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24.09.2021

Which Broker Is the Best for Stock Investments: Foreign or Local?

The stock market opens up almost unlimited opportunities for traders. Unlike Forex, there are more assets to form an investment portfolio. Today, we’ll share some tips and advice on choosing the right stock brokerage company for investing and making a profit. 

Stock Market: Why Is It So Profitable? 

The stock instruments are listed on stock exchanges and are available to private traders and institutional investors. Each client’s order is displayed in the general order book, excluding the possibility of manipulating quotes by a broker or market maker. 

Stock investments are more stable. The government or the central bank cannot control the share price of an individual company, unlike FOREX assets. Meanwhile, foreign exchanges can offer a trader a much larger set of assets than the local ones.  

The main thing that matters here is the choice of a financial broker. Is it worth opening an account with a foreign brokerage company or choosing a local one? 

Foreign Brokerage: Hits and Misses 

The main advantage of opening a trading account for stock investments with a foreign provider is that a trader does not need to obtain the status of a “qualified investor.” Here are some more advantages of this option: 

  • Hedging the market risks. Global brokers insure their risks and capital in insurance companies. It means clients will receive compensation from the insurance payment in case of force majeure. 
  • A more sophisticated set of trading assets. The number of available shares is rated in the hundreds on the Chicago or London stock exchanges. What’s more, derivative financial instruments (futures and options) are also available to traders. 

The option to purchase shares of new projects during an IPO. 

Still, investing in foreign brokers has its drawbacks. For example, many companies do not open accounts for CIS residents. In some countries, you might face dual taxation, both at home and abroad. 

Local Brokerage Companies 

  • A local brokerage company means:  
  • The absence of a language barrier 
  • Guaranteed opening of an account 
  • One can seek redress in the local judicial authorities in case of fraud 

However, according to Russian Federation laws, you must confirm your qualifications and obtain official investor status. In addition, the financial threshold for entering the stock exchange is usually lower for Russian brokerage companies than for European or American ones. Still, the set of assets is much more modest. 

Summary 

Choosing a broker for trading on the stock exchange requires careful analysis and a balanced approach. Before opening an account and investing funds, users must carefully weigh all the pros and cons to avoid further issues. 

For investors who decide to open their own company for servicing individuals and legal entities, the choice of jurisdiction is associated with taxation or obtaining licensed documentation and the quality of the software.  

To minimize the risk of failure while trading, we recommend using professional software by Profit Center FX. The brand is a trusted developer and software integrator with over nine years of experience and 200+ successfully launched brokerages worldwide. 

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