What is the US stock market?
The US stock market is a place where traders buy and sell different types of securities. The world’s biggest stock exchanges are located in the U.S. Some of the leading exchanges include the New York Stock Exchange (NYSE), Nasdaq, and the Chicago Board Options Exchange (CBOE). Those markets include giant companies such as Amazon, McDonald's, Nike, Wal-Mart, and many more.
While talking about the US stock market exchanges it should be noted that the US stock market offers much more diversification of different companies than any other market in the world. It means it has a huge portfolio and many offers for people interested in trading with the financial markets.
According to the latest statistics, the total value of the NYSE was $30 trillion. However, this value changes each day according to the market performance and buying and selling frequency. The US stock market is very volatile which means that the price of the securities fluctuates and it can change at any minute. This is dependent on the various factors that might include the important news in the economic world, an essential meeting held by the crucial financial institutions, press releases, and so on. They have a huge impact on the overall condition of the market and trading us stocks might become more profitable at this given time.
Besides, While explaining the US stock market, it should also be stated that the 3 biggest and the most well-known US stock market indexes include The S&P 500 Stock Market Index, the Nasdaq 100 Stock Market Index, and the Dow Jones 30 Stock Market Index.
How to start investing in the US stock market
If you are interested in trading in the US stock market and are taking the first steps into this industry, there are several things you should consider before starting the investing process. We will analyze how to start trading in the US stock market step by step in the following paragraphs so if you are a newcomer, you are recommended to take a closer look at this information.
Find a Stockbroker
To buy and sell US shares you'll need to sign up with the stockbroker that gives you access to the US market. If you are just starting and you do not have a big amount of money to invest, there are several cheaper options available in the market. This includes using the online share trading platform. There are plenty of trading platforms, however, you need to know that not all of them offer US stocks.
Several websites enable you to compare different US stock market trading platforms with each other, see their characteristics, features, trading tools, and other important offers, and make a final decision only after that.
Besides, in terms of costs, when you are picking the online broker one of the most essential costs to look at is the brokerage fee also called the commission fee. This is the fee that is charged by the selected broker every time the trader buys or sells the stocks. This brokerage fee in the US stock market is very different and it depends on the platform you choose. Ranging from as high as 60 a trade to zero dollars a trade. This is not surprising that some brokers charge nothing at all to make trades.
However, just because you do not pay for the US stocks does not mean that it is free. We all know that nothing is free when it comes to investing. This is why everyone is recommended to read the terms and conditions of the brokerage company until they start the trading process.
The other type of fee of the US stock brokers is the currency conversion fee. This is the fee charged by the broker to convert money from other currencies to USD. So if you are using the zero brokerage trading account, this type of fee can be the most important cost.
The other fees include account fees, custody fees, inactivity fees, etc. They all depend on the stockbroker. All those things indicate that finding a brokerage is a very important part of US stock trading, therefore, people should pay close attention to this process and choose the one that would be the most appropriate for them.
Pick the right stock
After opening and funding the account, picking the right stock is the most important part of the trading process. This is probably the most challenging part of trading US stocks. Probably no one would ever imagine that Tesla shares would be 800% higher than they were a year ago. It is a very hard decision to make because no stock can guarantee a trader that they will generate big amounts of money if they invest in it right now. However, there still are some tips that everyone should take into consideration while picking the right stock to trade with.
First of all, the important thing to note is that you should always pick the company that you already are aware of. If people actively use its products you will have a better idea of how it performs in the current market. If it is a failing customer, then you should avoid investing in this stock.
Besides, another important thing about US stocks for beginners is that following broker rating is also very essential while picking the right stock. Following the ratings and price targets set by investment firms or analysts might sometimes be very helpful and might cause good overall results eventually. On top of that, traders are recommended to pick a company they believe in. If they think that they are making the right moves in the market and are very ethical it might mean that those companies are worth investing in.
Moreover, professional investors suggest that traders should check the company’s debt until they choose one. If the company has a lot of debts there is a lot of chance that they will not manage to grow in the future, so picking this type of stock would not be beneficial.
Other important things to consider
The important thing about trading US stocks is that traders are recommended to keep an eye on the performance of the stocks. However, this does not mean that they should check them every second and every minute. Once a week or once a month is the perfect time to be fully aware of what is going on in the market at the given time. Otherwise, there is a big chance that you will make very poor decisions and will not manage to generate big amounts of payout eventually.
On the other hand, another noticeable feature is that you will need to pay tax on your potential payouts including dividends. This tax is dependent on the broker so if you want to know the exact amount, you should check it on their website. Besides, you should get a financial summary from your broker with your taxable income.
Largest Companies in the US Stock Market
The top three companies that have the largest market capitalization in the US stock market are Apple, Microsoft, and Visa. Those companies mean a lot not only for the American economy but also for the worldwide economy.
Apple Inc. is the technology company that creates and manufactures mobile phones and other devices such as computers. Their products include the iPhone, iPad, Mac, iPod, Apple Watch, and Apple TV. This company has also created the software such as the iPhone OS (iOS), OS X and watchOS operating systems, iCloud, and Apple Pay. Their Market Capitalization is 2,204.3 Billion dollars.
Microsoft Corporation is a technology company that develops and manufactures and sells computer software, which includes Windows operating systems, the Microsoft Office suite, Internet Explorer and Edge web browsers. It also produces Xbox video game consoles and other related services. The company’s overall Market Capitalization is 1,607.7 Billion dollars.
Visa Inc., is a financial company that is responsible for electronic funds transfers in the world. Its products include Visa-branded credit cards, gift cards, and debit cards. The overall amount of Market Capitalization is 444.4 Billion dollars.
Trading the US stock market outside of the US
Being a part of the international market might help traders around the world reach more success and build a way better trading career. However, there are several important factors that investors should take into consideration while talking about US stocks to trade outside the US.
First of all, trading the US market outside the US gives people an opportunity to buy a wide range of stocks that have better growth potential.
Besides, it is important to know that foreign stocks come with foreign regulations. For example, the shares of Chinese companies are only available to Chinese citizens. Foreign investment markets do not require the same rigid rules on accounting that the US markets do. Moreover, currency exchange can make a huge impact when you are investing in a foreign market.
As we have already mentioned, there are some requirements that non-US investors should have to consider before starting to trade. To open a brokerage account you need a valid passport, taxpayer identification of your county, and proof of address. Some brokerage companies might require an additional type of identification to comply with their internal policies.