I've been tracking the cannabis industry for awhile and would love to hop on the canna-stock wagon, but I'm not sure if Americans are allowed to invest in Canadian stocks. The companies I'd like to invest in do have NYSE codes; however, they're worth a lot less than its Canadian counterpart. Is this possible (aka not illegal, doable) and if so, worth the hassle?
Yes. Americans can legally invest abroad.
It is possible. It will have tax implications. The US wants to encourage investment but in its companies and to have the money stay here. So if you invest in other countries through funds/stocks and accounts abroad you will have to account for getting taxed on your foreign income (refer: PFIC). This is so that the incentive to 'park' funds in 'tax havens' is reduced.
NOTE: (and sorry to sound anarchist) that this is going to affect a regular middle class person way more than someone dealing in millions because the taxes you have to pay almost make investing in foreign funds pointless, at small to avg amounts.
To that extent the recommendation is to find an equivalent US fund or a US fund that invests in the same fund/stock and invest in it. Then you are pretty much keeping hte money in the US and your investment will be treated as regular domestic investment.
Now talking about all of it here at length would be trivializing it and it does need the advice of a tax consultant/advisor who is strongly knowledgeable in international investments and also your personal situation. Needless to say, if you start declaring this money from the year you invest in it, that is best for you.
Depending on how you keep the money (long term vs short term - standard 1 year mark) you will get taxed accordingly too. And if you would still like to pursue PFIC (Passive Foreign Investment Companies), you should look into those funds (Vanguard, for ex) that issue statements that the US tax filing requires.
I can leave one reference link to give an idea but would urge you to search more and approach an advisor - https://www.thetaxadviser.com/issues/2012/oct/clinic-story-07.html
- You can invest in Canadian companies directly; however, not all brokers may offer this feature to all clients.
- If the company chose to list its share in US exchange, you can invest in those shares. I'm not sure what you mean by them being "worth less" - the relevant question to you is whether it went up or down. The market cap will of course be affected by how many shares the company listed.
- There are ETFs and mutual funds that track specific industries or specific regions, sometimes both. These abstract away the complexity of foreign investment so you can simply buy shares in one asset and be done. The catch is fees and inability to fine-tune exactly which companies they will buy into.