There’s countless ways to invest in Asia. From buying real estate to simply starting your own business, the amount of options to grow and preserve your wealth might leave some confused.
Yet stocks are still the first thing most people think of when it comes to investing. Buying stocks might not be the most novel or innovative method of investment. But almost anyone in the world can trade stocks in Asia from home, and with little effort.
Practically any online brokerage will let you buy stocks on major international exchanges – if yours doesn’t, you should switch immediately. Stock exchanges such as Singapore’s and Hong Kong’s are mainstays of any brokerage worth their salt.
Major exchanges outside of Asia even list firms from countries like China and Japan. For example, Baidu is listed on the NYSE while Toyota is on the NASDAQ.
The United States has the highest concentration of stocks in Asia outside of the continent itself. As such, opening a U.S. brokerage account might be desirable for some.
You Should Trade Stocks in Asia with a Local Account
With that said, you shouldn’t use your American or European account to trade stocks in Asia. You’re just robbing yourself of the benefits which otherwise come from investing in emerging economies.
Why? The first reason is because you’re giving up your competitive advantage. You’re now competing with multi-billion dollar hedge funds and other institutional investors by trading stocks listed in New York or London.
These businesses have complex algorithms and thousands of highly paid researchers. Do you really think you can extract value out of a market when your competitors can perform in-depth analysis and execute trades in under a second?
Very rarely, some people manage to outperform the market by trading on large stock exchanges. But Goldman Sachs will usually get to any true, mathematically-proven “value trades” while you’re still waiting for Google Finance to load.
This reason is also why I prefer smaller exchanges such as Malaysia’s and Vietnam’s. These places have hundreds of hidden gems with almost no analyst coverage. Don’t just invest in China, or all the places where everyone else is.
Of course, the online brokerage you already have should let you trade in Japan or China. But they almost certainly won’t let you buy stocks in Vietnam or Malaysia. You’ll need to open a local account for that.
Lower Fees, Better Results
Keeping your ability to find hidden gems isn’t the only reason to open a brokerage account in Asia though. You’ll also save yourself a lot of money in fees. Brokers universally charge high commissions to make international trades.
For example, Fidelity (a major broker in the U.S.) charges HK$250 to buy or sell a stock in Hong Kong. That’s a whopping US$32 per trade. A local account such as Boom Securities charges HK$88, or just US$12 per trade by comparison.
Trading stocks in Asia is similar to most other places once you’ve opened your brokerage account. I won’t get into details or specific stock recommendations – they depend entirely on where you’re trading. Some exchanges have lunch breaks, while others have minimum orders and other quirks.
But as with most things, your end result depends on how much effort you’re willing to put in. The best way to invest in Asian stocks is to set up a local brokerage account. Don’t just trade shares of Sony on the New York Stock Exchange.
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