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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?

  • I don't see why not. I invest in an ETF that tracks non-US companies. There might be complications with taxes though. – alexgbelov Mar 16 '18 at 0:12
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    Do they have actual shares on NYSE, or ADRs? The former should be the valued the same (after currency conversion) but the latter are often NOT 1:1 but some other ratio like 2:1 – dave_thompson_085 Mar 17 '18 at 3:12
  • They do have actual shares on NYSE, as well as the Canadian Stock market. – D. Doe Mar 27 '18 at 20:41
  • Forgive me, what's an ETF? ELI5 – D. Doe Mar 27 '18 at 20:41
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Yes. Americans can legally invest abroad.

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    Yes, but there are many potential tax pitfalls to avoid or be aware of that need to be mentioned in a good answer. – Eric Mar 16 '18 at 19:21
  • Not really. The answer is whether or not it’s legal. The OP can feel free to ask additional questions in his question. However, I disagree with you because the OP explicitly asked whether or not it was legal. Now that he knows it is legal (simple answer), he can ask specific questions or do further research. So I respectfully disagree with your definition of what makes a “good” answer in this context, and I believe that you are projecting unto the OP what you would want to know, which again should be explicitely asked given the context. – Simeon Ikudabo Mar 16 '18 at 21:37
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    The OP asks if it is "doable" which, in my mind, includes whether it makes sense from a tax perspective. – Eric Mar 16 '18 at 22:11
  • Again. I respect “in your mind”, however your mind isn’t what the OP asked with all due respect. – Simeon Ikudabo Mar 17 '18 at 19:07
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    @SimeonIkudabo I was actually looking for the response Eric was speaking about. Thank you for the input, however – D. Doe Mar 27 '18 at 20:40
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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

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  • 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.

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