Summary for those in a hurry: Although large US companies (e.g. Coca Cola, Boeing or IMB) can also be traded via German trading systems (e.g. XETRA), we advise small investors, due to the low liquidity in Germany, to trade US securities on the US market with CapTrader, a specialized and low-cost online broker.
“Corporate America” is considered by many investors to be the backbone of the global economy and it is no coincidence that the Wall Street is still one of the most important financial centres of the world. With several thousand listed shares and a trading volume of more than one trillion US dollars in December 2013, the New York Stock Exchange (NYSE) is one of the world’s leading stock exchanges.
Already for reasons of risk diversification, a small “dollar investment” certainly belongs in every portfolio, even in that of small investors. That is why we have been looking for attractive opportunities to include American shares in our portfolio.
Can I buy American stocks on German stock exchanges?
In general, yes – there are no technical or legal reasons that would forbid such trades. German companies can be traded on US stock exchanges and that is also possibe the other way around. However, every company has a home stock exchange where the turnover of the company’s shares is the highest and therefore the share is the most liquid.
If we think, for example, of a few “heavyweights” among US companies, the names Coca Cola, IBM, Boeing or the other 27 index members of the Dow Jones Industrial Average – one of the world’s most important stock market indices – quickly pop up. Their home stock exchange is the NYSE, but of course these companies are also traded in Germany.
Let’s take the shares of the Coca Cola Company as an example. On January 31, 2013 (source: Finanzen.net), more than 5 million shares were traded in New York. Only 16,912 shares were traded via the Xetra trading system – only 0.3 % of the trading volume in New York. We also found similar distributions among other heavyweights in the DJIA.
In such sparse trading, a “fair” price is therefore not always guaranteed – the heavyweights from the NYSE are traded less frequently than the stocks in the SDAX.
How can I buy American stocks on Wall Street?
Nearly every broker will allow you to trade on the NYSE – but not always on favorable terms. If you purchase domestic shares from your “regular broker” or even worse – from your house bank – you will have to expect purchase charges of 20 euros (per trade) and more.
Check for yourself: Your capital gain (minus capital gains tax) must exceed the total purchase and sale expenses (in our case: 2×20 = 40 Euros). At a capital gains tax rate of 25% (as in Austria), the capital gain must therefore be at least 53.33 euros. With an average order volume of EUR 1,000, this corresponds to a full 5.33%. Should you make the cardinal mistake of investing (broker = house bank), custody account fees and other additional charges will also be added.
Conclusion: You need a broker who enables you to trade on US stock exchanges at small investor conditions. We recommend the CapTrader offer, which we use personally for our investment in the USA. For a trade on the NYSE, CapTrader only charges 1 cent per share, but at least 2 US dollars (at the current exchange rate, that is not even 1.50 Euros). Of course, the account or custody account management, the transmission/change/deletion of orders as well as the opening/closing/depositing/disbursing are completely free of charge. Domestic and foreign dividends are also entered in the custody account free of charge.