For the past decade, the US stock market have had a stellar performance. Record earnings and the rounds of easing instituted by the Federal Reserve have driven markets to fresh highs. The majority of the FAANG stocks -Facebook, Apple, Amazon, Netflix and Google- are currently worth over USD1 trillion with Apple topping the list with a staggering USD 2.4 trillion. Considering that Apple was worth just under USD250 billion in 2012, you could have made 10x your money since then. So if you are an Egyptian citizen and want a piece of the cake, then you’ve come to the right place. In this article, I will detail the steps and requirements needed to be able to invest in the US stock market.
Are there any restrictions or limitations?
First of all, no US law prohibits Egyptian citizens to invest in companies in the United States. In contrast, investment banks and brokerage firms are looking for ways to increase their offerings to international investors including Egyptians.
Since you do not reside in the US, you would be classified as a non-resident alien by the IRS -the US tax watchdog-. As a result, you would only be subject to a Dividend Tax and wouldn’t have to pay a Capital Gains Tax.
The long-term capital gains tax rates in the United States are 0% , 15% and 20%, depending on your level of income. The Dividend Tax, on the other hand, is substantially higher at 30%.
Do I have to report dividends to the IRS?
Generally, your broker would do it for you. Your broker would withhold the amount, when the company you invested in pays dividends to your trading account. So if you own 100 shares in Amazon and get USD2 per share, you would only receive USD200 – USD60 = USD140. The USD60 would be held by your broker to cover your Dividend Tax.
Most brokerage firms have no minimum deposit restrictions. Of course, this varies from broker to broker but all 5 brokerage firms mentioned below have a minimum deposit of zero.
What do I need to open an account?
To open an account in a US brokerage firm you’ll need the following documents:
- Copy of your Egyptian passport
- Copy of bank statement
- Utility bill such as gas, water or electric for proof of address
- Fill the form of your brokerage firm (incl. Contact Info, Employer etc.)
How can I transfer money to my new trading account?
If your bank is located in Egypt then funds will need to be sent by a wire transfer. You would provide your bank the wire transfer instructions of your brokerage firm. Most brokerage firms do not charge a fee for an incoming wire transfer deposit, however there usually is a outbound wire transfer fee to send funds from your trading account to your bank in Egypt. This outbound wire transfer fee is generally around USD25 but varies from brokerage firm to another.
How long does the approval process take?
After you submit your application and send the supporting documents required, it generally takes up to 7-10 business days for the application to be processed.
- Make sure to choose the right base currency of the account. With some brokers, changing it once you open the account can be painful
- Make sure to have a good understanding of the fees and commissions charged by your broker
- Depending on your account type you can buy stocks listed on major stock exchanges such as the NASDAQ and the New York Stock Exchange (NYSE). You can also buy ETF’s, Mutual Funds among other securities
- Make sure to know the risks involved with investing
Top Trading Platforms
According to StockBrokers, the following are the top 5 trading platforms based on 256 variables including commissions, minimum trading balance among other variables:
- TD Ameritrade – Best overall, best for beginners
- Fidelity – Best for everyday investors
- Charles Schwab – Best IRA accounts
- Interactive Brokers – Best for professionals
- E*TRADE – Best web trading platform
Type of Account
A cash account is a type of brokerage account in which the investor must pay the full amount for securities purchased. In a cash account, you are not allowed to borrow funds from your broker to pay for transactions in the account. recommended especially if you are not a professional trader
A margin account is a type of brokerage account in which your brokerage firm can lend you money to buy securities. Of course, you will incur interest costs when you buy securities on margin. not recommended unless you are fully aware of the risks
You are most likely going to open an Individual Account.
That’s all you need to know before opening a trading account in the US. For more information about how to invest check out this article here. Now go make some money!