros.
Once the account has been approved by the Broker, it's time to deposit cash. The depositing and withdrawing money methods are usually Credit Cards, Bank Transfers or eWallets (PayPal, PaySafe, Skrill, SafetyPay, Neteller, among many others). The available options to deposit funds will depend on each Broker. A vital fact to mention is that all of the Brokers presented above allow you to use a simulator on their platform, that is, they allow testing their Demo account, which is totally Free. In other words, you can open a Demo account, try the platform, and then decide whether to deposit money or not.
But I am not an Investment Banker... Is it easy to invest?
Online Brokers allow investing in the New York Stock Exchange straightforwardly through optimized apps that grant easy and fast access to the US financial markets. In fact, most platforms resemble a social network or any other phone app: They are designed so that the investor can learn and start trading very quickly, without the need for much prior knowledge. Literally, to buy shares of, for example, Apple, or to invest in a financial instrument that replicates the S&P500 index, you have to:
open a trading account as explained before,
deposit money,
Search for "Apple" or "SP500" on the Broker's Trading platform, and
press the "Buy" button.
And, done, you are officially investing in American related financial assets. If you wish to move forward, check out the 4 options that we have presented initially, which are, in our opinion, the best ones to deal with in Japan.
Do Japanese Pay Tax on US Stock Trading?
While helping to write the US Constitution, Benjamin Franklin said: "Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes."
However, things aren't that bad. Since you would be classified as a non-resident alien (you are a foreigner, and you don't live in the US) by the IRS (the US tax watchdog), so, you wouldn't be subject to Capital Gains Tax, but only to the Dividend Tax of 30%.
And How do you pay the dividend tax? Your broker would withhold the amount, whenever the company you invested in pays dividends to your trading account. For example, if you invest in 100 Apple shares and pay dividends for $0,20 per share, you would get $20 minus $6, that is, a net amount of $14.
Bottomline
The US Stock Market is by far the largest in the World. When investing there, you are technically investing with the US Dollar, the most sought-after currency. As a quick conclusion, US stocks can be a good investment for a variety of reasons:
Historical returns: Over the long term, the US Stock markets have produced attractive returns for investors. For example, the S&P 500 Index has delivered an average annual return of about 9-10% over the past few decades.
Diversification: Investing in a mix of U.S. stocks can help spread your investments across different industries, sectors, and geographic regions, reducing your overall portfolio risk.
Liquidity: U.S. stocks are generally highly liquid, meaning you can buy and sell them relatively easily and quickly. This can make it easier for you to access your money if you need it quickly.
Opportunity for growth: US companies have growth potential, and as they grow, their stock prices can increase, providing a potential source of capital appreciation for investors.
However, it's essential to remember that investing in the stock market involves risk, and past performance is no guarantee of future results. As with any investment, it's vital to research, consider your risk tolerance, and consult a financial professional before making any investment decisions.