How do I invest in NASDAQ?

Summary

  • The most popular method of trading in the NASDAQ from anywhere overseas is using a share trading platform.
  • On many sites, such as eToro, the investor is asked a series of questions. This includes things like annual income but might also include a question to test an investor’s experience and investing acumen.
  • Through these platforms, it’s possible to buy and sell individual stocks listed on the NASDAQ.

As the global economy recovers from the COVID-19 lockdown, which forced thousands of businesses across the world to close down, Australian investors are looking for ways to diversify their portfolios.

While the Australian Securities Exchange (ASX) has over two thousand listed companies for investors to choose from, there are exchanges worldwide offering a lot more choice. One such exchange, which also happens to be the second-largest, is the NASDAQ, and while Australians are geographically situated half a world away from Wall Street, that doesn’t mean they can’t invest in the famed exchange.

GOOD READ: Is it good to invest in Australian stocks?

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The NASDAQ: What Is It?

While The New York Stock Exchange (NYSE) is the largest in the world, it’s followed closely by the National Association of Securities Dealers Automated Quotations (NASDAQ).

The NASDAQ, which currently trades in 25 markets, five central securities depositories in the United States and Europe and one trading house, commenced on Wall Street in New York City in 1971 and now boasts an index of over 3000 listed companies, including tech giants like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).

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As well as stocks, the NASDAQ also lists some of the world’s most popular cryptocurrencies.

In 2007, the NASDAQ officially partnered with the OMX – the Scandinavian exchange group. It currently handles approximately ten per cent of the world’s transactions on securities.

The speedy evolution in technology has made NASDAQ’s electronic trading the gold standard for markets worldwide.

Can Australians invest in NASDAQ?

Australians looking to diversify their portfolio have turned to the NASDAQ to trade and invest in a wider range of stocks and commodities.

The most popular method of trading in the NASDAQ from anywhere overseas is using a share trading platform, such as eToro or IG share trading. Different platforms offer different trading fees, with some platforms charging no trading fees for US exchanges.

Through these platforms, it’s possible to buy and sell individual stocks listed on the NASDAQ.

It’s also possible for anyone to invest in Contracts for Difference (CFDs), which allow traders to speculate on the movement of assets, including stocks. However, it must be stated that this is a considerably far more risky option.

DO WATCH: How can you make money from investing in shares?

How do Australians invest in NASDAQ?

After choosing a trading platform (as previously said, different platforms charge different fees, so it’s important to shop around), the investor will simply need to open a share trading account. To do this, you’ll need to enter your basic details (name, date of birth, postal address etc.) and then provide a primary form of identification, like a passport. You’ll also be asked to share your Tax File Number (TFN). This is important as Australians are required to abide by the Australian tax legislation, which may include Capital Gains Tax, depending on the size of the profits as well as the length of time.

On many sites, such as eToro, the investor is asked a series of questions. This includes things like annual income but might also include a question to test an investor’s experience and investing acumen.

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Investors may also be asked how many years of trading and stock investment experience they’ve had, as well as the investor’s risk versus reward expectations.

While these questions may seem invasive, the site does this as part of the ASIC requirement to protect investors from potentially losing their money in ill-advised trades. Sites such as eToro will not allow those to trade who haven’t scored ten out of ten in a multiple-choice questionnaire.

It should also be noted, the information an investor supplies are kept strictly confidential.

Deposit Funds

Next, the investor will be required to deposit funds into their chosen site’s account. Different exchanges have different minimum deposits, but you can invest as low as AU$50.

The investor is then required to convert their currency from Australian dollars to US dollars. There is usually a small fee associated with this.

Buy NASDAQ Shares

The last step, of course, is to buy shares. This is the tricky bit, so it’s imperative that the investor conducts thorough research before deciding what to buy.

Furthermore, it’s important to lay out some financial goals before getting started. For example: Are you investing for long term gains, or are you trading stocks daily? Answering these questions will determine your investment strategy.

Virtual Investing

A good way to introduce oneself to a foreign market is to begin by virtual investing – investing fake money. Most platforms have this feature, and it allows people to trade without the risk of losing any real money. It’s a great way to learn, but it’s also virtual. That may sound obvious, but things are very different when there’s real money at stake. Feelings such as fear, which can be detrimental to an investor, if not adequately managed, are notably absent (or at the very least “virtual”) when investing with fake money.

But that’s another subject for another day.

Good luck and good investing!


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