How to invest in the NYSE from Canada

• Find out how to expand your investment activities into the New York Stock Exchange.
• Easiest ways to invest in the NYSE.
• Pros and cons of investing in the NYSE.

The New York Stock Exchange is the largest in the world as measured by the market capitalization of the securities listed there.

Investors resident in Canada can invest in NYSE-listed securities and, by extension, the US economy – also the world's largest.

Most investing apps and brokers have access to trade in this market. But, there are several options to consider since you can get exposure to the NYSE by investing in individual companies, funds, and index trackers. Read on for more details and find out where you can get started.

It’s quite easy to invest in the NYSE from Canada, since many online brokers offer access to US exchanges (including the NASDAQ), the LSE, and the Euronext, while others deal exclusively in US stocks. You can invest in exchange traded funds (ETFs) and index funds or buy shares in individual companies.

Exchange traded funds

ETFs are investments that pool cash created by selling units in the fund, and investing the cash in a basket of securities – such as shares, fixed interest bonds and commodities. Each ETF aims to track a particular market index, industry, commodity or investment strategy.

ETF units can be bought and sold on the stock market similarly to company shares. The unit prices constantly change during the trading day but generally show less fluctuation than individual company share prices because they are not dependent on the performance of a single company. This is why ETFs are considered a way of spreading risk. Because they are less risky than individual shares, an investment in ETFs is less likely to record significant losses or gains in the short term. Investing in ETFs is a strategy for long-term investors.

Many ETFs passively track an index (see ‘Index funds’ below), but some are actively managed funds whose investments are chosen by a team of share market experts. Here are some examples of this type of fund:

• JPMorgan Equity Premium Income ETF (NYSEARCA: JEPI)
• Dimensional US Core Equity 2 ETF (NYSEARCA: DFAC)
• ARK Innovation ETF (NYSEARCA: ARKK)

Index funds

An index fund is a type of ETF that tracks the overall performance of a given market, e.g. the NYSE, by investing in shares of all the companies listed on the index, proportionate to their representation on the index. Among the top US indexes are the Dow Jones Industrial Average (also known simply as ‘the Dow’), the S&P 500 index and the Russell 2000 index.

Because they automatically track an index, index fund ETFs are passive funds, unlike actively managed ETFs, which may not follow any index exactly. Passive funds will usually have lower management fees than actively managed ETFs.

Popular NYSE index funds include:

• iShares Core S&P 500 ETF (NYSEARCA: IVV)
• SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA: DIA)
• iShares Russell 2000 ETF (NYSEARCA: IWM)

Individual company shares

Another way to invest in the NYSE is to select several of the companies listed on the exchange and invest in them directly.

It would be too time-consuming and expensive to attempt to invest in all of them, but the list includes many huge blue chip companies, such as Exxon Mobil (NYSE: XOM), Citigroup (NYSE: C), Pfizer (NYSE: PFE), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), and IBM (NYSE: IBM).

You can invest in all of these companies using a USD trading account with an online broker.

The fact that NYSE-listed companies are large and well-known does not protect you from the increased risk of investing in individual shares because the success of your investments depends on the fortunes of just a few companies rather than a diversified fund.

Step 1: Choose a broker

There are hundreds of online share trading platforms to choose from. When comparing options, check their brokerage, cash withdrawal, and activity fee amounts. Available tradable securities offered should include ETFs and shares.

An important thing to consider is the currency conversion fee. Since many brokers are now commission-free, they make money by adding a margin when converting your currency to USD. If you are investing a lot of money, this fee can be a determining factor when choosing where to trade.

Whichever broker you choose must have access to the NYSE. For the sake of having all your investment activity in one place, you may also want access to UK and European share markets from the same broker.

Some brokers offer commission-free trades on ETFs. If you’ve decided to invest in shares, look for a broker offering fractional shares since many NYSE companies have high prices for a single share (notably Berkshire Hathaway Inc Class A).

Step 2: Decide how much to invest

Only ever invest what you can afford to lose because share markets are volatile.

If you can’t withstand losses in the short term, it’s best to wait until you can or plan to invest for the long term only. Losses are always a possibility, and your capital will be at risk.

Step 3: Transfer funds to your account

Add funds to your trading account with a bank transfer, the most commonly accepted method. Most brokers also accept debit cards. A few brokers can accept credit card deposits too.

It may take some time for funds to clear before you can start trading, and if you are trading in USD but have transferred CAD, your cash will have to be converted into USD first. Note that your broker may require a minimum deposit amount.

Step 4: Choose between shares, ETFs and index funds (or a combination of them)

ETFs and index funds are diversified across a range of companies, so they typically experience lower price volatility than individual company shares and can be better for long-term investment.

• Short-term investors hoping for quick capital gains (but also prepared for losses) may prefer to buy shares.
• ETFs can often be traded commission-free.
• Index funds mirror the market, so their value rises and falls in line with the broader market.

Step 5: Configure your order

Depending on the broker you use, you can choose from many different kinds of order.

A market price order is the most straightforward, requiring virtually no setup. Once executed, you’ll get shares at the next available market price for the share or fund unit.

You’ll need more options regarding order configuration if you have a specific strategy. Some brokers have highly customizable orders that can be triggered by events, meaning you can buy or sell when your chosen share or fund hits a price target.

Step 6: Place your order

When you’re happy with all of your decisions, submit your order to be executed.

Step 7: Monitor your investment

Share investment should not be a set-and-forget activity. Even if you intend to invest for the long term, you need to keep an eye on the company or fund's performance and price movements.