How to Invest in US Stocks from Canada in 2024

There are plenty of solid stocks on the Toronto Stock Exchange (TSX), but if you’re looking to expand your portfolio with some of the largest companies in the world by market cap, buying US stocks is a good option for investors in Canada.

While the TSX has plenty of high-dividend stocks in the energy, financials, and industrial sectors, tech stocks such as Microsoft, Google, Nvidia and Apple that are highly sought out by investors don’t trade on the TSX. Canadians can, however, add some growth and greater diversity to their portfolios by investing in US stocks on the New York Stock Exchange (NYSE) or the NASDAQ.

How do you invest in US stocks from Canada? First you have to find the right broker to buy US stocks in Canada and there are a few complications that Canadian investors need to consider first, such as taxes, and currency conversion costs. Let us walk you through what you’ll need to do to trade US stocks.

How to invest in US stocks from Canada: your step-by-step guide

There are four steps to take to buy US stocks in Canada: 

• Find a brokerage that gives you access to US markets from Canada
• Open an account with the provider you chose 
• Fund your account 
• Pick your favourite US stocks and buy them

A detailed look at the steps of buying US stocks from Canada

Let’s break down how each of those four steps work:

Step 1: Select a broker to gain access to US markets from Canada

The first step is finding a broker that will give you access to the US stock markets. Once you find a few brokers that do, it’s important to compare multiple brokerages based on your specific needs and investment goals. Consider your trading frequency, investment amount, and desired level of platform complexity.

Fees

Obviously, a big factor in choosing a broker is fees. Depending on your investment style, these can impact you to a greater or lesser extent. The most obvious cost is account fees. Some brokers charge monthly or annual account fees. Some brokers also charge an inactivity fee if you don’t trade frequently enough. After that, check to see if your prospective brokerage charges per trade or offers commission-free trading.

Currency conversion costs

One of the biggest concerns Canadians face when buying US stocks is currency conversion fees that some brokers charge when converting Canadian dollars to US dollars. The “spread” you will pay is the difference between the spot foreign exchange rate and your brokerage’s in-house currency rate.

Selection of US stocks and funds

You’ll want a brokerage that has a wide selection of US stocks, not just the ones you’re interested in right now. You may want to look at a broker’s options from ETFs, mutual funds and options as well. access to the US stocks you’re interested in.

Educational resources

Other things to think about when choosing a broker are just as important. Does its website provide educational resources about US stocks, such as news and other data?

Ease of use

Is the website intuitive and easy to understand? Assuming it has a mobile app, is that easy to use as well? Does it support automatic dividend investment?

Step 2: Open an account with the provider you chose

After you’ve chosen a brokerage, you’ll need to provide information from a government-issued ID and other personal information, such as your name, address, date of birth, Social Insurance Number and contact information, along with any account beneficiaries. Some brokerages will also want to know certain financial information, such as employment status, income, net worth and investment experience. 

You’ll also need to decide on what account type you want, such as a tax-deferred or tax-free investing account such as a (RRSP or TFSA), or maybe you’ll just want a personal account or a joint ownership account with another person. If you’re a Canadian citizen, you need to file a W-8BEN form to certify your foreign status for US tax purposes.

Step 3: Fund your account

Once the brokerage has approved your account, you’ll need to fund that account, likely connecting it to your bank account. You’ll likely need to either do an electronic funds transfer from your bank account or mail a check to the brokerage to fund the account, though some brokerages accept wire transfers.

Once your funds are deposited, you’ll need to convert them to US dollars. Your brokerage will likely have a section that allows you to exchange funds, so that you can convert Canadian dollars to US dollars for trading. Most brokers charge a fee for this conversion.

Step 4: Pick your favourite US stocks and buy them

At this point, buying stocks south of the border isn’t all that different from buying Canadian stocks. You need to do your research regarding what stocks you want to buy, reading analyst reports as well as a company’s quarterly reports. There are also stock screeners and AI stock pickers that can help your search for the top US stocks.

Comparing these top-ranked online brokers that let you buy US stocks in Canada

While fees are an important factor in determining a Canadian online broker to invest in US stocks, there are other factors to consider, including what investments, what educational opportunities each brokerage offers, and what kind of customer service it has. 

Brokerage	Account fee	Available investments	Fee to trade US stocks	Trustpilot score
Axi	Commission-free trading	More than 100 UK, US, HK and European stocks to be traded with CFDs	No fee to up to 3% fee	3.8
TD Easy Trade	No monthly fees or account minimums	Canadian and US stocks, plus ETFs sponsored by TD	First 50 trades / year commission free; No fee for TD ETFs	3.7
Interactive Brokers	Free to join	Stocks, bonds, options, index funds, ETFs, currencies, futures	Min. $1, max. 0.5%	3.4
CIBC Investor’s Edge	$100 or free (T&C apply)	Canadian and US stocks and bonds, mutual funds, options	$6.95 per trade or $4.95 (T&C apply)	3.2
RBC Direct Investing	$25 per quarter; or $0 (T&C apply)	Stocks, bonds, options, mutual funds, ETFs, GICs	$6.95 to  $9.95 per trade	2.5
Wealthsimple	Commission free	More than 14,000 Canadian and US stocks and ETFs	No fees, and avoid currency conversion fees for $10	1.6
Questrade	No account fee, but $1,000 minimum deposit to trade	Stocks, bonds, more than 100 ETFs, forex, mutual funds, options	Min. $4.95, max. $9.95; buying ETFs is free	1.5

Why invest in US stocks as a Canadian? 

Buying US stocks in Canada makes sense for the returns you may earn. Over the past two decades, if you skipped out on investing in US stocks, you would have lost money. Since 2004, the S&P/TSX Composite Index, the benchmark Canadian stock market gauge, delivered more than 400% in dividend-adjusted gains.

However, the S&P 500 Index had returns of 641% and the Nasdaq Composite has had returns of more than 1,000% over that same period. A lot of that has to do with growth. While the TSX has its share of growth stocks, such as Shopify, the US has a lot more – Nvidia, Alphabet, Tesla, and Microsoft, just to name a few.

If your risk tolerance is high, there are a lot of low-price but potentially high-reward Canadian penny stocks, especially among newer low-cap companies, but there are many more gems like those to be found in US markets.

Some of the benefits of investing in the US stock market from Canada

Diversification: There are very good Canadadian stocks, but US market is significantly larger and more diverse than the Canadian market, offering exposure to a wider range of industries and companies.

Growth Potential: The US economy is generally larger and faster-growing, which can lead to higher returns on US stocks compared to Canadian ones.

Tech Exposure: Canada has plenty of stocks in the energy, financials, and raw material sectors, including copper stocks. However, the US is a global leader in technology, with many of the world’s largest tech companies based there. Investing in US stocks can provide exposure to this high-growth sector.

Currency Hedging: While not a guaranteed strategy, owning US stocks can help hedge against a weakening Canadian dollar.

Dollar-Cost Averaging: Investing regularly in US stocks, regardless of market conditions, can help reduce the impact of market volatility.

Retirement Savings: Many Canadians save for retirement in US dollars, making US stocks a natural fit for their investment portfolios.

Global Leadership: The US the world’s largest economy, and investing in US stocks can provide exposure to the benefits that companies enjoy due to its size.

Index Funds: Low-cost index funds tracking US indices like the S&P 500 offer easy access to the US market.

Long-Term Perspective: Historically, the US stock market has delivered strong long-term returns, making it an attractive option for long-term investors.

Some of the risks of buying US stocks from Canada

Currency Risk: Fluctuations in the exchange rate between the Canadian and US dollars can impact returns.

Withholding Tax: Dividends on US stocks are subject to a 15% withholding tax, reducing overall returns.

Trading Costs: Trading US stocks from Canada can incur higher fees compared to trading Canadian stocks.

Political Risk: US politics can impact the stock market, creating additional uncertainty for investors.

The pros and cons of buying US stocks in Canada, at a glance

How to buy US stocks in your TFSA

TFSA stands for a tax-free savings account, a way to save and invest after-tax dollars. The advantage of a TFSA is that your investments, including their interest and dividends, grow tax free and when you withdraw your money, you do so tax-fee. It’s a great way to build wealth and sayings.

Most brokerages have established TFSAs that you can invest in. There are a few considerations, though, when you invest in a TFSA.

1. You need to be a Canadian resident to contribute to a TFSA. As a non-resident, if you hold a TFSA when you leave Canada, you can keep it and continue to be exempt from Canadian tax on investment income. However, you cannot contribute to your TFSA while you are a non-resident, and your contribution room won’t increase.
2. Determine your contribution room. The amount you can put in each year depends on your age and when you began contributing. It is based on the annual TFSA dollar limit, whether you had any unused contribution room from previous years and whether you made any withdrawals during previous years. The base for the TFSA dollar limit for 2024 is $7,000.
3. Choose a brokerage. Compare different providers based on their fees, investment choices, and customer service.
4. Open your TFSA account. You’ll need to supply personal identification, proof of address and your Social Insurance Number.
5. Transfer funds: Move money from your chequing or savings account into your TFSA.  
6. Choose what type of TFSA. You can choose between a regular TFSA, which has limited investment options or a self-directed TFSA with more options. Options include CICs (CI Canadian banks covered call income class ETFs), mutual funds, ETFs, or individual stocks and bonds.

What is the best way to invest in US stocks in Canada? 

Here, we’re showing you a few alternative ways of investing in US stocks, whether it’s through ETFs or unique Canadian investment vehicle. Read on for more details:

Can I buy US ETFs in Canada? 

Yes. There are several brokerages that Canadians can use that offer ETFs that specialize in US stocks. Each brokerage is different regarding ETFs and some don’t offer them at all. It’s an important distinction because low-cost ETFs are a great way to generate wealth while improving your portfolio’s diversity and risk level.

TD EasyTrade has ETFs, but only in-house ones, while others, such as Questrade offer no-commission ETFs for their own customers and other brokers. The key for investors is the number of choices of ETFs that each brokerage has. They might be looking for certain types of ETFs that encourage socially conscious investing, or perhaps ETFs that vary by the level of income generation and risk.

There are special brokerages called robo-advisors in Canada that will automate your investments using algorithms. They charge low fees as they typically invest in ETFs in Canada as well as the US.

Another way of buying US stocks in Canada — Canadian depositary receipts

Canadian Depository Receipts (CDRs) are a simple way for Canadian investors to gain exposure to US stocks without dealing with the complexities of foreign exchange. They work when a Canadian financial institution buys a big block of shares of a US company. Those shares are then divided into smaller units (CDRs), which are listed on a Canadian stock exchange. That gives Canadian investors the opportunity to buy them in Canadian dollars.

CDRs provide a built-in currency hedge, meaning investors don’t get caught with exchange rate fluctuations of the Canadian dollar. With CDRs, there are no currency conversion complications. Investors also receive dividends from the CDRs in Canadian dollars, again simplifying the transaction.

The downside is CDR fees are often higher than directly buying US stocks, and not all US companies have CDRs available to trade, though more than 50 of the world’s top companies have CDRs.

US stock investing in Canada FAQs