How to invest in US stocks from Malawi

Many of the companies people in Malawi use every day, from phone makers to social media and streaming services, are listed on stock exchanges in the United States. Owning part of them used to be out of reach for most Malawians. This guide explains how investing in US stocks works, the options available to people in Malawi, and the costs and risks to understand before you start.

What US stocks are

A US stock is a share in a company listed on a stock exchange in the United States. The two largest are the New York Stock Exchange and the Nasdaq. Together they list thousands of companies, including many of the largest businesses in the world.

When you own a US stock, you own a small part of that company, just as you would with a company on the Malawi Stock Exchange. If the company grows and its share price rises, the value of your shares rises too. Some US companies also pay dividends. But prices can fall as well as rise, and there is no promise of a return. If you are new to shares, start with What is a share?

Why people in Malawi look at US stocks

People give a few common reasons for wanting to invest outside Malawi:

• Choice. US exchanges list companies from almost every industry, many of which have no equivalent on a local exchange.
• Spreading risk. Holding investments in more than one country means your money does not depend on a single economy.
• Holding value in US dollars. US stocks are priced in dollars. This cuts both ways: when the kwacha weakens against the dollar, the kwacha value of your investment rises, and when the kwacha strengthens, it falls.

None of these reasons removes risk. Investing abroad adds currency risk on top of the normal ups and downs of share prices.

The ways to invest from Malawi

There are a few routes. Each has different costs, paperwork and minimum amounts.

An international broker

Some international brokers accept clients from Malawi. You open an account online, verify your identity and send money, usually by international bank transfer in US dollars. These accounts can give you a wide choice of shares, but they often need a bank account that can send money abroad, and some have high minimum deposits.

Funds that invest abroad

Some local and regional fund managers offer funds that hold foreign shares. You invest in the fund, and the fund manager decides what to buy. This can be simpler, but you pay management fees and you do not choose the individual companies.

Investing apps

Mobile investing apps aim to make investing simpler, with a sign-up in the app and payment methods people already use. Ziki is an app that lets you invest in shares from your phone, paying with Airtel Money, TNM Mpamba or USDC. As with any provider, check what you can invest in, how your investments are held and every fee before you put money in.

Fractional shares

Shares in large US companies can cost hundreds of dollars each. Fractional shares let you buy part of one share instead of a whole share. If one share costs 200 dollars and you invest 20 dollars, you would own one tenth of a share. Your part rises and falls in value in the same proportion as a full share.

Fractional shares make it possible to start with smaller amounts and to spread money across several companies. Not every provider offers them, so check before you sign up.

Costs to understand

Investing abroad usually involves more costs than investing at home. Ask your provider to show all of them:

• Currency conversion. Turning kwacha into dollars, and back again when you withdraw, comes with an exchange rate and sometimes a fee. A small difference in rate can cost more than the trading fee.
• Trading fees on each buy and sell.
• Deposit and withdrawal fees, including mobile money or bank charges.
• Account fees, charged monthly or yearly by some providers.
• Taxes. US companies' dividends paid to foreign investors are usually taxed in the US before you receive them, and you may have tax obligations in Malawi too.

A good provider shows you the full cost, including the exchange rate, before you confirm.

Risks to know

• Market risk. Share prices move with company results, interest rates and world events. They can fall sharply.
• Currency risk. Changes in the kwacha to dollar rate change the value of your investment in kwacha.
• Concentration risk. Holding only one or two companies makes your investment depend on them. An ETF is one way to hold many companies at once.
• Provider risk. Use a provider you can verify, understand how your investments are held, and be wary of anyone promising guaranteed returns.

Steps to get started

1. Learn the basics. Understand what shares and ETFs are and how prices move.
2. Choose a provider. Compare what you can invest in, how you pay, and all fees.
3. Verify your identity. Most providers ask for an ID and proof that it is you, such as a selfie.
4. Add money. Use a payment method the provider supports. Our guide to investing with mobile money in Malawi explains how this works with Airtel Money and TNM Mpamba.
5. Start small and spread your risk. You do not need to invest everything at once.
6. Review regularly, but think long term. Daily price moves are normal.

Key points

• US stocks are shares in companies listed in the United States, priced in dollars.
• People in Malawi can invest through international brokers, funds or investing apps.
• Fractional shares let you invest smaller amounts in expensive shares.
• Check currency costs, trading fees and taxes before you invest.
• Prices and exchange rates can move against you, so only invest money you can leave invested.

To learn how investing at home works, read how to buy shares in Malawi, or see how Ziki works.