INVESTING IN A USA BUSINESS

It is very easy to invest in a US business. You can simply buy some stock of a publicly traded US corporation through stockbrokers around the world. Direct investment in a specific US business is more complicated and can be quite risky for an uninformed investor. Here are some tips on investing in US businesses.

Publicly Traded Companies

Most of the larger corporations in the USA issue stocks that are publicly traded on one of the stock exchanges. You can easily invest in such businesses by simply purchasing some shares of their stock. Your liability is limited to your initial investment in the stock. You might lose the money that you initially invested if the price of the stock declines, but you will not risk further liability.

A lot of information is readily available about publicly traded companies. The US Securities and Exchange Commission regulates the activities of all publicly traded companies. They set standards for disclosing and reporting important business and financial information with hefty penalties for violation. If you intend to invest in a publicly traded US corporation, you can easily find a lot of information about the company and the price performance history of its stock. You can be reasonably sure that the information is accurate.

The Stock Exchanges

There are four primary stock exchanges in the USA where the shares of publicly traded corporations are bought and sold. These are the wholesale marketplaces for corporate stocks. Usually, only brokerage firms or professional stock traders directly participate in these markets. Every one else normally purchases or sells their stocks through one of the brokerage firms with access to these markets.

The New York Stock Exchange (NYSE) is the oldest and most prestigious stock exchange in the USA. About 3000 major corporations including some of the largest and best-known corporations in the world are listed on this exchange. It includes about 300 foreign corporations in its listing. The daily prices of all stocks listed on the NYSE are published in most US newspapers and financial publications. Minute-by-minute listings of the prices appear on the Internet and through financial reporting services.

The National Association of Security Dealers (NASD) oversees the American Stock Exchange (AMEX) and the National Association of Security Dealers Exchange (NASDAQ). These exchanges are much larger than the New York Stock Exchange. They list many thousands of corporations of all sizes except the very smallest. These exchanges are more technologically advanced and make use of more electronic trading options. They are linked to major stock exchanges around the world. Stock Brokers in many countries have direct access to this US stock market.

Publicly traded stocks that are not listed on one of the above listed exchanges are usually called over-the-counter stocks. (OTC) These stocks may be traded on an informal basis between major stockbrokers. Approximately 3600 over-the-counter stocks are listed on the Over The Counter Bulletin Board (OTCBB) Many smaller public corporations that are not listed on any of the major stock exchanges are traded as over-the-counter stocks.

Stock Brokers

There are many stockbrokers in the USA and around the world that can buy or sell stock in the US corporations listed on any of the exchanges. Traditional stockbrokers offer a whole array of services for the individual investor including investment advice, stock research and investment assistance. They charge a fee on every stock transaction. Their fees can be quite modest on large transactions, but can be relatively high on small transactions due to minimum charges.

Discount brokerage companies provide a little less personal service, but offer lower transaction fees. They usually provide a lot of stock information and research on their Internet web sites, but provide little individual service or advice. You can gain significant cost savings especially on smaller transactions by using a discount broker.

Non publicly traded stocks

Most of the smaller businesses in the USA are not publicly traded on any stock exchange. Privately owned businesses or partnerships and many smaller privately held corporations are not publicly traded. They do not fall under the regulatory restrictions of the Securities and Exchange Commission and are not required to disclose accurate business and financial information.

If you are considering investment in a non-publicly traded business, you may find it difficult to obtain adequate information to determine the actual worth of the investment. Typically, the only source of information will be from the owners of the business, and there may be no independent verification of its accuracy. I do not recommend direct investment in a US business unless you are very familiar with business acquisitions. If you intend to do so, I suggest you hire a business consultant that specializes in mergers and acquisitions to assist you.

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