Investing in stocks can seem a little scary, especially in overseas markets such as the US. To help you find your way, here is our beginner’s guide to what to look out for when investing in US stocks.
How do I start investing in US stocks?
It’s simple. You can do it from the comfort of your office or armchair.
All you need to do is open an account with an online broker or investment platform who make it easy for you to start trading. Once you’ve opened an account, all you need to do is deposit some money. Then you’re all set.
Then you need to decide what you want to buy. Maybe equity in an individual company? Or invest in a mutual fund? Or maybe an ETF? Now that you’re set up, you’re free to make that decision.
Is investing in stocks risky?
Stocks are riskier – and more volatile – than other asset classes, such as fixed income instruments or cash. But they can also offer higher returns.
A simple way to reduce the risk of investing in stocks is to invest in a number of different stocks. This diversifies your portfolio. If you invest all of your money in one stock and that company gets hit by bad news, you can lose all your money. By diversifying, you reduce the risk.
How much should I invest?
There is no right answer. But no amount is too small. So don’t be afraid of investing if you think that don’t have much to invest. Just start.
You should also be aware of fractional investing. This allows you to invest in the world’s biggest companies without having to buy a full share.
A great way to invest in companies without buying individual (and often expensive!) equities is via ETFs. These can give you exposure to thousands of companies at a very low cost. For example, the Vanguard Total Stock Market ETF gives you exposure to 3000 large, medium, small and micro-cap companies. It lets you mirror the US equity market for next to no cost.
ETFs, essentially, let you own fractional shares of a company. They also trade on the stock market, so buying a unit of an ETF is as simple as buying a share in a company. So rather than having to pick one stock for your money, ETFs let you spread your risk and lower your costs.
When should I start investing?
Much like no amount being too small, there is no better time to start investing than today. The sooner you start, the sooner you see the benefits of long term investing in quality companies.
Trying to time the market is also extremely difficult. Without being able to see into the future, today is always the best entry point for any stock. As the old saying goes: time in the market trumps timing the market.
What should I invest in?
Stock picking is incredibly hard. Even the best investors in the world, such as Warren Buffett, admit it’s nearly impossible to pick the right stock all of the time. One problem is that via a broker or a trading platform, you now have all the choice in the world. So making your choice is difficult.
You can make this choice easier by diversifying your portfolio across a broad range of investments. This means that there isn’t so much pressure on picking one perfect stock. By buying a range of stocks, none of which take up more than, say, 5% of your portfolio, you lower the risk. One easy way to diversify is to simply buy into an ETF, via an investment platform like Sarwa.
How do I invest specifically in US stocks?
A good online broker or investment platform will connect you to the world’s major stock markets. This will allow you to purchase the likes of Google, Amazon and Facebook stocks.
Of course, if you’re going to invest in US companies, tune in to happenings in the US. For example, if The Fed hike rates, this will affect US companies. So when buying US stocks, make sure to keep up with US news.
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At Sarwa, we help our customers to build a better financial future by allowing them to easily accumulate wealth through investing. Investing can be intimidating and this can mean that new investors make mistakes. So we’re here to take out the stress, helping you to invest wisely.
All you have to do is open an account with us, answer a few questions, and you’ll get a globally diversified portfolio. You don’t have to worry and you don’t need any research or financial experience. We do it all for you!
So if you have you have questions about any aspect of investing money, be it in stocks or other securities, why don’t you get in touch for a chat?
Ready to invest in your future?