Investing in the United States

September 3rd, 2022
6 minutes read

Boasting the largest economy in the world in terms of nominal GDP and the entity that regulates the world’s reserve currency, the United States attracts substantial investment interest. The financial system of the United States is highly regarded for its transparency, accessibility, and liquidity. This draws many global companies to list on US public exchanges and international investors to participate in US markets. 

Are you curious about investing in the United States? Learn about US Exchange-Traded Funds (ETFs), real estate crowdfunding, and P2P lending - 3 popular ways to invest in the United States outside of traditional assets.

The United States Economy

The overall population of the United States is considered wealthy. It has one of the world's highest per capita GDP figures at 69,558 US dollars per resident.[1] Consumer spending plays a vital role in the US economy and is a key driver of the country’s economic growth, accounting for around 70% of the GDP.[2]

The United States is a net importer, consistently carrying an international trade deficit. The country imports more than any other country, with the most recent 2020 data reporting a deficit of over $900 billion. However, the USA is also the second largest exporter in the world, only behind China, exporting large amounts of petroleum products, medical instruments, integrated circuits, cars, and gas turbines.[3]

Despite huge trading volumes of goods, the United States excels with its advanced services sector in areas like financial services, healthcare, and technology, contributing upwards of 80% to its overall output.[4] US-based companies like Walmart, Amazon, Apple, and CVS Health are some of the world's most significant and far-reaching, with approximately a quarter of the Fortune Global 500 list composed of American corporations. 

The United States is home to the two largest stock markets in the world, the NYSE and NASDAQ, which dwarf all other stock exchanges in terms of the market capitalization of listed companies. Many investors and economists use the S&P 500 index as a benchmark for understanding the US economy, as the index comprises 500 large-cap companies across the breadth of the US industry.

Investing in the United States Through ETFs

Investing through ETFs is a simple and common method of investing in the United States that allows you broad exposure across industries and sectors at a low cost. ETFs contain a diversified portfolio of companies, with most of these investment vehicles passively managing their assets by tracking an underlying index. For example, one of the most popular ETFs is the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index and has a historically averaged yearly return of nearly 12%.[5] With total assets around $400 billion and a very affordable expense ratio of 0,0945%, it’s hard to overlook the SPY as a stable and well-diversified option for grabbing a piece of the US economy.[6]

However, there a quite a few other top-tier US ETFs to choose from, including: 

  • SPDR Dow Jones Industrial Average ETF Trust (DIA)
  • Invesco QQQ Trust (QQQ)
  • iShares Russell 2000 Growth ETF (IWM)
  • Vanguard Total Stock Market ETF (VTI)

USA ETFs are easily accessible to citizens of any country through most international brokerage firms. Foreign investors are usually not required to file a tax return on capital gains income generated from US securities but instead are subject to tax laws in the home country. However, foreign investors who are not residents of a tax treaty country are subject to a 30% dividend tax rate, which is commonly withheld automatically and paid to the IRS directly by your broker-dealer on your behalf.[7] [8] [9]

Investing in the United States With Real Estate Crowdfunding

Investing directly in United States real estate has become unattainable for many, with the median sale price of homes nearly doubling between 2010 and 2022, from $222,900 to $433,100.[10] However, these days, it’s fairly straightforward to split the cost with other investors by investing through one of many real estate crowdfunding platforms that operate in the United States

There are many high-quality real estate crowdfunding platforms to explore that offer the opportunity for US real estate exposure at a fraction of the usual cost. The minimum investment starts as low as $10. Each platform provides distinctive portfolio options to capitalize on the US real estate market with improved diversification and liquidity than traditional real estate investing.

Investing in the United States With Peer-to-Peer (P2P) Lending

The US offers various opportunities for those interested in investing in both short and long-term loans through peer-to-peer lending platforms. P2P lending allows investors the opportunity to increase portfolio diversification while realizing solid returns. With as little as $25, investors can access personal, business, agricultural, or real estate loans through any of the 40+ US-based P2P lending platforms

US-based P2P lending platforms are highly regulated at both the state and federal level, with the Securities and Exchange Commission (SEC) overseeing the investing side of these platforms and both the Consumer Protection Financial Bureau and the Federal Trade Commission guiding the borrower side. The SEC does not allow American P2P platforms to credit the lender with the borrower's loan directly.[11] Instead, the platform has to work with the bank to originate the loan from the platform to the borrower and then issue a debt security to the lender who then becomes a creditor to the platform itself.

The Bottom Line

Traditional assets like stocks and bonds have dominated the US investment landscape, with favorable lending practices for both nationals and foreigners encouraging real estate as a popular alternative investment. However, high inflation and uncertainty in public financial markets are causing many to look beyond the typical investment options. ETFs have been a popular method to get diversified exposure in the US, but real estate crowdfunding and peer-to-peer lending platforms are alternative assets that are becoming increasingly popular too. No matter which investment avenue is chosen, investors in the United States can have a high degree of confidence that their money is parked in a highly regulated, stable, and secure market.

Article Sources

  1. OECD Data: ”Gross domestic product (GDP) - USD"
  2. Investopedia: “The Spending Habit of Americans
  3. The Observatory of Economic Complexity (OEC): “United States Profile
  4. Focus Economics: “United States Profile
  5. Investopedia: “S&P 500 Average Return
  6. State Street Global Advisors (SPDR): “SPDR® S&P 500® ETF Trust
  7. Internal Revenue Service (IRS): "United States Income Tax Treaties - A to Z"
  8. Investopedia: “Do Non-U.S. Citizens Pay Taxes on Money Earned Through a U.S. Internet Broker?
  9. Charles Schwab International: “What you need to know about U.S. taxes
  10. FRED Economic Data: “Median Sales Price of Houses Sold for the United States (MSPUS)
  11. ADBInstitute: “Optimal Regulation of p2p lending for small and medium-sized enterprises