US Stock Market

The US stock market is known as one of the most important financial markets that investors worldwide pay attention to, centered on the New York Stock Exchange (NYSE) and NASDAQ. It is understood to account for approximately 40% of global market capitalization, and with global companies like Apple, Microsoft, and Amazon listed, it appears to serve as a barometer of the world economy.

1. Key Points

Korean investors investing in the US stock market have been rapidly increasing in recent years, which is believed to be because they judge the US market to have more stable and long-term growth potential than the domestic market. In particular, younger generations are showing interest in cutting-edge tech companies like Tesla and NVIDIA and actively pursuing overseas investments. Furthermore, this trend is expected to continue going forward. US stock market trading hours are known to run from 11:30 PM to 6:00 AM the next day in Korean time, and during daylight saving time, they run from 10:30 PM to 5:00 AM. Due to this time difference, working professionals find it difficult to monitor the market in real time and tend to prefer long-term investing. The methods by which investors can invest in the US stock market are broadly divided into three, as is generally understood. The first is direct purchase of overseas stocks through a domestic brokerage, the second is investing in US ETFs,

2. Detailed Explanation

and the third is utilizing domestically listed US ETFs. Each method has its own advantages and disadvantages, so it is advisable to choose based on your own investment style. The major indices of the US stock market include the Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ Composite Index, and these three indices are known to each have different characteristics. The Dow Jones consists of 30 blue-chip companies, the S&P 500 is composed of 500 large-cap stocks, and NASDAQ is known as a technology-focused index with relatively high volatility. In recent years, the US stock market has shown a rapid recovery following the COVID-19 pandemic, repeatedly hitting historical highs. In particular, the NASDAQ index, led by tech stocks, has continued to surge alongside the AI boom and is drawing significant interest from many investors. This upward trend is expected to continue for the time being.

3. How to Use

When investing in the US stock market, currency fluctuation risk must be taken into account. During periods of dollar strength, investors can gain from exchange rate appreciation, but during periods of dollar weakness, they may incur losses from exchange rate depreciation. Therefore, for long-term investing, a dollar-cost averaging strategy that spreads purchases over time to take advantage of currency rate averaging is considered advantageous. Additionally, using currency-hedged products can be another viable option. Tax issues are also an important consideration. Dividend income from US stocks is subject to a 15% withholding tax in the United States, and Korean dividend income tax must also be paid in Korea. Meanwhile, for capital gains tax, up to KRW 2.5 million per year is tax-exempt, so it is important to establish an appropriate tax-saving strategy. The greatest appeal of the US stock market lies in its long-term upward growth trajectory. Looking at 100 years of historical data, while there have been short-term declines, the market has recorded an average annual return of around 10%

4. Additional Information

over the long term, which is attributed to the innovative nature of the US economy and the competitiveness of global companies. The sectors that investors pay attention to have changed with the times. Recently, cutting-edge technology fields such as artificial intelligence, cloud computing, electric vehicles, and semiconductors have been gaining popularity. Companies like NVIDIA, AMD, and Tesla are frequently cited as representative beneficiaries. Additionally, emerging tech fields such as quantum computing and robotics are also gaining attention. The monetary policy of the US Federal Reserve (Fed) is one of the most influential factors on the US stock market. During periods of rate hikes, the stock market tends to experience corrections, while during periods of rate cuts, stock prices tend to rise. Therefore, it is considered important to closely monitor the direction of the Fed's monetary policy.

5. Advanced Topics

A common mistake beginners make when investing in the US stock market is obsessing over short-term gains and trading frequently. Even though a long-term holding strategy is far more advantageous when considering transaction fees and taxes, many investors end up amplifying their losses by being swayed by short-term market volatility. It is important to avoid emotionally driven investment decisions. Earnings season, when US companies report their quarterly results, arrives every quarter. During this period, stock price volatility tends to be significant. If a company reports results above expectations, its stock may surge, and in the opposite case, it may plummet, so it is advisable to check earnings announcement schedules in advance. The New York Stock Exchange is known to be one of the oldest stock exchanges in the world, founded in 1792, and boasts a history of over 200 years. The NYSE building, located on Wall Street, is regarded as a symbol of finance, and traditionally, large blue-chip stocks are primarily

6. Reference Notes

listed there. NASDAQ, founded in 1971 as an electronic stock exchange, is known to operate through computer networks without a physical trading floor. Tech companies such as Apple, Google, and Facebook are listed on NASDAQ, making it popular among technology investors. Additionally, innovative startups also tend to prefer listing on NASDAQ. The US stock market offers a wide variety of investment products. In addition to individual stocks, various derivatives such as ETFs, mutual funds, options, and futures are also traded. In particular, ETFs are considered well-suited for beginner investors, as they offer the benefits of diversification while being as easy to trade as individual stocks. ETFs that track the S&P 500 index are known to be among the most popular investment products in the world, with representative examples including VOO, SPY, and IVV. Investing in these ETFs

7. 7th Section

automatically provides diversified exposure to 500 large US companies, making them suitable for stable long-term investing. Dividend stock investing is also known as one of the attractive strategies in the US stock market. Companies such as Coca-Cola, Johnson & Johnson, and Procter & Gamble are referred to as dividend aristocrats for their decades-long track records of consistently growing dividends. They are particularly popular among investors seeking stable cash flow. Furthermore, utilizing a dividend reinvestment strategy can maximize the power of compounding. The VIX, which is the volatility index of the US stock market, is used as an indicator of market fear sentiment. The higher the VIX, the greater the market anxiety, and when VIX exceeds 30, it is generally interpreted as a state of extreme fear, which can conversely be seen as a buying opportunity. Among US economic indicators, the ones that deserve particular attention include employment figures, the Consumer Price Index (CPI), and GDP growth

8. 8th Section

rate, among others. When these indicators come in better than expected, they tend to have a positive impact on the stock market, and when they come in worse, they tend to have a negative impact. The US stock market is also significantly affected during election seasons. Historically, stock market returns tend to be higher in re-election years than in the first year after an election. Market stability increases as policy uncertainty decreases. Additionally, the sectors that benefit may vary depending on each party's economic policies. Popular platforms used by US stock market investors include Robinhood, Charles Schwab, and Fidelity. In Korea, it is also easy to trade US stocks through domestic brokerages such as Samsung Securities, NH Investment & Securities, and Kiwoom Securities. Since fees and services vary by platform, it is advisable to compare them before choosing. Through the overnight futures market, one can get a sense of the next day's direction for the US stock market.

9. 9th Section

By looking at futures prices traded in the morning Korean time, one can get a rough sense of how the US stock market will open that night. However, since futures prices are not always accurate, they should be used only as a reference. It is also important to check corporate disclosures and news in real time. Referring to SEC filings, corporate IR materials, and analyst reports can help lead to better investment decisions. In particular, insider trading activity can serve as useful information for predicting a company's future. The US stock market is closely connected to the global economy, so factors such as China's economic conditions, European financial policies, and geopolitical risks also affect the market. A broad understanding of global issues is considered the key to successful investing. For risk management, it is important to build a diversified portfolio.

10. 10th Section

By diversifying across sectors, market capitalizations, and regions, the impact on the overall portfolio from a sharp decline in any specific area can be minimized. Periodic rebalancing to readjust asset allocation is also necessary. From a long-term perspective on US stock market investing, one can experience the magic of compounding. By consistently reinvesting returns each year, assets can grow exponentially over time. As Warren Buffett emphasizes, patiently investing long-term in quality companies is understood to be the most reliable method of wealth accumulation. The US stock market is expected to continue growing alongside innovative companies. In particular, new investment opportunities are expected to continue emerging in future industries such as artificial intelligence, biotechnology, and clean energy. As a global investor, we hope you deepen your understanding of the US stock market and make wise investment decisions.