What you buy when you buy a stock
FINRA, the body that oversees US brokers, explains that buying a stock means buying an ownership share in the company. When the company is profitable it can choose to pay part of its earnings to shareholders as a dividend, but it does not have to. FINRA also notes that stock prices go up and down, sometimes sharply, and that the outcome depends on the company's success or failure. Buying a stock is therefore a risky investment, and the money you put in can lose value. An overseas broker does not change that principle. It is only the channel that carries your order to the exchange and the place where your shares are held for you.
From order to settlement
Everything starts with an order. Investor.gov explains that a market order guarantees execution but not the price, and that a limit order executes only at your price or better. After execution comes settlement, the day cash and shares actually change hands. According to FINRA, most US trades settle on the business day after the trade date (T+1), a rule that took effect in May 2024. So when you buy, the broker must receive your payment no later than one business day after execution. Check whether your broker requires the money to be in the account before you send the order.
Custody: where your shares are held
After settlement the broker holds your shares, so it is worth knowing what protection applies if the broker itself fails. In the US, SIPC protects customers of member firms up to 500,000 dollars, including up to 250,000 dollars in cash. SIPC stresses that it protects only the custody function, meaning the return of missing securities and cash, not a fall in the value of securities. It also does not cover assets held at a firm that is not a SIPC member. The US Securities and Exchange Commission adds that with international investing you may not be able to sue in the United States if a problem arises. Check who regulates your broker and which protection scheme covers your account.
Currency conversion and its effect on returns
A US stock trades in dollars, so anyone depositing shekels goes through currency conversion on the way in and on the way out. The US Securities and Exchange Commission explains that when the exchange rate between the investment's currency and your own changes, it can increase or reduce your return. A stock can rise in its home market and still be worth less in your currency. The SEC also notes that international investing can be more expensive, with higher fees, commissions and taxes. So check in advance what conversion rate the broker uses, whether there is a conversion fee, and whether you can hold a dollar balance without converting on every transaction.
Dividends and withholding tax
The US Internal Revenue Service states that a US-source dividend paid to a nonresident alien is subject to 30% withholding, or a lower rate if a tax treaty applies. To claim the reduced rate, the beneficial owner files Form W-8BEN with the withholding agent, usually through the broker. The payment is reported on Form 1042-S. This is general information only and not tax advice. Israeli taxation of foreign gains and dividends is a separate subject and was not checked in this guide. Confirm it with a tax adviser or an official Israeli source.
Fractional shares
Some brokers let you buy part of a share, for example 0.5 or 0.1 of a share, according to the amount you want to invest. FINRA explains that this gives access to expensive stocks without buying a whole share. There are conditions too: according to FINRA you usually cannot transfer fractional shares to another broker, so moving brokers means selling them. Often you cannot trade them outside regular market hours, 9:30 a.m. to 4 p.m. New York time, and you may not have voting rights. Availability differs between brokers, so check it before you assume it exists.
What to compare between brokers
Before choosing an overseas broker, compare a few fixed points. Who regulates it and what protection scheme covers custody. Which exchanges and markets you can reach, and whether shares are actually bought or only held as a contract on the price. What each trade costs, what conversion rate applies and what conversion costs. Whether fractional shares are offered and on what terms. How Form W-8BEN is handled and how dividends and withheld tax are shown. And finally, whether you can transfer holdings to another broker. The US Securities and Exchange Commission notes that international investing costs can be higher, so calculate the total cost and not only the advertised commission.
How long until the share is really mine?
In the US most trades settle on the business day after the trade date (T+1), a rule that took effect in May 2024.
How much tax is withheld from a US dividend?
According to the IRS, a US-source dividend paid to a nonresident alien is subject to 30% withholding or a lower treaty rate. The reduced rate is claimed with Form W-8BEN. This is not tax advice.
Does SIPC protect me from investment losses?
No. SIPC protects only custody at member firms, up to 500,000 dollars including up to 250,000 dollars in cash, and not a fall in the value of securities.
Can I transfer fractional shares to another broker?
According to FINRA, usually not. To move brokers you need to sell them, which may trigger taxes and fees.
This information is for learning and comparison, not investment advice. Verify product details and eligibility conditions against the current source.
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