(If you want a quick guide for beginners how to start investing in the Philippine stock market, you can download your free ebook here.)
Looking to trade stocks in the US Stock Market while you’re in the Philippines?
Here’s a simple guide on how to buy and sell US stocks even with little capital.
How to Invest in US Stocks (even if you’re in the Philippines)
Oftentimes, we start with investing in local companies we’re familiar with, having been exposed to and aware of their products and services.
This includes investing in so-called blue-chip companies we have in the Philippines such as SM & BDO by Sy Family, Ayala Corp, Ayala Land, Jollibee, Meralco, telecoms Globe and PLDT, and more.
And this approach of investing actually makes sense, especially for beginners.
In fact, a useful bit of wisdom is to NEVER invest in something we don’t understand.
So by investing in these giant companies, we protect ourselves from unnecessary huge volatility in companies we don’t have visibility on.
At least if we hear any update in local news, we can easily respond and adjust.
But there’s one huge problem with investing that way, or more specifically, sticking to one asset class – such as Philippine equities.
Challenges in Philippine Stock Market
The first problem touches on the importance of diversification.
For instance, if our economy, or our politics, or any other factor is not aligning with our expectations in a company, it will shortly follow that our investments in these local companies will suffer.
And because all these businesses are operating in one geography under a single government policy and economic climate, we as investors have limited if not zero control over how to “balance” the impact of these factors.
For instance, the rift between Philippine president Duterte and the ABS-CBN media company has brought the stock of ABS-CBN down by as much as 80+% through the years of the administration.
Even big blue-chip company Ayala Corporation (AC) was not spared when existing deals of the government with Manila Water (a company under AC) began to have issues.
Things like these are normally outside of our control as retail investors so when this happens, it’s only logical to PAUSE investing in them during those times and START looking at other better-performing assets elsewhere. This is exactly what diversification should bring us.
Diversification enables us to spread risk across many asset types and increase our opportunity for profit by increasing the opportunities for catching successful trades.
Proper diversification requires bets on many different instruments or asset classes.
It could be another company in a different industry or a totally different asset in a totally different country.
And that’s what I want to share in this blog.
Why Invest in US Stock Market
I started diversifying into the US stock market given that
(1) the United States has the biggest economy in the world and arguably the most powerful central bank in the world which is The Federal Reserve System (FRS), often just called “the Fed”.
(2) the US also contains the biggest and most innovative global companies at the present too such as Apple, Google, Facebook, Amazon (and more) which we’re certainly familiar with. If you think about it, these giant modern companies have the entire world as their client base which means a much greater potential of growth of earnings for them.
In fact, the graph below compares one stark difference in the way the US stock market index recovered during the 2019 COVID pandemic period as opposed to our own Philippine Stock Exchange index (PSEi). While the US index has reached new all-time highs, the Philippine market benchmark index remained negative at -10%.
One primary reason for this difference is the nature of companies comprising the two market indices.
While US technology companies under the FAANG group (Facebook Amazon, Apple, Netflix, Google) are clear beneficiaries of the shift to the online way of living and working, our top local companies in the Philippines (SM, Jollibee, Ayala Corp & more) are really of traditional brick-and-mortar type with huge challenges ahead before their full recovery.
Stockbrokers for US Stock Market
Popular mainstream options for online stockbrokers for Filipinos interested in the US stock market include Interactive Brokers (IBKR) and TD Ameritrade.
You can open an account with them online while funding is done using a bank wire transfer.
That means you will also need to have a US dollar bank account here in the Philippines which you will use for account funding and withdrawals. Big banks like BDO, BPI, Metrobank, Security Bank normally offer US dollar bank account services.
Another platform you can consider for investing in US stocks is Tiger Brokers.
This broker supports trading U.S. stock, H.K. equities, ETFs, options, and futures as well as margin trading for investors.
Using this platform allows you to enjoy some of the most competitive commission fees in the market.
They also have a mobile app you can use for easy access of your US trading account.
Funding is also via bank wire transfer which means you need to have your US dollar-denominated bank account ready.
Tiger Brokers Security
In terms of fund security, Tiger Brokers holds a Capital Markets Services Licence under the Securities and Futures Act (Cap.289) by the Monetary Authority of Singapore (MAS).
Your funds and investments are also kept in a segregated bank account and custodian to ensure it does not commingle with other accounts.
Get your Free Share of Starbucks too!
You can also take advantage of their welcome gifts for those new people signing up with them.
As of today (May 31 2021), you can receive a free share of Starbucks, for example, when you make an initial deposit of at least 2000 SGD or equivalent currency.
You can also enjoy 60 commission-free trades for U.S. stocks, H.K. stocks, Singapore stocks and Futures within 180 days after signing up.
They also have a Virtual account so you can try our the platform first before even making your first ever trade.
Gotrade mobile app
Gotrade is another mobile-only platform you can use when it comes to trading US stocks for those living in the Philippines.
It’s super intuitive app and provision of fractional shares are what attract many to try it out now.
You can even start buying your first US stocks with as low as $1 (less than Php50) only.
Ready my review about Gotrade US trading mobile platform here.
(You can actually get up to $6 for free just by signing up.)
Global Investing Webinar
If you’ve got questions on how to start and more, then you can always join our webinar to find answers for those.
Register here for our Global Investing Walkthrough and other sessions (it’s free).
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