Comprehensive Analysis of the US Stock Investment Mechanism — A Must-Read Trading Guide for Beginners

Why Are US Stocks Worth Investing In?

Compared to other stock markets worldwide, the US stock market has inherent advantages. As the most liquid financial market globally, US stocks often trade over 10 billion shares daily, which means market manipulation risks are extremely low. As the world’s largest economy, US-listed companies operate stably, and market activity is unparalleled.

For small investors, the biggest attraction of US stocks is low trading thresholds. US stocks allow purchases starting from just 1 share, so investors don’t need to wait until they have a full lot. For example, investing in Tesla requires only about $260; in contrast, Hong Kong stocks typically require a minimum of 100 or 1,000 shares, A-shares require at least 100 shares, and Taiwan stocks require 1,000 shares per trade unit. This difference directly lowers entry costs for beginners.

Core Rules of US Stock Trading

The US stock market mainly includes three major exchanges: the New York Stock Exchange (NYSE), NASDAQ, and the American Stock Exchange (AMEX).

Standard Trading Hours vary seasonally. During daylight saving time, they are 9:30-16:00 Eastern Time; during standard time, 10:30-17:00. Additionally, there are pre-market trading (4:00-9:30 during daylight saving time, 5:00-10:30 during standard time) and after-hours trading (16:00-20:00 during daylight saving time, 17:00-21:00 during standard time) for investors to choose from.

US stocks use a T+0 trading system, meaning you can sell stocks on the same day you buy them, offering liquidity far superior to other markets. Settlement for stock sales is T+2, meaning funds are available two trading days after the transaction. The minimum trading unit is 1 share, priced in USD. Trading fees depend on the broker and method chosen; manual channels typically charge about 1%, while electronic trading usually costs 0.5%-1%.

It’s important to note that US stocks have no daily price limit but do have circuit breakers to prevent extreme market volatility.

Account Types: Cash Account vs Margin Account

Different account types determine trading flexibility and risk tolerance.

Cash Accounts are the most basic, with opening thresholds usually around $500. These accounts can trade stocks and ETFs but do not support short selling. They operate on T+0 trading and T+3 settlement mechanisms, suitable for conservative investors holding long-term positions.

Margin Accounts involve borrowing funds from brokers to leverage trading, typically requiring at least $2,000 to open. These accounts support T+0 trading, allow both long and short positions, and can trade stocks, ETFs, etc. The main advantage is leveraging to amplify returns.

Contracts for Difference (CFDs) have become popular in recent years. They require very low minimum deposits—only $50-$100 margin—and trading units can be as small as 0.01 lots. CFDs support leverage and two-way trading, making them especially suitable for short-term traders and those employing complex strategies.

Three Main Investment Paths in US Stocks

Direct Purchase of US Stocks

Buying actual US stocks means becoming a shareholder of the listed company. The advantage is extremely low transaction costs, and profits are not subject to capital gains tax. Thanks to the T+0 system, investors can seize market opportunities promptly.

However, disadvantages include time zone differences, often requiring late-night monitoring; opening a real account can be relatively complex. Different regions have various channels: Taiwanese investors can trade via sub-brokerage, with fees around 1%; Southeast Asian investors can choose platforms like Malacca Securities, Moomoo, with fees ranging from $3.8 to $25; mainland Chinese users can use brokers like Futu NiuNiu or WeBull.

Note that while capital gains are tax-free, dividend income is subject to a 30% withholding tax, and assets may be subject to estate tax upon the investor’s death.

Investing in US Stock ETFs

ETFs (Exchange-Traded Funds) track specific indices or sectors. The US market offers a vast array of ETFs—technology, healthcare, gold, bonds, etc. Investing via ETFs effectively diversifies risk and avoids the extreme volatility of individual stocks.

US stock ETFs have highly competitive management fees. For example, VOO’s annual management fee is only 0.04%, which is one-tenth of similar ETFs in Taiwan. Investing in ETFs requires less effort in researching individual stocks and is suitable for investors seeking diversified, long-term stable returns.

The only drawback is that even ETFs within the same sector can differ significantly in focus, requiring thorough due diligence. Additionally, ETFs face price spread risks, especially during the first half-hour after market open, when volatility is highest.

Trading US Stock CFDs

CFDs are derivative instruments based on US stock price movements. Investors trade US stocks via CFDs, essentially trading financial contracts based on US stock prices rather than owning actual shares.

Core advantages of CFDs include: high leverage (small margin to control large positions), two-way trading (profit from both rising and falling prices), and a wide range of trading assets (including US stocks, forex, gold, indices, cryptocurrencies, etc.).

However, risks are also significant—leverage amplifies both gains and losses. Investors must carefully assess their risk tolerance to avoid margin calls. CFDs are most suitable for experienced traders capable of handling high risks.

The Most Notable US Stocks

The US stock market has over 8,000 listed companies, many of which are global giants seeking larger financing capabilities. Nasdaq, home to Apple (AAPL), Amazon (AMZN), Google, Tesla, and other tech giants, is renowned worldwide.

In healthcare, Johnson & Johnson (JNJ) is a leading global manufacturer of healthcare products, medical devices, and pharmaceuticals, with over 250 subsidiaries and sales in more than 170 countries. Nvidia (NVDA) dominates the AI chip sector, making it one of the hottest tech stocks in recent years.

In consumer goods, Procter & Gamble (PG) is one of the largest producers of daily necessities, ranked as the tenth most admired company in Fortune 500. Walmart (WMT) leads the global retail industry. In software, Microsoft (MSFT) maintains steady performance thanks to its Windows OS and Office suite.

Additionally, Chinese concept stocks like Alibaba (BABA), Starbucks (SBUX), and other service industry leaders are also listed in the US, offering diverse investment options.

Comparing the Three Investment Methods

CFDs, direct stock ownership, and ETFs each have their focus. CFDs are based on price movements, support high leverage and two-way trading, have the lowest account opening threshold but are more suitable for short-term trading; direct stock ownership involves buying real assets, requiring long-term holding, generally without leverage, and profits from price appreciation; ETFs are the lowest-risk option, suitable for long-term allocation.

Investors should choose the appropriate path based on their capital size, risk tolerance, and trading horizon. Small investors seeking to leverage their gains can consider CFDs; those preferring steady long-term growth should opt for direct stocks or ETFs.

Final Advice for Beginners

Investing in US stocks is not an overnight endeavor; it requires thorough theoretical learning and practical experience. The greatest investor of all time, Warren Buffett, has navigated the stock market for decades precisely because he has endured numerous financial crises, learning from each and every one, forming profound investment wisdom.

As a beginner, avoid rushing for quick profits. Master the trading rules, account mechanisms, and other theoretical fundamentals, and gradually accumulate experience through practice. Only by combining theory and practice can you maintain composure amid unpredictable markets and ultimately become a consistently profitable investor.