It all began on 13th January 2019 when I was sipping on a Starbucks Latte— Grande, to be precise. The packaging, the taste, and the barista asking for and writing down my name on the cup felt just right. Impressed and intrigued, I wondered what it would be like to own a small part of the company. And this very thought nudged me towards investing in US stocks.
Three years and 70% portfolio gains later, I feel it would be educative to talk about how things unpacked for me from 14th January onwards. And just so you know, Starbucks wasn’t the only company I eventually invested in. But more on that later!
What does it mean to invest in US stocks?
Contrary to what most tutorials and people would want you to believe, investing in US stocks is easier than you can even imagine. Yet, the question beckons— what does investing in US stocks mean?
From a layman’s perspective (something that I started with), investing in stocks is like owning some part of a company. As for US stocks, they are the shares of the companies listed on the NASDAQ (National Association of Securities Dealers Automated Quotations) and the NYSE (New York Stock Exchange).
And you being interested in buying these stocks (concerning specific companies) means that you expect the company to keep growing and outperform over time.
Yes, it is as simple as that. The day I set my eyes on Starbucks (SBUX) stock, I expected the company to grow bigger and bring in changes such as revamping the menu and changing their packaging.
And Starbucks didn’t disappoint! I purchased a few shares at close to $63 post 13th January 2019, kept adding a handful on every dip ($58 in March 2020 being one), and eventually exited in July 2021 at close to $120 apiece. Within 24 months, I raked close to 80% gains on my total Starbucks holdings, albeit with careful research and analysis (something we will explore a bit later).
And that was just Starbucks. As of now, I am invested in chip designer Advanced Micro Devices Inc. (AMD), chipmaker Nvidia Corp. (NVDA), mobile services platform Digital Turbine (APPS), and more. Not bragging, though!
US stocks: The starter pack
Even though investing in US stocks is easy enough, you still need to go through a few hoops to get started. Here is a simple, three-step approach that worked for me:
1. Decide the way to get started
As of today, you can either start investing on your own, get an expert Robo-advisor or brokerage firm to do the heavy lifting, or rely on the employer-backed 401(k) strategy (only for the folks in the United States of America).
2. Basket or direct buying
The US stock market is easily one of the more liquid, flexible, developed, and efficient global financial realms— offering a diverse range of investment picks. And while you can easily buy the direct stocks of specific companies (provided you have a trading account with an investing platform such as CoinSwitch), there are other ways to get started.
If you have a more mellowed risk appetite, getting hold of ETFs (Exchange Traded Funds) or Index Funds can be a more reliable strategy. This way, you can invest in a bucket of stocks, and multiple buckets help you diversify your portfolio (something that’s highly recommended if you’re a rookie investor).
3. Prepare a budget
Getting the budget sorted is arguably the most important aspect of investing in the US stock market. Remember, purchasing US company stocks isn’t a one-time thing. If you plan on taking this seriously, you might have to set aside a monthly, quarterly, or even yearly budget to buy through the dips.
But what happens if you do not have enough funds to buy a single equity share of a company, say Starbucks, which is currently priced close to $73. In that case, fractional investing support offered by major US-specific investment platforms such as CoinSwitch can be of help, allowing you to get a slice of the company without having to get hold of one full equity share.
If followed to the T, each of these steps can help you get started on the right path to investing in US stocks— fractional, direct, or even fund-based.
And that’s more or less what you need to know for getting started with US stocks. However, before you move ahead with investing, it is essential to DYOR (Do-Your-Own-Research) by checking out the price-to-earnings ratio, earnings per share, and other fundamental aspects of a company.
From an investing point of view, you need to wrap your head around the volatility surrounding the exchange rates (as you would be paying in INR for stocks denominated in US dollars), taxation on profits and dividends, and upper investing limit before moving from paper trading to actual trading. And most importantly, you should be able to analyze the technicals (price action, momentum, and other elements) before targeting entries and exits. But we will cross that bridge when we get to it.
For now, it is vital for you to get acquainted with the starting points for understanding the US stock market to finetune your approach to global investing.