(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 Philipines?
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 that actually makes sense.
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 our leaders, 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 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 really 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. Imagine, these giant modern companies have the world as their client base which means a greater potential of growth of earnings for them.
In fact, below graph 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 due to 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.
So if you want to know how to invest online and buy or sell US stocks if you’re from the Philippines, you can follow the steps in this blog. I also shared a quick preview in this video.
Stockbrokers for US Stock Market
Popular options for online stockbrokers include Interactive Brokers (IBKR) and TD Ameritrade.
You can open an account with them online while funding can normally be done using a bank wire transfer.
That means you will also need to open a US dollar account in any local bank account which you will use for funding and withdrawals.
Big banks like BDO, BPI, Metrobank, Security Bank normally offer opening US dollar account services.
Another platform you can consider for investing in US stocks is eToro.
I use eToro as my trading platform for now given that I see them offering the best user interface which beginners can easily follow and doesn’t require huge capital to begin. It’s actually much easier to use than our local stockbroker apps.
You can start with USD200 initial capital, and they have their mobile app too. The drawback here is not all US companies are available for trading here unlike in mainstream brokers mentioned. Aside from US stocks, you can also trade other instruments such as currencies (foreign exchange), exchange-traded funds (ETF’s), cryptocurrencies, and other themed “copy portfolios”.
The nice thing with eToro is you can create your online (FREE) practice account so you can explore this without any risk of losing money.
You’re given 100k virtual money you can use to invest in any available asset you want at their actual prices.
That way you see the actual profit/loss updates with your asset picks through time.
Once you get comfortable with how it works, you can then deploy your initial real capital.
Copytrading in Global Markets
Another great feature inside the platform is its Copytrading feature.
If you don’t have the time to actively monitor your investment, you can still achieve what the top traders earn by automatically copying all their trades using this copytrade feature. By doing this, you copy all their buy and sell orders including their risk-management strategy.
Global Investing Webinar
If after watching the video, 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).
PS.Get market updates & stock picks!Get your quick guide for beginners how to start investing in the Philippine stock market and more practical trading tips and tricks. Simply sign-up below (it's FREE!)
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Investing in global stocks means checking stock markets of other countries, which allows you to practically diversify in your portfolio.It's very similar to investing in local stocks, but since we're expanding on geography and other asset classes, we now have more stocks to choose from. Join our FREE webinar to learn more.
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