Investing in the US share market from New Zealand
Let‘s take a look at the key things to know when you invest in US shares from New Zealand. You’ll get an overview of how liquidity, opening hours, and currency movements affect your investing.
A lot more companies and funds to invest in
For starters, you’ve got access to over 3,000 companies and ETFs across three US exchanges on Sharesies:
New York Stock Exchange (NYSE)
Chicago Board Options Exchange (CBOE).
That’s in addition to the over 165 New Zealand companies and funds that Sharesies makes available on the New Zealand Stock Exchange (NZX).
To compare the size of these markets, you can look at their total market cap. Market cap is how much an exchange is worth in total. In this case, it’s the total value of all the shares issued for all the investments on each exchange.
The market cap of the NZX Main Board is about $172 billion NZD (as at 28 August 2020). Compare that to the $21 trillion USD market cap of the NYSE (the largest stock exchange in the world). That makes the NYSE roughly 49 times larger than the NZX!
US share markets also tend to be more liquid than the smaller NZX. This means it’s typically easier—and quicker—for shares to be bought and sold as the buy price is close to the sell price. Both the ease and speed of trading—and the larger market size—open up more opportunities for you to diversify your portfolio.
Different time zones, different opening hours
US share markets are open weekdays 9:30 AM to 4 PM Eastern Time—that’s in the US, not Gizzy—and are closed on major US holidays.
In New Zealand, that’s during the early morning hours of Tuesday through Saturday. So unless you’re a night owl, you’re likely to be sound asleep when US share markets open!
Daylight savings in both countries shifts the opening hours’ window too. Throughout the year, US share market opening hours in NZ are:
2:30 AM until 9:00 AM NZST (Mid-March to early April)
1:30 AM until 8:00 AM NZST (Early April to late September)
2:30 AM until 9:00 AM NZDT (Late September to early November)
3:30 AM until 10:00 AM NZDT (Early November to mid-March).
But you don’t need to commit these times to memory! You can see the exchange's opening hours for the week ahead when you look at an investment in Sharesies.
Investing while you sleep
So how do you go about placing orders for US shares? Thankfully, you don’t need to set an alarm for the middle of the night. You can place an order at any time, and it’ll go to market when it opens. This is the same as placing NZ orders if you’re trading outside of market hours.
When you place your order, you can choose to make a market order or a limit order.
A market order lets you buy or sell shares at the available market price in line with our Best Price Policy.
Market orders are typically used when you want an order processed quickly and you’re willing to let the market decide the price.
To have more control over the amount you buy or sell shares for, you can place a limit order.
Buy limit orders lets you set the maximum price that you’re willing to pay for a share.
Sell limit orders lets you set the minimum price you’re willing to sell at.
A limit order will wait for up to 30 days on the market. It might not get filled if the market doesn’t reach the price you’ve set, or if there are other orders ahead of yours in the queue.
When investing in US shares, you can’t place a limit order for fractional shares—only whole shares can be bought and sold when placing a limit order for US shares.
US share prices are likely to shift while you’re sleeping. To set a price you’re comfortable with (rather than leaving it to the market to decide) you might choose to place a limit order instead of a market order. That way, you can have peace of mind that you’re not buying shares for too high a price—or selling for too low a price!
Currency movements can affect your returns
US shares are bought and sold in US dollars. While investing always involves risk, investing in shares in another currency exposes you to the added risk of currency fluctuations. For example, if:
the NZ dollar loses value against the US dollar, the NZ dollar value of your US shares will go up
the NZ dollar gains value against the US dollar, the NZ dollar value of your US shares will go down.
This assumes that the share price stays the same, and it’s just the currency’s value that’s changing.
Exchange rates between currencies are constantly moving up and down. This is based on the supply and demand for each currency, which can be influenced by many things, including inflation, interest rates, and a country’s economic performance and growth. When you turn one currency into another currency, this is called foreign exchange.
Currency fluctuations can impact returns by raising or lowering gains and losses. Diversifying your investments is one way that you can manage the risk of currency fluctuations across your wider investment portfolio.
While there’s some key differences to look out for with US markets, the basic principles remain the same. Consider investment techniques, such as dollar-cost averaging, to help manage your risk, be prepared for the market’s ups and downs, and keep a well-diversified portfolio.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.