Investing in Foreign Stocks

[carpe_diem]

What is it with playing stocks in the internet? Is there a Master Trader in the Philippines doing international stocks like the U.S.? No IPO's but listed stocks in NYSE, NASDAQ, ... etc ...

[lupuS]

I'm not quite clear about your question, but if you are asking if I trade (US) stocks online, the answer is NO. Online trading is being advertised as a cheaper alternative to using a broker. I still use a broker, and pay him full commissions because:

1) I live in Manila and most of the action happens when I am asleep. I let the broker, and everyone else who works in his company, worry about executing my trades.

2) I need the broker for more than making trades. I need the information provided by his company's research network. If I traded online, that means I would have to assemble all the information myself. Yes, plenty of information is available online. But a lot of it is unverified and close to garbage. Having an analyst following the stock (which they do at full-service brokerages) increases the confidence I have that the information I get has been verified.

For example, if I were trading based solely on information I've gathered, I probably would have been burned on August 25, the day Mark Jakob decided to issue a phony press release about Emulex Corp, causing the price to drop and resulting in a profit (to Jakob) of more that $200,000. Jakob, as you may know, has since been arrested for stock manipulation.

3) My broker is an electrical engineer, and used to design chips before he switched to selling securities. My investments are tech-heavy, so it pays to have a knowledgeable person to talk to and explain to me the technology behind the companies I am trying to invest in. I get more than trade execution; I also get an education.

[Karasu]

I have this thing that's bugging me. I'm planning to open an online investing account in E*trade or Datek or any other mutual fund company like Advantus Funds, etc. through the internet. My question is- is this allowed legally in the Philippines? I mean, I'm not like going to dump millions in an offshore account or something, but just for the sake of investing and financial preparations, etc.
I know my being only 18 yrs. old may provide some difficulties... but I could put it under my Mom's name then transfer it to mine when I'm legally capable/allowed.

[lupuS]

The legal thing to do is to include in your annual tax return all the income you make from trading in this account, and pay the appropriate taxes on them. Whether you keep the assets here, in the US, or wherever, does not really matter to our revenue authorities.

[Karasu]

Hmmm... interesting. Actually, I was thinking more of dividend reinvesting. I'd just invest and invest money regularly into my account (which means I'll be sending money outside of the country to the online broker's office) and the "profit" (kung meron man) is just invested back into the account. I don't see what to tax there. :D

[lupuS]

Total value of account (what the account is worth) - total contributions made (what you have sent abroad) = Total gains from investing (this is income and is taxable in this country)

[Karasu]

Wow. Ok. I understand it now. But, I have to file a tax return even if I'm still...like below 21 or something (if the account is in my name, that is, and not my parents')?
Oh well...I think the BIR can help me with all those tax questions already. its their job, right? :D
Thanks lupuS. You're a big help.

[lupuS]

Every Filipino, regardless of age, who makes money above a certain amount per year needs to file an income tax return.

You did ask about the legal way to do things. The legal way is not the only way. Having said that, I'll shut up now. ;)

[Karasu]

:lol: :lol: :lol:
Ok...I think I know what you're inplying. But gad no, please don't let me fall into that. hehehe... :D

[pale_pilsen]

bawal sa etrade and datek ang foreign accounts. for mutual funds it is also very hard to find one that would accept an international application. look at some companies like firstrade, etc.


check this link
http://www.sonic.net/donaldj/brokers.html

[Karasu]

pale pilsen: Wow. I didn't know that. I read some articles at the Motley Fool and there actually were parts which talked about investing internationally....oh well...
*sigh*
I was planning on http://www.maxfunds.com or http://www.buyandhold.com but there could be more...I'm gonna visit pa your suggested link.
Thanks again. :D :D

[Edited by Karasu on 03-12-2001 at 04:36 PM]

[pale_pilsen]

i take that back. i think datek does accept foreign apps.

i was lucky last year when dlj rejected my application (even though i filled out a W-9 form kasi im a taxpayer here in the US, i am still a Philippine citizen). i was prepared to go all out on techs. look what happened to the nasdaq kanina, it fell like a ton of bricks.

on mutuals - i think the minimum for most is $2000, then around $50 monthly afterwards. if you dont have that much to invest (or even if you do), stick with individual stocks na lang. besides, it more fun too!

[Karasu]

I have been poring over the forums on the Motley Fool regarding non-resident alien investing (I hate that term!) and I'm still searching for clues, info, etc. about how to go about things....
*sigh*
Actually, yes...individual stock investing IS very exciting but its also VERY risky...oh well, I 've read in so many sources that the younger one is, the greater risks one can take...but I wouldn't want to dive into the great whirlpool of risks...hahaha!!! :lol:
I was thinking of investing in index funds. Low risk..steady income, etc.
I just saw this post about a guy whose father was living in Argentina. The father wanted to invest in index funds in the US and when the son inquired at Vanguard about the minimum deposit in order to open an account...it was a staggering $100k!!!! :eek:
This is going to be hard.
To be honest, one of the first few online discount brokers which have caught my attention was E*trade and Datek...but their minimum is SOOO not "minimum"...sounds more like maximum for my level. I've heard about online brokers which accept $500 or even $250 minimums... Now that's for me. :D :D

[Q]

Karasu,

The reason why those brokers don't like opening accounts with foreign addresses is because they do not want to risk any collections problems. In fact, the foreign accounts which they do open often have a "cash up front" restriction, meaning no money in the account, no trades.

It will be easier for you to open an account if you have:
1. A US social security number
2. A US based billing address

By having these two items it will give the impression that you will be held accountable for any payments on your trades. They'll know where to find you, and your SSN will be marked with the US credit bureaus should you fail to pay.

If you truly want to open a trading account with a US broker why not consider opening a joint account with a relative in the States? That way, the account will be addressed in the States, and in the event you have no US social security number, your relative working abroad can provide theirs. HOWEVER, your relative would be subject to any taxes generated from capital gains, etc. in addition to any liabilities (i.e. you don't pay for your online trades thus leaving them with the bill). That's something you'll have to talk to them about for sure.

If you want to open an account, the acceptable minimum will be around $5,000. Unfortunately, anything less won't get you too far. Yes, you can buy into mutual funds, but often times, these mutual funds will have steep charges if you sell out of them before a specified time period, usually 6 months. They aren't designed to be trading instruments. The fund companies do this to make their cash outflows more predictable.

Hope this helps. I used to be a broker for one of the major firms. Heard about these situations all the time. Good luck.

-Q

[Karasu]

Q: Thanks for answering my questions.... :D :D but to be honest, I wasn't really THAT interested in active trading.... I just wanted to look for an online discount broker that would let me purchase index funds. I would then subsequently deposit money into my account after that. I don't think I'll be touching/trading/selling the shares for about 10+ years.... more of like a buy and hold style.
Actually, I'm not even THAT keen on finding a foreign broker...even a local (?) one will do...pwede ba yon? As long as it could sell me index funds that would imitate the S&P500 or the Dow. But I doubt there are local brokerages which offer these kinds of funds????...

[travy]

pls. post the step by step procedure? tnx.

[SILENTMAX]

suppose i have an ssn but i still reside in the philiphines could i use a relatives address?

if i purchase a house in the states and still reside in the philiphines would this be a more viable situation?

[snop]

suppose i have an ssn but i still reside in the philippines could i use a relatives address?

if i purchase a house in the states and still reside in the philippines would this be a more viable situation?

Yes, to both questions! Perhaps, wifey and I can visit you in Las Vegas one day when we coast to coast drive there again.

:)