A guide to investing in US equities

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 party because of the size of the market.

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 500 large US companies, weighted by market capitalisation. Our ETF products allow you to trade the S&P 500, which can give exposure to a broad set of companies through a single investment, depending on the product structure.

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 more about US equities, 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. fulfil 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 market capitalisation measured in the tens of trillions of dollars, and this changes over time. In contrast, other exchanges are smaller by market capitalisation. Larger capitalisation reflects the aggregate value of listed companies; larger companies may have more resources, but they can still struggle in bear markets.

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. There are thousands of exchanges listed on US exchanges (the exact number varies over time), 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. See an overview of Saxo's commissions (fees vary by product and account tier).

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 there are 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, consider your objectives, time horizon and risk tolerance. 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.