New to the US stock market? A comprehensive guide to buying US stocks and opening an account

U.S. stock market continues to rise, and many investors want a share of the pie. But for those new to U.S. stocks, issues like opening an account, choosing the account type, and determining the investment approach often leave people confused. This article will detail five core steps to help you understand how to buy U.S. stocks and how to open a securities account to achieve global asset allocation.

Step 1: Understand U.S. Stock Account Types

Before opening an account, you need to clearly understand the two main types of accounts offered by brokers and their differences.

Cash Account features conservative and prudent investing: no overdrafts, no short selling, and some brokers even restrict options trading. This type of account carries relatively low risk, suitable for conservative investors and beginners, but offers limited investment tools.

Margin Account provides more flexibility: allows borrowing securities for short selling, using leverage, and T+0 day trading. These features give experienced traders more operational space but also entail higher risks. If investors do not manage leverage properly, they could lose their principal entirely.

The choice of account depends on your risk tolerance and trading experience. Most beginners should start with a cash account.

Step 2: Master U.S. Stock Investment Methods

Before opening an account, you must understand the various investment approaches available in the U.S. stock market so you can select the appropriate account type based on your needs.

Direct Purchase of U.S. Stocks

The U.S. stock market is the largest in the world, home to many high-quality companies. There are two ways to buy U.S. stocks directly: through domestic brokers’ cross-委托 (entrustment) — letting domestic brokers delegate to overseas brokers — or by opening an account directly with an overseas broker.

If using the cross-委托 method, you need to prepare your ID, passport or other identification documents, bank passbook, and seal, then open a cross-委托 account at your broker’s branch, and set up a settlement account at the bank.

Bond Investment

U.S. stock bonds have lower expected returns than stocks but also lower risk, making them suitable for conservative investors.

Purchase of U.S. Stock ETFs

Index stock funds (ETFs) track the changes of underlying indices and are listed on exchanges. Compared to buying individual stocks, ETFs diversify risk by holding a basket of underlying assets, making them a relatively stable way to invest in U.S. stocks.

Advantages of buying U.S. stock ETFs include: first, significantly reducing investment risk; second, flexible trading — you can buy directly from the fund company or on the secondary market.

Trading Options

Options are leveraged derivative contracts that give holders the right, but not obligation, to buy or sell an asset at a predetermined price on a specified date. U.S. stock options mainly include call options and put options. Only advanced traders meeting certain conditions can trade options in margin accounts.

Trading Contracts for Difference (CFD)

CFD is a financial derivative that allows investors to trade based on price movements without actually holding the underlying U.S. stocks. The advantages include low entry barriers, flexible leverage, and support for two-way trading (long and short).

For example, investing $20,000 in a product with leverage:

• Without leverage: initial capital $20,000, a 10% price increase yields a profit of $2,000, a 10% return
• With 1:10 leverage: initial capital $2,000, a 10% price increase yields a profit of $2,000, a 100% return

But it’s important to note that improper leverage trading can lead to losses exceeding the initial margin. Therefore, choose platforms carefully, prioritizing those with regulatory approval, negative balance protection, and stop-loss/take-profit features.

Step 3: Choose the Right U.S. Stock Broker

When selecting a U.S. stock broker, consider the following factors:

Platform strength and legality — ensure the broker is regulated by reputable financial authorities and has a good operational record.

Deposit convenience — supports multiple deposit methods (credit card, wire transfer, etc.) with simple procedures.

Range of investment products — can they provide the trading varieties and tools you need?

Trading experience — platform stability, ease of operation, and whether Chinese language support is available.

Fee levels — different brokers have varying fee structures; compare based on your trading volume and style.

For long-term investors, cross-委托 may be convenient but often incurs higher fees (0.5%-1%). You should compare these costs with those of direct account opening. If you plan to do short-term trading, CFD products offer higher flexibility.

Step 4: Research and Select Investment Targets

After opening a U.S. stock account, choosing suitable investment targets is equally important. For beginners, directly picking individual stocks carries higher risk; it’s recommended to focus on:

Tracking the U.S. stock market via index ETFs:

• S&P 500 Index (S&P 500) — includes 500 large U.S. companies, a key indicator of overall U.S. stock market trends
• Nasdaq Index (Nasdaq 100) — features major tech giants like Apple, Google, Microsoft
• Dow Jones Industrial Average (Dow Jones) — composed of 30 of the largest and most well-known U.S. companies

Or choose industry-leading stocks — if you have some stock-picking skills, select top companies in various sectors.

As your experience grows, you can gradually explore derivatives like U.S. stock options and CFDs, but only after learning technical analysis and proper capital allocation.

Step 5: Optimize and Adjust Your Investment Portfolio

After opening a U.S. stock account, you should develop a reasonable asset allocation plan based on your investment goals and risk tolerance.

Initial allocation suggestion: Suppose you have $30,000 to invest, you might allocate: 40% to U.S. tech stocks or other quality sector stocks, 40% to U.S. stock ETFs, and 20% to derivatives like CFDs.

Advanced adjustment principles: As your knowledge and stock-picking ability improve, you can increase high-risk allocations appropriately. But initially, strict risk control is essential — ensure leverage is used properly and avoid reckless investments.

Long-term maintenance: Regularly review your portfolio’s performance, and adjust when industry or sector changes occur, balancing each part to maintain steady long-term returns.

Key Takeaways

Once you master the key steps of how to buy U.S. stocks, you are ready to enter the U.S. market:

1. Choose the appropriate account type — beginners should generally opt for a cash account for safety
2. Understand various investment methods — from direct stock purchases to derivatives, select tools that suit you
3. Carefully select your broker platform — weigh fees, experience, and regulatory compliance
4. Focus on indices and leading stocks — reduce stock-picking risk
5. Regularly optimize and adjust — turn investing into a dynamic, ongoing process

Although the U.S. stock market is the most mature trading market globally, investing still requires caution. Proper risk management, rational portfolio allocation, patience, and sufficient knowledge are the true secrets to achieving stable returns in the U.S. stock market.