How does one invest in the US stock market while living in Africa and be able to access funds as a retirement plan?

 

Planning for the future especially for retirement is the best treat anyone can offer him/herself. We are all sure that the strength we have today will not be there tomorrow and without proper personal financial planning, we may be found wanting. It is therefore apt and important for everyone to plan for the future especially for retirement. Retirement comes with a lot that we are not able predict.

Investing in U.S stock market, whilst living in Africa has become common and easy for many Africans, thanks to the Internet of things. More and more Africans prefer U.S stocks mainly because investment in dollars serves as a natural hedge against local currency vrs dollar depreciation. Also the prudent/strict stock market regulations that U.S stock exchange(s) offer make it worthy of long term retirement investment.

That said, let’s understand the process of investing in U.S stocks from Africa.

1. Understanding Stock Market Investments

2. Selecting Your Brokerage Firm

3. Account Onboarding Process

4. Transfer Of Money Into Your Brokerage Account From Africa.

5. Selecting Stocks For Your Investment

5A. DIY Method

5B. Stock/Investment Analyst Services

5C. Investment In Large Selection Of Stocks.

5D. Other Types Of Investment

6. Certificate Of Ownership Of Shares

5. Accessing Your Retirement Account

6. Monitoring The Performance Of Your Investment
7. Accessing Your Retirement Funds

1. Understanding Stock Market Investments.
Before you embark on investments in stocks, you need to understand how stocks exchanges work. Investment in stock is unlike a checking account where you can at any day and time withdraw your investment. Buying stock/shares in a company means holding an equity position in the company. Holding an equity position in a company makes you part owner of the company’s whose shares you hold. Fortunately, you need not manage, operate or run the business you invest in yourself. This is done on your behalf by the directors and managers. The management of the company is delegated to board of directors and managers of the company. Further, U.S companies in general abide and practice good corporate governance principles making them attractive destination for investments.

2. Selecting Your Brokerage Firm
Investing in public listed stocks and for matter U.S stocks requires you, the investor, to select a brokerage firm which is registered with the stock exchange. The firm’s role is to buy/sell the stock for you. This is because it is only brokerage firms that are registered with the stock exchange are allowed to buy/sell stocks that are listed on the exchange. Once you select your prefered brokerage firm, you will then apply for an account. The brokerage firm will take you through their onboarding process, after which it will open an account for you.

3. Account Onboarding Process.

There are strick rules regarding anti money laundering and terrorism financing activities in the U.S. United state firms therefore have to comply with all rules and regulations in this regard in the U.S. This rules are meant to ensure that proceeds of crime do not find their way into the United States or financing of terrorism, as legimate funds.

However, legitimate funds and investors are free to invest on any venture/stocks in the U.S without any hiccups.

Therefore, the firm that you want to deal with in the U.S will need to identify your properly and also know the source of funds for your retirement investment.

The following process will be followed in opening the investment account for you.

1. Your name, identity, address and sources of funds(in details).

2. The brokerage firm will then do due deligence on the information you have provided.

3. Once the firm are satisfied , it will open accounts for you.

Next step for you is to transfer funds to the brokerage firm to be used to buy the stock for you.

4. Transfer Of Money Into Your Brokerage Account From Africa.
After the onboarding, you can transfer your money to your broker through normal bank transfer. You can transfer money through the use of your debit/credit card as well.

4. How To Select Stocks For Your Investment.
It is your responsibility to choose stocks that you will want your brokerage firm to buy for you. You can do that in two ways.

5A. DIY Method

You can do DIY to select your own stocks that you think will appreciate and in the long term enable you achieve your investment objectives. This involves studying the performance of companies listed on the New York Stock Exchange and predicting into the future how you think these companies will perform. If you think they will do well into the future, then you buy. Otherwise sell and use the proceeds to buy other stocks with good future value.

Since its a retirement investment, I will recommend high growth potential stock. Usually high dividend stocks seems to reach maturity stages of growth so the company will want to return cash to investors. As a result the stock price growth rate may not be that encouraging. In case you choose dividend stocks for example, then you need continuous research into other stocks that you will reinvest your dividends in. In anyway, it is advisable to diversify your portfolio to even out returns and avoid concerntration risk. Don’t put all your eggs into one basket.

5B. Stock/Investment Analyst Services
In case you are not able identify potential stocks for your investment, then you will need an investment analyst or research firm. These stock analyst firms research various stocks and make recommendation to you. Mind you, you have to pay a little for their services. You then choose from stock recommendations presented to you by your stock analyst. Base on this, you request your stock brokers to buy your prefered stocks.

5C. Investment In Large Selection Of Stocks.

In case you do not want the options above, there are numerous Exchage Traded Funds (ETF) whose stocks prices mimick a large section of share trading on New York Stock exchange. For instance S & P 500 ETF, mimicks 500 stocks one the New York Stock Exchange. This is the weighted average price of all the 500 stocks it represents. Therefore, returns from these single S & P 500 stock is as though you have invested in all the 500 stocks on the exchange. With this too, diversification is achieved.

You can invest in S & P 500 as you do with the earlier own selected stocks. The onboarding process is the same.

5D. Other Types Of Investment

There are many other investment schemes such as mutual funds, unit trust, different managed funds (active and passive). The list is endless.

Once you have chosen one, the onboading process is the same

6. Certificate Of Ownership Of Shares

After you place an order to your brokerage firm to buy shares for you, it will be done. The firm will then forward the certificates of ownership of the stocks to you for safekeeping. This is usually kept online with your account number etc. You can always login into you account

7. Accessing Your Retirement Account
You will be investing in stocks (shares) of your chosen company. Therefore as with all investments in stocks, to access the your account, you will have to login into your account you opened with your brokerage firm using your username and password. If your purpose of loging into your account is to know the value of your investment, then you may not need to login into your account. Instead do the following:

1. Keep a personal record of the number of stocks and company you invest in.
2. Know the symbols or alphabet that represent your stocks on the exchange.
3. At any day, look at the stock price of the company you invest in.
4. Multiply the number of stocks you hold in a particular company by the stock price to know the value of you investment.

8. Monitoring The Performance Of Your Investment

You have a duty to yourself to monitor the performance of the stocks you invest in, sell or buy more as and when required to ensure that your investment and retirement is not jeopardised. Also because the stocks you invest in are listed on a stock exchange and traded daily, you are sure to know how much your investment is worth daily.

5. Accessing Your Returement Funds.

The U.S stock market is very liquid; stocks you hold can be sold within an hour. Do the following:

1. Ask your brokerage firm to sell some of the stock for you.

2. The firm will request you to fill some forms for your oder.

3. Once that is done and submitted, the brokerage firm will sell the shares for you and deposit the proceeds into your designated account. This could also be direct transfer into your local African bank account.

If the proceed are deposited into your U.S designated account, you can access that account with your username and password. From there, you can transfer the money to yourself in Africa.

Conclusion

Investment in the U.S stock market for retirement is can be very easy if you understand the processes involve. The main issues are selecting you stock, onboarding process; which can take a little while and mostly importantly monitoring the performance your investment. With a little due delegence and tack you will achieve your retirement goals. Start now!