Why Are Global Investors Focusing on U.S. Stocks? An In-Depth Beginner's Guide

The size of the US stock market is the largest in the world, with an average daily trading volume of over 10 billion shares, attracting investors from all over the globe. Compared to other countries’ stock markets, the US stock market is popular mainly due to its mature trading system, a rich selection of over 8,000 stocks, and an ecosystem that gathers top global technology companies and innovative enterprises.

So, how can ordinary investors participate in US stock trading? What are the necessary conditions? This article will answer questions for beginners looking to get started with US stocks from three dimensions: basic rules, account selection, and investment strategies.

Basic Rules of US Stock Trading You Need to Know

US stocks are mainly traded on three major exchanges: the New York Stock Exchange (NYSE), NASDAQ Stock Market (NASDAQ), and American Stock Exchange (AMEX).

Trading Hours and System

US stocks adopt a T+0 trading system, meaning investors can buy and sell the same stock multiple times within the same day without any limit on the number of transactions. This is a significant advantage over other markets. The standard trading hours are 9:30 am to 4:00 pm Eastern Daylight Time (EDT) in summer, and 10:30 am to 5:00 pm in winter. Additionally, there are pre-market trading (4:00 am to 9:30 am EDT in summer) and after-hours trading (4:00 pm to 8:00 pm EDT in summer), providing more flexible trading windows for global investors.

It is worth noting that US stocks have no daily price limit, but circuit breaker mechanisms are in place to prevent extreme market volatility. Trading is denominated in US dollars, with a minimum trading unit of 1 share (a huge advantage compared to other markets). Funds from sold stocks are settled on T+2.

Trading Costs

The trading costs for US stocks are relatively low. Through electronic trading channels, commissions are usually between 0.5% and 1%, much lower than the 1% fee for manual trading. Meanwhile, investment gains in US stocks are not subject to capital gains tax, further reducing investment costs.

Account Types Determine Your Trading Permissions

When opening a US stock account, investors need to choose the appropriate account type based on their own situation, as different account types have significantly different operational permissions.

Cash Account is the most basic, generally requiring around $500 to open. This type of account does not allow short selling or leverage and is mainly used for medium- to long-term investments. Stock trading achieves T+0, but funds are settled T+3. Suitable for conservative investors.

Margin Account typically requires at least $2,000 to open but offers greater permissions. Investors can borrow money from the broker to conduct margin trading, support T+0 trading, and allow both long and short positions. The core advantage of this account is the ability to leverage to amplify returns, but it also increases risks.

In addition to traditional accounts, Contracts for Difference (CFD) have become increasingly popular for US stock investments in recent years. Trading US stocks via CFDs requires only a minimum margin of $50-$100 to start, with minimum trade sizes as low as 0.01 lots. This method is suitable for short-term traders and investors employing advanced trading strategies.

Why Are US Stocks More Attractive Than Other Markets?

1. Lowest Trading Threshold

The minimum trading unit for US stocks is 1 share, allowing investors to participate at very low costs. For example, investing in Apple (AAPL) requires only about $260 to become a shareholder. In contrast, the minimum trading units for Hong Kong stocks are usually 100-1,000 shares, mainland A-shares start at 100 shares, and Taiwan stocks at 1,000 shares, all requiring significantly higher capital.

2. Richest Stock Selection

The US stock market hosts over 8,000 stocks worldwide, including giants like Apple, Microsoft, Amazon, as well as international high-quality companies like Alibaba and JD.com. Investors can choose companies from various industries and styles according to their preferences.

3. Strongest Market Liquidity

With an average daily trading volume exceeding 10 billion shares, the US stock market boasts extremely high liquidity. This means market manipulation is less likely, and buy/sell orders can be executed quickly, reducing the risk of individual stocks being artificially manipulated.

4. Concentration of Innovative and Growth Companies

NASDAQ is renowned for tech stocks, with global tech giants like Apple, Google, Amazon, and Tesla listed here. As a global innovation hub, many startups with cutting-edge technology and business models also choose to list in the US stock market, providing investors with opportunities to participate in future industry developments.

5. Stable Market Fundamentals

The US is the world’s largest economy, with a large population and active consumer market. Corporate operations generally maintain stable growth, ensuring a long-term upward trend in the US stock market.

Which US Stocks Are Worth Watching?

As a beginner, you should prioritize companies with good fundamentals and stable long-term profitability. Here are some directions worth researching:

Technology Sector: Nvidia (NVDA) has become one of the hottest stocks in tech recently, leading in graphics processing technology; Microsoft (MSFT) has Windows and Office as major cash cows; Apple (AAPL) continues to innovate; Amazon (AMZN) has a promising cloud computing business.

Consumer and Retail: Walmart (WMT) is the world’s largest retailer; Procter & Gamble (PG) is one of the largest consumer goods manufacturers; Starbucks (SBUX) faces competition but has strong brand value.

Healthcare: Johnson & Johnson (JNJ) is a US healthcare products and medical devices manufacturer, with over 250 subsidiaries and products sold in more than 170 countries.

Semiconductors: Intel (INTC) is the world’s largest semiconductor company with over 50 years of technological innovation.

International Companies: Alibaba (BABA) owns platforms like Taobao, Tmall, and Alipay, and is listed in the US, offering international investors a direct way to participate in China’s e-commerce giants.

Three Ways to Invest in US Stocks

For beginners wanting to invest in US stocks, there are three different approaches, each with its own advantages and disadvantages:

Path 1: Direct Investment in US Stocks

This is the most traditional and straightforward method—buying shares of listed companies. US stocks operate on a T+0 trading system, allowing same-day buy and sell transactions with excellent liquidity. Since there are no lot size restrictions, trading costs are very low, limited to broker commissions, with no other fees. Profits are not subject to capital gains tax.

The downside is the need to adapt to time zone differences. If you prefer short-term trading, you may need to stay up late to monitor the market, and account opening procedures can be relatively complex.

Path 2: Investing in US Stock ETFs

“Exchange-Traded Funds” (ETFs) are a type of special fund traded on exchanges. The US stock market offers a wide variety, including tech ETFs, healthcare ETFs, gold ETFs, and more.

Advantages of investing in ETFs are clear: risk is well-diversified, avoiding the uncertainty of individual stock fluctuations; management fees are very low—some ETFs have annual fees as low as 0.04%, much cheaper than similar products domestically; investors don’t need to spend much time monitoring or selecting stocks.

The disadvantage is that different sector ETFs, although seemingly similar, can have significant differences in investment scope, requiring in-depth research to choose the right products. Also, ETFs face spread risks, especially during the first half-hour after market open, when price fluctuations can be large.

Path 3: Trading US Stocks via CFDs

CFDs are financial derivatives targeting US stocks, featuring high leverage. Investors can use a small amount of margin to gain outsized returns, and both long and short positions are possible, enabling two-way trading. This method is especially suitable for short-term traders and investors with high risk tolerance.

Core advantages of CFD trading include: high leverage, allowing large positions with small margins; T+0 mechanism enabling two-way trading; a wide range of tradable assets, including US stocks, forex, gold, and indices within the same account.

However, risks should not be underestimated—leverage can amplify losses, so investors must fully understand their risk capacity.

Comparing the Three Investment Methods

Direct US stock investment, ETFs, and CFDs each have their characteristics. Direct investment in US stocks is suitable for long-term holding, owning real assets, with returns coming from price appreciation and dividends, usually without leverage. ETFs offer a balanced risk profile. CFDs excel in high leverage and two-way trading, with the lowest account opening threshold but the highest risk, suitable for experienced traders with risk management skills.

Small investors seeking to leverage higher returns with limited capital can consider CFDs, but if you prefer stability and long-term growth, direct US stock investment or US stock ETFs are more appropriate.

Summary: Long-term Perspective on US Stock Investment

The US stock market is globally prominent mainly because of its mature market system, rational participants, and the concentration of the world’s top enterprises. However, successful US stock investing is not achieved overnight; it requires continuous accumulation of theoretical knowledge and practical experience.

The legendary investors in history have long-term winning records because they have experienced multiple market cycles and various financial storms, enabling them to respond calmly to market fluctuations. Beginners should not rush into US stock investing; they must master trading rules, product features, and other theoretical fundamentals, and continuously learn and refine their investment strategies through practice. Only by combining theory and practice can they achieve steady profits in the US stock market.