While the entire world economy is stalled due to the Korona-ka, “US stocks ” continue to perform well. In the United States, giant technology companies that drive the world economy, such as Apple and Amazon, are concentrated, and stock prices continue to rise. As a result, the number of people who are interested in or invest in US stocks is increasing rapidly. Therefore, this time, I will explain the basic knowledge, points, and precautions that you should know when investing in US stocks.
Immediate investment (Basic characteristics of US stocks that you should know before investing)
Stock prices have risen over the long term, and attention is focused on US stocks, which are expected to grow in the future. I think there are many readers who are interested in US stocks. Before you start investing, let’s first understand the basics of US stocks.
What are US stocks?
US stocks, as the name implies, are stocks traded in the United States. U.S. companies include giant IT companies called GAFAM (Google, Amazon, Facebook, Apple, Microsoft), long-established companies such as Coca-Cola, and companies that have become a hot topic in recent years such as Netflix and Tesla. There are many well-known companies.
In addition, the size of the total market capitalization is the largest market in the world. For example, GAFAM introduced above occupies the top of the market capitalization ranking of companies in the world. Companies with a large market capitalization can acquire human resources, acquire companies, and make large-scale capital investments with huge capital, so it can be said that many companies in the United States have an environment for long-term growth.
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Trading hours of US stocks
Due to the time difference between Japan and the United States, US stocks are traded at midnight Japan time. Furthermore, in the United States, we have introduced a system called “summer time” that advances the standard time by one hour from March to November, so the transaction start time changes between summer and winter. For example, the New York Stock Exchange is open from 23:30 to 6:00 the next day in winter time and from 22:30 to 5:00 the next day in summer time (both are Japanese time).
Also, there is no break between the morning and afternoon in the Japanese market, and US holidays such as President’s Day (Washington’s Birthday) and Memorial Day are closed. You should also be careful about what you do.
Why US stocks are attracting attention
A major reason why US stocks are attracting attention is that stock prices of US stocks have been rising for more than 30 years. See the chart below. Looking at the movement of the S & P 500, which is a representative stock index of US stocks, for about 35 years, the stock price has increased 18 times. Compared to the performance of Japanese stocks, the results are quite high.
Where are the major exchanges for US stocks?
The major stock exchanges on which US stocks are traded are the New York Stock Exchange (NYSE) and NASDAQ (NASDAQ). Let’s take a look at the characteristics of these stock exchanges.
・ New York Stock Exchange (NYSE)
It is the largest stock exchange in the world, and it is said that the number of listed companies is around 2000. There are many opportunities to see it on TV and newspapers, and it can be said that it is a familiar exchange in Japan.
The listing standards of the New York Stock Exchange are said to be “the strictest of the major developed countries,” and listing on the New York Stock Exchange can be said to be a proof of being a world-class company. Large companies such as Johnson & Johnson and Coca-Cola are listed.
Founded in 1971, NASDAQ is the second largest exchange in the world after the New York Stock Exchange. NASDAQ is an automated stock trading system operated by the National Securities Dealers Association. Nasdaq is known as a market for start-ups. Many of the listed companies are IT companies with growth potential, such as Apple and Amazon.
What are the main stock index indicators of price movements in the US stock market?
To understand the price movement of the entire stock market, it is effective to look at the representative stock price index of that market.
The major stock index indicators of price movements in the US stock market are the Dow Jones Industrial Average (Dow Jones Industrial Average), the Nasdaq Composite Index, and the S & P 500.
・ Dow Jones Industrial Average (Dow Jones Industrial Average)
The most representative stock index in the United States is the Dow Jones Industrial Average of 30 stocks. Commonly called the “Dow Jones Industrial Average”.
This is Dow Jones & Company, which publishes the US newspaper “Wall Street Journal”, selects stocks based on the companies listed on the US market, growth potential, and the high interest of investors. .. It consists of 30 brands such as McDonald’s and Microsoft. In Japan, the Nikkei Stock Average will be close to the image.
When many of the constituent stocks rise, the index tends to rise, and when many of the constituent stocks fall, the index also tends to fall. Also, if there is a big movement in a stock with a high price (a stock with a high price), it will have a big impact on the average stock price.
・ Nasdaq Composite Index
The Nasdaq Composite Index is a stock index calculated based on the market capitalization of all stocks listed on Nasdaq. Based on the market capitalization on February 5, 1971, the value is calculated as 100.
Since many advanced IT companies such as Apple and Amazon are listed on NASDAQ, it is an indicator that mainly looks at trends in the high-tech and Internet-related industries. Due to the explosive growth of IT companies in recent years, it has been rising steadily over the long term.
・ S & P500
The S & P 500 is a stock index calculated by Standard & Poor’s based on the market capitalization of 500 representative stocks selected from companies listed on the New York Stock Exchange and NASDAQ.
The S & P 500 occupies a market capitalization ratio of about 80% of the entire US stock market, and is attracting attention from all over the world as an indicator of price movements in the entire US stock market. In Japan, TOPIX (Tokyo Stock Price Index) will be close to the image.
Advantages and disadvantages of US stocks
US stocks have many attractions, but there are some things to keep in mind. Familiarize yourself with the advantages and disadvantages of US stocks before making an investment.
● You can invest from 1 share
Japanese stocks are usually purchased in units of 100 shares (unit stock). Recently, transactions of shares less than one unit are increasing, mainly for smartphone securities, but in most cases it costs tens of thousands to hundreds of thousands of yen to purchase with unit shares. In that respect, many US stocks can be purchased on a per-share basis. The minimum investment amount is low and you can start with a small amount.
● Easy to diversify
Many US stocks can be purchased from one stock, so it will be easier to buy multiple stocks. If you concentrate on investing in one company, and if that company’s business performance deteriorates or scandals occur, the stock price may plummet and you may suffer a large loss. In that respect, if you can invest in multiple stocks, some companies will raise their stock prices, while others will fall, so the overall fluctuation range can be suppressed.
● Many high-dividend stocks
US companies tend to focus on shareholder returns on dividends, and there are many high-dividend stocks. In Japan, most companies pay dividends once or twice a year, but in the United States, many companies pay dividends four times a year. In addition, some US stocks are increasing their dividends almost every year, and some, such as Johnson & Johnson and P & G, have been increasing their dividends for more than 50 years.
● There are many excellent and global companies in the world
The United States is only the center of the world economy, and there are many excellent and global companies in the world. Starting with a giant IT company called GAFAM (Google, Amazon, Facebook, Apple, Microsoft), Coca-Cola, Pepsi, McDonald’s, Nike, 3M, and other excellent companies that everyone knows are also US companies.
● High liquidity
Together, the New York Stock Exchange and Nasdaq, the two major US stock markets, have a global market share of over 40%. The US market, which boasts such a large scale, has active transactions and is extremely liquid.
Although US stocks have many advantages like this, there are some disadvantages and things to be aware of.
● It is necessary to pay attention to foreign exchange risk
US stocks are traded in US dollars. When investing in US stocks from Japan, you basically exchange yen and dollars for trading (*), so you need to be careful about “exchange risk”. Depending on the movement of the exchange rate at the time of buying and selling, there is a possibility that a loss will eventually occur even if the stock price is higher than at the time of purchase. Try to check both stock price movements and exchange movements.
* For yen payment. You can also choose to settle in a foreign currency.
● Less information than Japanese stocks
When investing in foreign stocks, it tends to be difficult to obtain information, although it is not limited to US stocks. In particular, it will be difficult for the general public to analyze stocks even for stocks in Japan. Therefore, it is recommended to utilize the report of the securities company. By reading the reports issued by professional stock analysts belonging to securities companies, you will be able to understand trends in US stocks and stocks with growth expectations.
● There is no price range limit
In Japan, depending on the level of the stock price, the price range is limited so that the range of daily price movements falls within a certain range from the standard value such as the closing price on the previous business day. This is to prevent a sharp rise or fall in stock prices. The US stock market does not have such a price range limit. Since the stock price of a particular stock can move significantly during the day, you may incur significant losses when the stock price falls. To put it the other way around, it is possible that stock prices will move significantly and seize unexpected profit opportunities.
● Transaction fees and foreign exchange fees are incurred
In addition to the “transaction fee” when purchasing US stocks at a securities company, there is a “exchange fee” for yen settlement. Transaction fees are incurred when buying and selling US stocks, and exchange fees are incurred when converting yen deposited in a securities company’s account into dollars, or when converting the sale price sold in dollars into yen.
● If you receive a dividend, you will be double taxed.
Dividends on US stocks are taxed at 10% in the US and 20.315% in Japan, for a total of approximately 30%. However, if you apply the “foreign tax credit” in your tax return, you can deduct the amount taxed in the United States from your income tax and residence tax in Japan. Foreign tax deductions are not available for NISA accounts.
Read also: Is the Stock Market Going to Crash in 2022?
Continuously growing US stocks! Take on the challenge of investing after fully understanding the risks
The US stock market has continued to grow for a long time and is expected to continue to grow at a high rate. It is also attractive that the stocks of world-famous global companies can be invested from a small amount. Why don’t you start investing in US stocks, which is easy for beginners to try?