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How to buy shares of IT-companies on foreign exchanges? (part 2)

Stock Investing for Dummies (theory) In the first part of this article, we examined the theoretical foundations of stock trading in American stock markets (NASDAQ, NYSE, AMEX). Familiarized with the basic concepts, definitions and principles. If something is incomprehensible in the second part, then perhaps you have not read the first part very carefully. You can always go back and clarify something.

In the second part I wanted to formulate and set out a step-by-step practical guide, i.e. Some HowTo on how to buy some specific stocks on the NASDAQ or NYSE. Suppose you want to buy shares of a particular company, for example, Google, Apple, Microsoft, Yandex, Intel or Tesla Motors for the purpose of investment (based on the growth of the value of these shares in the future).

What is needed for this, and where to start?

What stocks will you buy?


Decide which companies you are interested in. Let it begin to be shares of a single company.
Open Google Finance or Yahoo! Finance , find there the stocks of the company you are interested in, look at which exchange they bargain for, what their ticker is, how much they cost.
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For example, if you do a search for stocks under the name “Microsoft”, then you will find stocks of Microsoft Corporation that are traded on the NASDAQ under the ticker MSFT and are worth about $ 24 each at the time of this writing. At the same time look at the trends of the course for the last week, month, three months.

How much money are you willing to invest in stocks?


Money calculations Decide on what amount of investment you expect.
Usually in investment / brokerage companies there is a certain minimum amount with which the investor is offered to enter the market. Some brokerage companies have $ 2,000, others have $ 5,000, and others have $ 50,000 or more. Here it is important to understand that this is not at all a hard limitation, but only a recommendation of a broker. On the one hand, they are trying to protect themselves from very small customers, so as not to waste their time on them. On the other hand, it is also more profitable for investors (in terms of profit margins) to invest more money in stocks in order to reduce the percentage of losses on overhead and commission expenses.

If you are willing to invest money less than the minimum amount voiced by the broker, then there is nothing to worry about. In any agreements on the provision of brokerage services the minimum amount is not indicated. Moreover, the investor transfers the funds to the brokerage account already after signing the contract, therefore at the time of signing the contract the broker doesn’t really know how much the client will transfer funds there (maybe more, or maybe less than the recommended amount).

We are looking for a suitable investment (brokerage) company


Now you need to find a suitable company that will provide you with brokerage services for the purchase of shares of interest.
You need a company that:

How to start a search?


Lists of brokerage companies Make a list of investment (brokerage) companies represented in your region. You can search for lists of investment companies on various financial and brokerage sites / forums. And you can even in any search engine (Yandex / Google / Bing) type a query like “investment company% CityName%”, “brokerage company% CityName%”, “investment bank% CityName%”, “brokerage service% CityName%” to find companies in this area in your city.

For example, here are some lists:
brokers-rating.ru/?sortby=assets&order=desc
www.2stocks.ru/main/invest/world/info/worldbrok
rating.rbc.ru/article.shtml?2011/01/26/33138398
rating.rbc.ru/article.shtml?2011/05/14/33287416

Next, you need to go through the list and collect information on brokerage services in these companies. I’ll say right away that it will be rather difficult to look for information about the conditions of brokerage on foreign exchanges on the websites of many Russian investment companies. Someone has a site with poor navigation, but this information is hidden deep. Someone has information on brokerage in Western markets not on the site of a Russian investment company, but on the site of their subsidiary, registered somewhere in Europe. So I guess, either they don’t provide brokerage services on the US exchanges, or you just didn’t find this information on their website.
To write them emails with similar questions is long and inefficient (not everyone will answer). The fastest and most efficient way is to call and interview all Russian investment companies from your pre-compiled list by telephone.

What to ask by phone?


Dial the number, and there is something like this dialogue:
Phone dialog - Company% CompanyName%. Hello.
- Hello. I am interested in brokerage services on Western stock exchanges.
If you didn’t call a special number of brokerage services consulting consultants, but for some common company number, then you will first communicate with a certain call center operator who, having heard the key words about brokerage services from you, will switch you already for a brokerage specialist. Further you continue conversation already with this expert.
Phone dialog - Hello. Does your company provide brokerage services to individuals for buying shares on US stock exchanges?
[Note: It is not necessary to specify the name of a specific stock exchange (NYSE, NASDAQ, AMEX). A brokerage company either provides services on all US stock exchanges (and usually on the same conditions and at uniform rates), or does not provide brokerage services on any US stock exchanges.]
- Well no.
If the answer is no, then this company does not suit you, say: “Thank you. Goodbye. ”, - hang up and cross out this company from your list.
If the answer is "yes", then ask questions further:
Phone dialog - Do you provide brokerage services in Western markets for unqualified investors?
- Well no.
If the answer is no, then this company does not suit you, say: “Thank you. Goodbye. ”, - hang up and cross out this company from your list.
If the answer is “yes”, then this company works exactly according to the “Cypriot brokerage scheme” described in the first part of the article, which means you are potentially suitable.
You can further clarify in which company a brokerage account will be opened and where this company is registered. Most likely you will be informed about a certain foreign company registered in Cyprus or with a representative office in Cyprus.

We cross out the wrong companies This initial survey of companies will help you quickly reduce the original list. You will cross out those who are definitely not suitable for you, so as not to waste your time and attention on them. After these questions, literally a few of the companies are likely to remain on your list.
For example, I initially took a list of about 30 leading investment companies and investment banks that are engaged in brokerage services and are represented in my region (Moscow). After the initial survey described above, I deleted the lion’s share of companies from this list. There are literally 5 companies on my list. I’m not even ashamed to call them: BCS (BrokerCreditService), CIT Finance , Otkrytie , Finam , Zerich . The rest either did not work on US exchanges, or provided brokerage services on US exchanges only to legal entities, or worked with individuals, but only with qualified investors (as they have a brokerage account opened in Russia). However, at the time of writing this article on the website of Otkritie, it is written that at present they do not provide access to international markets for individuals, so now my list after this survey would be one more company less.

With those who remain on your list, you will need to communicate further more thoroughly and substantively.

What to ask next?


Next, you need to find out the conditions and rates for brokerage services.

Customers turn to investment / brokerage companies for different purposes: someone plans to be a trader, someone simply invests. And the choice of this or that tariff plan offered by the investment company to its clients may depend on it. Therefore, immediately explain to the manager-consultant with whom you will communicate that your goal is not active daily trading, namely, medium-term or long-term investment of money in the shares of companies trading on US exchanges . Those. you want to make a one-time purchase of shares of a company on the NYSE or NASDAQ for about NNN USD, and then in a few months or even years, when their value rises, sell them. After that, ask what tariffs they have that are best suited for the purposes described.

Under the terms and tariffs, specify the following items:
  1. Questions Is there a fee for opening a brokerage account and maintenance of the initial transaction?
  2. What is the size of the brokerage commission when buying / selling shares on US exchanges? Is there a minimum commission for one trading session?
  3. What is the fee for depositing funds to a brokerage account?
  4. Is it possible to transfer funds in rubles or euros with subsequent conversion? (if you are interested in this opportunity)
  5. How can I apply for the purchase / sale of shares? Is it possible to apply by phone "by voice"?
  6. How much is the application "voice"? How often can such applications be submitted?
  7. What is the fee for opening a custodian (deposit of securities) and what is the fee for keeping the purchased shares on the custodian?
  8. What is the amount of commission when withdrawing funds from a brokerage account to a bank account in a Russian bank?
If you are interested in the possibility of opening a bank account in a Russian bank for depositing / withdrawing funds to a brokerage account, then you can also ask:
  1. Do they have the opportunity to open for you a bank account in Russia, through which you would be able to deposit / withdraw funds to a brokerage account?
  2. How much will it cost to open and maintain this bank account?
  3. What is the fee for transferring funds from this bank account in Russia to a brokerage account?
  4. What is the fee for withdrawing funds from a brokerage account to this bank account in Russia?
Questions In general, do not hesitate to ask the consulting managers of investment companies any questions on brokerage services, even if these questions seem naive or even silly to you. These people are there specifically to advise clients and answer their questions. You will never be answered there: “RTFM, lamer! Everything is written on the website! ”- you will always patiently answer all your questions. But I hope that after reading this article you will not have any stupid questions.

In addition, you can ask the manager-consultant to send you an e-mail with documents containing broker service rates on US exchanges, as well as custodial service rates. Well, if you do not send it by e-mail, then at least suggest in which section of their site you can find these documents (finding them yourself on the site is not always easy).

By collecting the answers to all these questions for each investment company, you will get quite a clear idea of ​​the conditions and rates of brokerage services in these companies. Perhaps, one of the companies-applicants will be eliminated at the stage of collecting this information, because to the naked eye will be visible overcharges.

For example, in my case, two more companies dropped out of the remaining ones (due to the too high proposed tariffs) and three finalists remained: BCS (Broker Credit Service), CIT Finance, Finam. It was from them that I made my final choice (I will not name a specific company). It is possible that these companies will also be present in your list of applicants, since except Moscow, all three named investment companies are represented in other regions of Russia. Here is a brief squeeze of links on them (arranged just alphabetically) for self-study:
  1. BCS (BrokerCreditService)
  2. KIT Finance
  3. FINAM

If, after collecting information on tariffs at first glance, the difference between the remaining companies is not too obvious and not too straightforward, then I recommend conducting a comparative analysis of tariffs. To do this, you can come up with several typical scenarios:
  1. Transfer of N rubles to a brokerage account with conversion in USD.
  2. Buying K shares for L dollars each.
  3. Custody of these shares for custodians M months.
  4. Increasing the value of purchased shares on average by P % per month.
  5. Sale of shares after this period and withdrawal of profits to a bank account in Russia.
With different values ​​of these parameters in different scenarios. You can even the example of shares of real companies in past years.

Tariff Evaluation and Comparison Next, estimate how much each scenario will cost you according to the tariffs of each of the companies. It is not excluded that in some scenarios the tariffs of one company will be more profitable, and in other scenarios - the tariffs of another company. For example, if you plan to store purchased shares for a long time, then a company with custodial service fees would be less profitable for you than a company with free custodial services. Or, if you plan to withdraw funds often in small portions, then a company with a higher withdrawal commission will be less profitable. And in scenarios with frequent buying / selling, a company with a lower brokerage commission will be more profitable.

After all the comparisons and in-depth analysis, you are already choosing one particular company with which you will enter into a brokerage service agreement. What company I chose, I will not write, I do not want you to impose your choice.

Conclusion of contracts


If you have decided which company you will work with, then call their brokerage service specialist and arrange a meeting at the company's office to sign all the necessary papers. Agree on the time and specify the venue. Exchange contacts (mobile phones) for quick communication.

I recommend immediately asking you to send you an e-mail in electronic form forms of all contracts (as well as tariffs) that you have to sign at a meeting in the office. This will allow you to take a leisurely and thoroughly study the texts of the documents so that you can clarify or clarify something by phone before signing. In this case, the meeting for signing documents will take less time, because on site you will spend less time studying all the documents.

Broker contract For his part, the specialist of the investment company will ask you in advance (even before the scheduled meeting) to fill in an electronic form, as well as to send scans of documents. They need this data to prepare for the appointment of contracts and other documents for signing. This questionnaire may have questions about your place of work, position, annual income, the value of your property and the approximate amount of the planned investment. Write there what you see fit. No documents confirming the specified amount will not have to provide.
If you plan to immediately open a bank account (or several accounts in different currencies) in the Russian bank of this company, also inform about it before the meeting, so that the manager prepares all documents for opening bank accounts in advance.

As for the documents that are required of you to prepare and sign all contracts, this is at least a passport of a citizen of the Russian Federation. In addition to a Russian passport, a second identity document is sometimes required. It is often specified that this should be a document where the name and surname are duplicated in Latin letters (i.e., for example, a foreign passport or driver's license). The second document is not required in all companies, you can clarify this issue with the consultant in advance.

Passport and money Well, then come to the appointment at the office of the investment company. Of course, you take documents with you (I was asked only a Russian passport at the meeting, only a previously sent scan was enough from a foreign passport). If you plan to open a bank account in the bank of this company and immediately deposit funds in cash through the cashier, then immediately take the money with you. If you use your bank account in another bank, then capture the details of this account.
In the office, the manager will meet you and lead you to the negotiation room, where you will receive a package of documents prepared for signing. There you will once again carefully read all the documents, ask all the remaining questions and sign the papers. There will be two main documents for signing:
  1. Brokerage service agreement (+ broker service rates as an attachment to this agreement).
  2. Custodial Services Agreement (+ tariffs for custodial services as an attachment to this agreement).
All contracts are in two languages. Each page of the contract is divided vertically into two columns: in one clause of the contract in English, and opposite - in the other column - the same clauses in Russian. All documents can be read and completed in Russian, knowledge of foreign languages ​​is not required.
These contracts are concluded directly between two parties: an individual (you) and a brokerage company registered in Cyprus. The Russian investment company, to whose office you come to sign documents, is not legally a party to the contract, they here act as intermediaries to help you conclude an agreement. The contracts are signed in two copies, the second copy will be returned to you after the signing by the other party.

If you immediately open a bank account, deposit funds into it and transfer them to a brokerage account, then more will be added to the list of documents to be signed at the meeting:In addition, among the documents being signed there will be any small things:And so on…

Signing of documents Sign documents. Open an account. Deposit funds (if the cash desk of the bank is located in the same office). Transfer funds to a brokerage account (or rather, while only submitting a payment order for this transfer).
On this your visit to the office of the investment company ends.

A brokerage service agreement usually gives you the right to make transactions with various financial instruments (stocks, bonds, options, futures) in various world financial markets. Therefore, even if you initially planned to trade only stocks and only on the US stock exchanges (NYSE, NASDAQ, AMEX), then you can expand the field of your financial activities to other markets and other instruments using the already concluded contract. Unless tariffs for the different markets and for different securities usually differ.

After signing the documents from your side, these documents are sent for signature to the general director of the Cyprus brokerage company. Somewhere on the next business day (well, or every other day), you will receive an e-mail notification stating that the contracts have been signed and accounts have been opened. In this letter, they usually send scans of contracts signed by both parties and further instructions on the transfer of funds, on their conversion, on access to trading systems and on how to submit applications for transactions. You will also receive a list of voice passwords for submitting instructions from the voice, instructions for installing and configuring the trading terminal (in case you want to work through the trading systems), contact numbers for submitting trading instructions, technical support contacts and other technical information necessary for start working with the exchange.

After opening a brokerage account, your previously submitted orders for money transfer and conversion will be executed. In addition to orders for the transfer of funds, it is sometimes additionally required to submit an order for crediting these funds. They are simply transferred by default to a certain general account that can be used for different markets and different types of securities, and the transfer order indicates that you want to credit these funds specifically for trading stocks and precisely on the US stock exchanges. The need for such an order for crediting funds, check with the manager when signing contracts.

As soon as you receive a notice of opening a brokerage account, and you have credited funds to it, you can already make deals to buy shares. You do not need to wait for this return to you of the signed copy of the paper contract. Paper contracts with seals and signatures of the other side will come to you with a delay of a couple of weeks. Upon signing the agreement, you can agree on the method of transferring the signed agreement to you. Either you drive up to the local office of the company yourself, or they will give it to you by courier, or send it by mail to any specified address by registered mail.

Making deals


Now you can periodically view Google Finance or Yahoo! Finance for changing the stock of interest to you. Nobody will hurry with the purchase of shares. As soon as you consider that the price of the shares you are interested in is suitable for purchase, then you estimate how many shares you want / can buy, call the broker by phone for a special number for voice instructions and give an order to purchase shares. The brokers are all Russian-speaking, and the dialogue with them will look something like this:
Phone dialog - Hello. Company% BrokerCompanyName%, broker% BrokerName%. Listen to you.
- Hello. I want to apply for stock purchase.
- Introduce yourself, please, and give the number of your brokerage agreement.
-% ClientFullName%, contract number% ContractNumber%.
- Name the password number N. [Note: for example, number 7 - the broker may ask any number from your list at all]
- [Dictate the password with the specified number from the previously received list of passwords.]
- Password is correct. Your brokerage account is now K dollars. What deal, what stock and how much?
- Shares of the company% CompanyName% [for example, Microsoft on the NASDAQ (ticker: MSFT)]. Purchase at current market price. X pieces.
— %CompanyName% YY.YY . X . ZZZZ.ZZ . ? ?
— , .
— . X %CompanyName%. VV.VV [.: , .. ]. WWWW.WW . UU.UU .
- ?
— . , .
— .
, . , , : « - », — , , , , . ( ) « , ». , , . -, , . -, , , ( ).

Deal , (), ( ) . , , 2-3 .
e-mail . - (, ), ( , , ), . .

Profit Google Finance Yahoo! Finance . , , , , , X %CompanyName% . , . , .

. ( ) . , , . , .

?


Let's consider an example of a brokerage company with the following rates:
Opening a brokerage account: free of charge.
Opening a bank account and depositing funds: free of charge.
Brokerage fee: $ 0.01 per share, minimum $ 10.
Storage of shares on deposit: 0.06% per annum (0.005% per month).
Withdrawal: $ 25 per order.

The script is as follows:
There are 6,000 USD, we transfer them to a brokerage account (without conversion), we buy 200 shares of Tesla Motors (NASDAQ: TSLA) (about $ 30 per share). We keep the purchased shares for 1 year, the whole year their price grows approximately linearly (at $ 0.5 per month), there are no dividends. A year later, when these shares cost already $ 36 apiece, we sell all of them and withdraw the money received to a Russian bank in the form of USD (without conversion).

Calculate costs and profits.

graph Profit before tax:
200*($36) - ($6000) - ($10) - (~$4)[. .] - ($10) - ($3)[ ] - ($25) = $1148
If you pay them income tax (13%), it will remain: $ 999
As you can see, even taking into account taxes, a yield of more than 16% per annum is obtained, which is significantly higher than the yield of fixed-term deposits (cash deposits) in Russian banks. But this, of course, based on the assumption that Tesla Motors shares will grow by a specified amount in a year. Considering the information that in early 2012 they will start selling the previously announced model of Tesla Model S electric vehicles, for which there is already a pre-order, this may be reasonable expectations for the current situation.

Disclaimer


Stock exchange risk Before you start trading stocks on the exchanges, it is important to realize that income is not guaranteed in this case. You can either make money on the stock exchange or lose it. It depends on your ability to feel market trends, on your ability to predict, on the successes and failures of the companies you invested in whose stocks, on the market situation, on global financial and local industry crises, on natural disasters, natural disasters, man-made disasters, yes and from many other objective and not very factors.

Investment diversification It’s impossible to count in advance. Buying stocks is always an investment with a high degree of risk. But on the other hand, if you succeed in stocks, you can earn more than in less risky investments. If you are not ready for such a risk and possible financial losses, it is better to refuse to buy shares. You can try less risky investments with guaranteed returns, for example, time deposits (cash deposits) in banks.

If possible, try to diversify your investments and risks accordingly. Simply put, do not store all the eggs in one basket. For example, form your stock portfolio from several different companies in a different industry. And besides stocks, it’s better to distribute your investments among other financial instruments: bonds, mutual funds, time deposits (bank deposits).

Afterword


Well, it seems that's all. The topic is quite extensive, so I tried to explain the very basics, but on the widest possible range of issues. For the initial immersion in the subject of this will be enough, and then it is up to you.

Perhaps to experienced players in the stock markets, this article will seem rather primitive and in some moments not very accurate. I won’t be surprised if this text looks as naive and funny to experienced stock traders as an article about information technology in Cosmopolitan magazine for an experienced IT person. But it does not bother me at all. I am here and do not pretend to academic knowledge in the subject area, I myself am new to this topic. Just sharing my little practical experience at the level of my competence in these matters. If there are amendments and additions from experts in the field of stock trading and international investments, I will be happy to hear (write in the comments).


CC BY License logo		Article author: Roman Tik <ya.roman.tik {at} yandex.ru>
The text of the article is distributed under the terms of the license Creative Commons Attribution 3.0 Unported (CC BY 3.0). You can freely copy, edit and use for any purpose this text with the obligatory indication of authorship.

Last update: 2011-06-06 04:00 (UTC + 4)

Source: https://habr.com/ru/post/120419/

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