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How do I invest in the US stock market from Latin America?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 284.5 million views in recent years.

In the answers below I focused on the following topics and issues:

  • How do I invest in the US stock market from Latin America?
  • Do you need a bank account as an expat?
  • What is herding in investing? How common is this?
  • Would I prefer to invest in stocks in Hong Kong, the UK or the United States?
  • Should you buy leveraged ETFs?
  • Should you reinvest most of your money from the stock market, such as dividends, or take it as income?
  • What do most financial advisors get wrong?

Some of the links and videos displayed on the original answers might not show up on here, and if so, you will need to refer to the original answers to view that.

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

How do I invest in the US stock market from Latino America?

Source: Quora

Of course, Latin America is a big place, so it depends on which country you are speaking about:

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Venezuela and Cuba and very difficult. Most brokers don’t want to touch them due to compliance and legal issues, in much the same way investing from Iran or Iraq is hard.

Some will consider it if you already have the money in a bank or financial institution outside the country.

For the majority of the other countries, it is fairly easy.

You just need to:

  1. Find a DIY brokerage or advisor who accepts for the region
  2. Give anti-money laundering documents like proof of address dated in the last three months, proof of ID and do an application form for source of wealth
  3. Fund the account once approved
  4. Trade. If you want to buy stocks directly on the US stock exchange, you usually need to complete a W8-Ben form. However, if you are happy with ETFs, there are ways around this, by purchasing ETFs tracking the US stock market, which are listed on the London or Irish stock exchange

Some countries, like Argentina, make getting money out of the country difficult.

In which case, many people invest on a monthly basis with a debit or credit cards, rather than sending out lump sums.

With any country, the bigger question is how to invest productively, rather than simply how to invest.

Most people need to avoid this situation/result:

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The biggest reasons for the above is:

  • Emotions. Panicking when markets are down and getting too excited when they are up
  • Investing by yourself without having the knowledge.
  • Not focusing on having a long-term investing plan, and sticking to it.

If done right, you can not only invest from Latin America, but invest productively in the US stock market.

Is it good to have a bank account when you are an expat?

Source: Quora

Well, of course, it is essential to have a bank account, regardless of whether you are an expat or local.

It is difficult to function, on a day-to-day basis, without one, in most parts of the world.

The difference is this. Most locals, unless they are planning to live overseas, don’t need to care about portability as much.

The only reasons locals tend to have overseas bank accounts is for diversification, or because they don’t trust the local banking system.

For expats, it is far better to have expat friendly bank accounts, which are portable if you move from country-to-country.

The banks used to do that function well, albeit for an expensive cost. HSBC Expat is an example.

A better, more transparent and lower cost option is Wise – formerly known as TransferWise:

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With this account, you get a MasterCard. If you move countries, or even go on holiday, you can simply open a new balance with a touch of the button.

Got a job offer in Hong Kong? Click add and then you have a new Hong Kong Dollar balance:

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Within seconds, you can use the same bank card, with close to zero FX fees, to pay for things in HKD.

You can move money from the USD balance to HKD, with no need to open up a new bank account in Hong Kong, if your employer will agree to pay to that account.

If you are a business owner, it is simple. Revolut has a similar system.

The same should be true for investments as an expat. Focus on portable and international options which can be taken with you, not localized ones.

Technology combined with portability is a winning combination.

Is herding behaviour quite common while investing?

Source: Quora

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In some cases, wanting to huddle together and follow the pack is very common.

We can see it when it comes to which assets people like to own. Many British and Singaporean investors prefer property. Many Indians prefer gold, as do some other nationalities.

We can even see it inside the same asset class. “Everybody” seemed to want to buy technology stocks in 1998, 1999 and recently.

Few wanted to buy in 2001, 2002 or even as recently as 2009–2010. It was out of fashion then.

The same thing happened with emerging markets. Very popular in the 2000–2010 period, and especially before 2008. Not so popular afterwards.

One of the reasons that herding behaviour is so powerful is it is, partly at least, connected to recency bias.

If many people are going into an asset class which has performed very well for 5–10 years, it seems to make rational sense.

As a final comment, there is a kind of herding which manages to catch out even experienced investors.

Most experienced investors stay away from mania’s like this one connected to Reddit:

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When stocks are going up like crazy, wealthier, older and/or more experienced people can see through it.

Fear is a bigger emotion than greed, though. When markets are going down by say 10%-20%, most people can deal with that.

Yet when markets go down by 30%, 40% or 50%, even people who know that they will come back can get weak at the knees.

Look at the last crisis in 2020. It was the quickest 50% fall in history:

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Just like in every crisis, there are people, including “serious” ones, warning that this time is different.

Of course, even though every crisis is different, the market recovers:

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I have run out of the number of people who say things like “I know I shouldn’t time markets and sell, but I am worried about……:”.

You can fill in the blanks. COVID-19. Trump. 2008–2009. The 2012 US election. The 2016 election. The 2020 election. Brexit.

Each time, these things come and go, but people tend to herd more when fear is at play.

Given today’s economy, would you prefer trading US, UK stocks, or Hong Kong stocks?

Source: Quora

There are a number of points to make here. Firstly, this question was asked ten years ago.

In that time, we have once again been reminded that the economy is not the stock market and vice versa.

Stocks can perform well during all economic conditions, including when GDP is falling, and they can fall during relatively good periods.

Julia’s reply below illustrates the misconceptions many people have about stock markets.

She advocated Hong Kong stocks over the US and UK markets due to the economic situation, and also backed emerging markets in addition to the Hong Kong stock market, due to this economic reason.

In the last ten years we have seen the issue with this way of thinking, and chasing “hot trends” like emerging markets, which happened in the 2000–2006 and 2010–2011 period.

Now to answer your question directly, the US stock market is better for most international investors because

  • It is even more global than London or Hong Kong. Many international firms IPO on the NYSE. Most US MNCs have huge revenues in emerging markets and beyond. Look at Apple. Less than 37% of their revenue is for North America.
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  • The political risks are smaller, and the US system has shown they can withstand big shocks.

With that being said, Hong Kong could gain from many Chinese firms delisting from the NYSE, so I wouldn’t be afraid of having an allocation to the market.

Likewise, the UK stock market looks cheap, and it is another tried and tested market.

Long-term, at least if you adjust for dividends, the FTSE All Stars hasn’t done that much worse than the S&P500:

The last twenty years is a great example of that. The FTSE100 has been stagnant in capital terms.

The FTSE250 has done better. But if you owned the FTSE All Stars, which is the whole UK stock market including the FTSE100, 250, 350 and all caps, it has done pretty well:

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Unless you are going to retire in America, it makes sense to own a few different stock markets.

Just be diversified and you will be fine.

The following answers were submitted on the adamfayed.com Quora space.

Source: Quora

Which broker allows Indian residents to buy/sell leveraged ETFs like TQQQ?

Source: Quora

I am not sure which brokers allow Indian residents to do this.

All I would say is most people should avoid buying leveraged ETFs. Just buy and hold vanilla ETFs.

Leveraged ETFs work great on the upside, but are a nightmare on the way down. That makes it harder to recover.

Simple example. If you would have bought Vanilla ETFs, like the S&P500, on January 1, 2020, you would have recovered within months, despite the huge crash of 2020.

A leveraged ETF would have been down more than 50%, and therefore it is unlikely that you would now be above break even point.

Should you reinvest most of your profits from investments?

Source: Quora

Most people should reinvest dividends into the investments, and reinvest gains. The reasons are simple:

  1. Dividends are a huge proportion of stock market’s total returns:
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2. In most countries, people need to pay capital gains taxes on sales

3. You miss out on compounded investment returns if you keep withdrawing.

The exception, of course, is if you need the money. For most people, that means in retirement. For others it could be when you lose a job.

Due to misleading online content, there has been a rise in people who think it is easy, and safe, to get passive income from the stock market.

Long-term accumulation, and only drawing down when you need the money, is far safer.

What are some things that many financial advisors get wrong about money?

Source: Quora

Good question. The biggest ones I have seen are:

  1. Not practising what they preach. There are many fat doctors. There are also many advisors, wealth managers and even owners of advisory firms who are broke! Knowing something, and doing what you preach, aren’t always the same thing.
  2. Thinking that regulation is always a good thing. Sometimes highly-regulated products, like pensions, just result in lower returns for the client. That depends on the exact structure though, so isn’t applicable for all countries.
  3. Assuming that professional exams are the be all and end all. Often exams teach theory, regulation etc. Some advisors don’t supplement that with extra reading on asset allocation and other areas. Again though, it depends on the country, the exact exam etc.
  4. Thinking that just because I don’t like investment A, that means the client can’t have investment A, as even a small percentage of the portfolio.
  5. Thinking that these days most people want to meet face-to-face. Even before the pandemic I realised that was ridiculous. I don’t want to meet my accountant in-person. I have never met them. Same with my recruiter. I Google when it came to getting a tax advisor. If I was a client, I would do the same for an advisor.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 748.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

Adam is an internationally recognised author on financial matters, with over 284.5 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:

  • Can market risk be insured? Should it be insured considering the other strategies that you can utilise? 
  • Should you invest in alternative assets?
  • Should people in retirement own any stocks?
  • How can you invest in a foreign country, apart from through ETFs?
  • Has the pandemic affected my investment strategy?

To read more click on the link below.

Can market risk be insured?

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