Buying US Stocks In Canada: Top 6 Brokerages for 2024

It's no secret that the US stock market is one of the most lucrative in the world. If you're looking to invest in some of America's top businesses, buying stocks on a US exchange is the way to go. But what if you're based in Canada? Can you still take advantage of these opportunities?

The answer is yes, but finding a good brokerage that offers cross-border trading can be tricky. We've compiled this list of the top six brokerages for buying US stocks in Canada, and we’ll explain how to buy them and what to look for.

The Best Online Trading Platforms for Buying US Stocks From Canada in 2024

Buying US stocks from Canada requires some thought, as there are so many options to choose from. For that reason, we’ve compiled a selection of online trading platforms that will enable you to do just that. Take a closer look at the platforms on offer and see if any are a good fit for you.

Why Invest in US Stocks From Canada?

It’s a worthwhile life skill to know how to buy stocks and where to look for them. In the past, it was way more expensive to invest in global companies, so not many people chose to do it. Nowadays, with so many different trading platforms out there, investing in US stocks from Canada is easier than ever. Indeed, the brokerage fees per trade are often less than $10.

It is wise, however, to double-check that the trading app you want to use offers access to US stocks. Similarly, always check the fees the platform charges. This way, there’ll be no surprises, and you’ll be familiar with all terms before you start trading.

There are a few reasons why investing in US stocks from Canada really does make sense: 

• You’ll diversify your portfolio. By investing in multiple exchanges across different industries and looking outside of Canada, you’ll diversify your holdings and will be able to mitigate the risks of trading. For example, if you notice that your Canadian stocks aren’t doing great, you can always focus on the US ones. It’s wise to think about the ideal number of stocks in your portfolio to optimise your earning capacity. 
• On the other hand, the US economy is way stronger than the Canadian one, so you might expect the US market to offer more opportunities. For that reason, more people buy US stocks in Canada, and not the other way around. The two most significant stock exchanges - the NASDAQ and the NYSE - are based in the US, and with them, you’ll have a wide variety of options for trading. If you want to invest in successful companies like Apple, Netflix, Google, Amazon, and Facebook, you’ll need to look outside of Canada.
• Not only is the US economy stronger than Canada’s, but it’s arguably the strongest in the world. Over the past decade, the S&P 500 of Wall Street’s index had an average return of approximately 14.1%, whereas Canada’s equivalent was only 6.9% for that decade. 

How to Buy Us Stocks in Canada in 2024

With multiple options, buying US stocks from Canada is now straightforward. You’ll need to open a trading account that offers access to US stocks, set up the account, and buy the stocks you want. However, there are a few specific things to look for if you’re a Canadian buying US stocks.

Always be mindful of broker fees, as each has a different fee schedule. While some brokers will offer commission-free trades, others will charge all the fees they possibly can, so it’s imperative to do proper research.

Exchange fees vary depending on the broker, but there are also other types of fees you might be charged. There are monthly fees some brokers ask for, and even inactivity fees for those periods when you don’t use the platform as much as you should.

Before you buy US stocks in Canada, check whether your broker offers market data and quotes in real time, and whether this service is free of charge. Pay attention to which countries you can trade in and how well-optimised the platform is.

Of course, not everyone is a trading expert, so be aware that the trading experience will be confusing if you’re a beginner and don’t have access to clear resources you can count on while trading. For this reason, the platform you choose must have educational resources to help you with any doubts you might have along the road.

You should also look for apps that offer stock price alerts, because hardly anyone has time to stare at the screen all day. This way, you’ll be notified about all significant changes to your portfolio. 

The Fees You Should Be Aware Of 

When it comes to buying American stocks in Canada, you should think about two types of fees: commission and currency conversion fees. 

Commission fees should be at the top of your list when looking for a suitable broker, because you can be charged anywhere from a few dollars to over $100 per trade you make.

Currency conversion fees are charged by your broker when you buy American stocks with Canadian dollars. They typically range from 1% to 4%. This information is crucial, because you’ll want to be sure you’re making a profit when you decide to sell your stocks. It’s imperative to realise when it’s the right moment to sell stocks in order to make the most of the situation. 

Potential Risks of Buying US Stocks from Canada

One of the key risks when buying US stocks from Canada is not being properly informed. After all, you might not be as knowledgeable about American stocks as you are about TSX trading. For this reason, it’s essential to familiarise yourself with the trading process itself, because the price you pay could be a significant financial loss. 

On another note, you need to be very careful with the possible tax implications of buying US Stocks in Canada. Making mistakes when declaring your income could get you in a lot of trouble, so it’s essential to check where and how you need to do your taxes. 

Canadian citizens are taxed on their income from both Canadian holdings and worldwide income. Paying taxes to the Canadian government will not do the trick if you’re holding US assets; you’ll also have to pay taxes to the IRS. Specifically, those who hold US assets need to pay 10% withholding on interests and 15% withholding on dividends. 

Norbert’s Gambit - What Is it and How Can it Help?

Now that you’ve found an answer to the question “How are US stocks taxed in Canada?”, you should know about a very useful technique that could help you buy US stocks. Norbert’s Gambit is a conversion technique that helps you eliminate exchange fees from USD to CAD and the other way around. 

To use Norbert’s Gambit, start by opening a discount brokerage account with Canadian dollars and American trading accounts. Next, you’ll need to buy a dual-currency ETF like DLR using your CAD account. After you finish settling the order, contact your brokerage to convert your DLR shares to USD in your account. They will show up as DLR.U. Finally, sell your DLR.U shares, and you’ll have USD in your USD trading account. When all of this is done, you can trade US stocks in Canada without worrying about exchange fees.

Additional Ways To Invest in US Stocks from Canada

Another option you can make use of is Canadian Depositary Receipts (CDRs), which make US stocks more affordable for Canadian citizens. So, what is a CDR?

CDRs are instruments representing share ownership in American companies. Therefore, if you buy an Amazon CDR, that would be the same as owning a specific number of Amazon shares. This number is called the “CDR ratio.” Just like stocks, DRSs pay out dividends, give voting rights to the shareholder, and trade on an exchange. For many, this could be a great alternative to trading US stocks in Canada. 

Possibly the greatest benefit of CDRs lies in trading in CAD. Apple stocks normally can’t be bought using Canadian dollars. However, with Apple CDRs, you can buy with CAD and also sell in the same currency, thus saving on conversion from CAD to USD. 

CDRs are not the only remaining way for you to invest in US stocks from Canada. One option that could be lucrative for you is buying American depositary receipts. They are typically traded for a higher price than the stocks themselves, but they could be worth it with the amount you save in conversion fees. 

Bottom Line

If you’re interested in buying US stocks in Canadian dollars, there are a few things you need to know. First, you need to find a brokerage that offers this service. Second, you need to know the fees associated with buying and selling US stocks. And third, you need to understand the currency conversion process. 

Entering the US market can be a wise business decision, and it will help you diversify your portfolio. That said, bear in mind that aside from all the perks, there are risks that you should consider before buying US stocks from Canada.