A guide to investing in US equities A guide to investing in US equities A guide to investing in US equities

A guide to investing in US equities

Saxo Group

A guide to investing in US equities 

The US stock market is the biggest in the world. In fact, the money traded across US stock exchanges accounts for more than 50% of the global equity market’s $95 trillion value. This, coupled with the fact that major companies, including Amazon, Google, and Tesla, are all listed in the US, makes it an attractive proposition for investors. 

Naturally, just because the US equities market features the world’s largest companies doesn’t mean profits are guaranteed. Even the most valuable stocks can lose value, therefore, you shouldn’t assume that buying US equities is a sure-fire way to make money. What you can count on, however, is that there is plenty of potential within the market. Thanks to its size and significance, the US equities market has plenty of opportunities for traders around the world. 

What are equities? 

Equities is another way of saying stock. When you buy stock in a company (i.e. individual shares), you gain some equity in it. When we refer to US equities, we’re talking about stock in companies listed on US exchanges. 

Buying shares in these companies means you have a stake in their performance. If they publish strong quarterly reports and revenue is high, the likelihood is that their share prices will be bullish. That’s good news for you because, as we’ve said, you have equity (a stake) in the company. 

Of course, the reverse is also true. Poor performances can cause a company’s stock to lose value. That means the value of your investment will also decrease. There are ways to counter this, such as taking a short position, nonetheless, in general when you buy equities, the value of your investment is directly linked to the value of the company’s share price. 

Defining the US equity market

Equities can be categorised in a variety of ways: for example, you can focus on tech stocks, blue-chip stocks, penny stocks, or dividend stocks. You can also categorise equities on a regional basis. Those that are available in your country of residence can be classed as local equities. For instance, if you’re based in the UK, stocks in companies listed on the London Stock Exchange would be local. 

You can also focus on international equities. This term refers to stocks in companies listed on exchanges outside of the country you live in, so unless you’re living in America, stocks in US companies are classed as international equities. US equities are popular with traders because the market is worth more than $45 trillion. 

You can find a specific list of US equities at Saxo Bank. However, for a quick overview of the largest US companies, you can look at the S&P 500. This index fund tracks the performance of the 500 largest companies by market cap in the US. Our ETF products allow you to trade the S&P 500, which means you’ve got an interest in all 500 companies with a single investment. 

You can also trade stocks and shares individually. This means you buy and sell shares in Apple, Microsoft, Amazon and other companies in a more focused way. Before we explain why you should consider investing in US equities and how to do it, here’s a quick rundown of some popular stocks:

  • Apple 
  • Microsoft 
  • Amazon 
  • Alphabet (Google’s parent company) 
  • Tesla 
  • Berkshire Hathaway 
  • NVIDIA 
  • Johnson & Johnson 

Why invest in US equities? 

Size and significance are the main reasons to invest in US equities, but they’re not the only ones. It’s important to reiterate that profits aren’t guaranteed. If you’re trading in a currency that’s not your own, you may incur additional fees. It can also be argued that, if you don’t live in the US, you might not have a deep understanding of the market. 

This is an argument that applies to all international equities because proximity can affect how connected you are to a market, however, because the US is such a significant market, this isn’t as much of an issue as it would be if you were buying stocks in companies listed on the Hong Kong Stock Exchange. 

Assuming you’re comfortable with the risks and potential pitfalls, the advantages of investing in US equities are: 

Better liquidity 

Liquidity is important in all financial markets, regardless of whether you’re trading stocks, forex, or something else. Liquidity refers to the amount of trading activity there is. Low liquidity means it’s harder to match buyers and sellers (i.e. fulfill orders). The sheer size of the US market means that liquidity is rarely an issue. 

Better capitalisation 

The New York Stock Exchange and NASDAQ have a combined capitalisation value of $30 trillion. In contrast, the London Stock Exchange has a capitalisation of $3.6 trillion. Better capitalisation means the companies listed are in strong financial positions which means they have the resources to survive bear markets, innovate, and expand. 

Diversification opportunities 

The US stock markets have been dominated by tech companies since the early 2000s. Given that it’s the biggest financial market in the world, there are plenty of alternative options. Data from Schwab shows that there are over 5,300 companies listed on US exchanges, so when you trade US equities, you’ve got more scope to diversify than you have in other regional markets. 

Greater accessibility 

Of all the international equity markets you can trade, the US is the most accessible. There are times when certain countries/markets are unavailable because of legal or liquidity issues. The US is widely available, so you’ll rarely have a problem accessing stocks or data related to US equities. 

The risks and costs of trading US equities 

Trading US equities isn’t risk-free. There are fees for trading all stocks, but you may be subject to additional charges if the price is listed in a currency that’s not your own. You can click here to get an overview of the standard charges at Saxo Bank. For reference, Classic account holders pay 0.02 USD per transaction, with a minimum charge of 10 USD. Platinum and VIP account holders pay 0.015 USD (min. 7 USD) and 0.01 USD (min. 3 USD), respectively. 

Market insights can also be an issue. Because you’re not intimately connected to the local market, it may be harder to get an acute insight into its daily happenings. The counter to this, though, is that we offer a variety of resources. From trading tools and guides to expert insights and market updates, there are plenty of ways to educate yourself. 

It’s important to stress again that all investments can increase and decrease in value. This is just as true for US equities as any other financial instrument. If you’re going to make trades, do it in a responsible way. If you can do that and accept the inherent market risks out there, there are options aplenty within the US. From the New York Stock Exchange to NASDAQ, you can buy or sell shares in some of the biggest companies in the world. 

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