Investing in US Stock Market: How to Do It Successfully?

Some people have certain doubts about investing in stock market. They believe that the market condition is too volatile that investing equals to risking their hard earned money to probability. While it might be true for short term investments, studies have shown that sustained investments are actually going to benefit you long way down in the future. If you have financial means to invest, it would be a waste to throw away the opportunity. Now, the question becomes: where should I invest my money?

Stock market in the United States is without doubt one of the most favorite destinations for investments. When an investor wants to expand their portfolio outside their home country, US is often becoming the first choice. There are many reasons for its popularity among investors.

The variety of industries available is certainly among the main reasons why US is an attractive choice. Seeing that the country is a dominant global economic power, you can expect that it offers various thriving industries. As an example, if you want to invest in tech market, you will encounter so many different choices. The US stock market is filled with established and growing tech companies as it is a center of tech industry in the world. There are other industry options available too, such as banking, real estate, and even fashion.

US is also consistently ranked as top country to invest in due to the smoothness of conducting business there. The country adopts free market system. It means that unlike in other countries, people who have capital are not restricted with complicated regulations. They can invest their money freely. Every investor has equal opportunity to develop their capital because the government ensures that economic process is transparent. This works not only for US citizen, but also foreign investors.

This country is also a home to top quality talents in the workforce, in any industry imaginable. You should not need to be afraid about investing in stagnant market, because the stock market in US is highly dynamic. Innovations are continuously being made so if you are into risky investments that have probability of high return, US is a great choice for you. These ventures are also growing rapidly, thanks to the ease of accessing capital.

The resource is not only limited to the human resource. United States is very vast country and each region offers its own rich natural resources. The infrastructure that connects each region is well-developed. Thus, the processes of manufacturing products and transporting them to the market are done with minimum difficulty. Not to mention that the rate of consumerism in US is very high. For a long term investment, such stable market is highly recommended.

The legal system in US is also well-established. It has an implication to your investment, particularly related to the security of the capital. If there is an indication of foul play, you can definitely bring the issue to court in order to protect your assets. As long as you have proofs and great legal advisors, which you can easily find here, you will likely to win your case.

Method of Investing in the US Stock Market

What do you need to do when you want to invest in US stock market? You have to create an investment account in order to start your portfolio. There are two types of approach that you can choose, depending on your preference. The first approach is self-managed brokerage account. This type of investment account is the perfect choice for investors who would like to be hands on in their portfolio development. The second approach, utilizing robo-advisor or managed brokerage account, is more passive. It is perfect for people who have capital but do not want to be actively involved in their portfolio development. 

You can create a brokerage account with an investment firm of your choice. Once you have opened the account, you will be able to access various forms of investments. Your access is not limited to stock market, but also other financial products like mutual funds and bonds. In the US, tax is applied to the account. It means that the earnings you gain will be taxed according to the country’s regulation.

This day, you can create a brokerage account online. You do not have to come to the office to fill various forms as everything can be done digitally. When creating the account, many investment firms will not demand you to pay deposit fee. The deposit is only required if you want to purchase an investment. Transferring fund to your brokerage account is very simple. You can transfer certain amount of money to the account from your bank account. It is also possible to send check to the investment firm to do this.

The difference between self-managed brokerage account and the managed one is the presence of investment management. When you self-manage your account, you will need to be fully involved in the process in developing portfolio. It means that not only you need to set up goals on your own, the decision making responsibility in portfolio building all falls into you. You are the one who decides which stock to buy. 

Meanwhile, the managed brokerage account will involve investment management, most often in the form of robo-advisor. The capital owner does not need to be actively involved in the process of managing their own investment because an investment manager is going to take over that task. If you choose this approach of investment, your task is to specify the investment goals you wish to achieve according to certain time spans. The manager will tailor a portfolio that suits your goals. All that is left to do is reaping the benefits of your investments.

In the self-managed brokerage, you do not have to pay robo-advisor fee, unlike if you are utilizing investment management service. However, even if you choose to use such service, there is no need to worry because the fee is not that high. This is especially the case in robo-advisor which offers the lowest cost. Robo-advisor utilizes computerized algorithm to manage your investments. The automated process is not as expensive as if you are seeking help from traditional advisor.

There are certain reasons that make people opt for managed brokerage account. First, they might not be confident about their own decision making and therefore require guidance. The investor is perhaps also too busy to manage their own portfolio and thus employs the manager’s help. Some people also seek for investment management service to help returning their portfolio progress on track because it drifts away for certain reasons.

Choosing the right investment firm is also something that you need to do carefully. Not all investment firms have your best interest in their mind. You must do research on your own through the firm’s profile, reviews on the internet, and even inputs from people around you. Here are some of the considerations in choosing the right investment firm.

1. Costs

You have to see whether the fee charged by the investment firm is right for you. As you see, in the US you already need to pay for the tax. If the firm charges a lot for your account, then your return of investment might not reach your target. You also need to check if there are hidden fees applied. Nonetheless, the cost should not be your only concern in choosing the right firm. As long as the other services provided equivalent to the fee you pay, this should not bother you.

2. Access to foreign trade

You may not only invest in the US in the future. After some years, investors tend to consider about expanding their portfolio to outside of US. It is easier to manage fewer broker account so if your account can accommodate your US and other countries’ investments, it will be more convenient to you in the long run.

3. Platform options

In this era, the stock market can change direction really fast. In the case of self-managed account, you have to be able to get in with the latest change as soon as possible. Thus, you should be able to access the account through varied platform, particularly the mobile ones. These days, most investment firms already come up with their own mobile apps so that clients can access their accounts whenever and wherever.

4. Adequate data

Stock market investment is based on data. In order to ensure that your portfolio progresses according to your investment goals, you need to read the data. A good investment firm will provide such data for you. The data can come from the firm’s own research or a third party source.

What do you need to prepare when you are opening a brokerage account to invest in the US? Here are some of the basic requirements.

Government issued ID (e.g.: passport and driver’s license)

Social Security Number or equivalent document in your own country.

Net worth

Income information

Tips to Invest in US Stock Market

You often see success stories of people who invest in US stock market. What you may not often hear are the stories of failed ventures. In investment, there will always be a risk to lose your money. What you can do is ensuring that you get the maximum benefit while minimizing the risk. Here are some advices that you should heed.

1. Conducting extensive research about US stock market

You cannot dabble in stock market if you have zero knowledge about it. This applies whether you use investment management service or not. You should understand financial metrics and the definition of each common metric. Investor must also understand the right way to select stock and when to purchase it. Another thing that they need to master is the types of market order. Such research takes time, but you have to do it to protect your capital.

2. Setting up the goal for extended period

It is better to long term goal than short term one in investing. If you set the goal for shorter period, it is more likely for you to behave rather rashly with the investments. However, you also need to consider your own future financial needs. It will be difficult if you cannot access your fund when you need it in the future. In your portfolio, it is recommended to have investments that you save up for faraway in your future. This particular investment should not be touched unless necessary.

3. Deciding on how much risk that you can take

Investment is a risky business. Basically, you need to pay certain amount of money with expectation that you will gain more out of that. However, there is also a risk to lose that money entirely if the endeavor fails. At the beginning, you have to decide how much money that you can spend for investing. You should follow through with that decision. That will ensure that you still have fund left instead of losing it all on your investments. Of course, as your capital grows, this number can increase. The plan needs to be reviewed once in a while.

4. Enriching your portfolio with varied investments

Every advisor will suggest that you invest in variety of industries. It is because each industry has its own dynamic. When your portfolio is diverse, you are minimizing the risk of investment. As an example, you invest your capital entirely on fashion companies. Due a certain condition, the fashion industry faces disturbance so the stock market plummets. If you do not have back up investments, this means that you are losing all of your capital.

5. Avoiding leverage as much as possible

Investor is recommended to avoid using borrowed money to purchase stock. In US, the access to capital through loan is very easy. It can be a big temptation. However, such method is unwise. If you lose the borrowed capital, you will be left with a huge loan that you have to pay off. 

6. Managing your emotion

It is easy to be driven by emotion while managing your investments. When you see that a market trend is increased you might get too excited and purchase many stocks within that market as short amount of time. If the market suddenly falls, you will be left with nothing. This is an issue that many beginner faces. They might be too excited or too fearful about certain circumstances in the stock market. You need to base your decisions on market data instead of your emotions.


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