How to invest in the US stock market

How to invest in the US stock market

Lead summary

How to invest in the US stock market is a question many new and experienced investors ask. Investing in U.S. equities typically pursues growth, income, or diversification and can be achieved through individual stocks, ETFs, mutual funds, ADRs, bonds, REITs, and derivatives. This guide synthesizes practical steps, account and trading mechanics, strategy options, risk management, costs, and regulatory and tax basics.

As of Dec. 15, 2025, according to Motley Fool reporting, high-profile IPO talk — notably around SpaceX — underlines how public markets can reshape access to large private companies and affect investor interest in major U.S. listings. As of Dec. 11, 2025, Motley Fool also highlighted sector winners and infrastructure trends (AI, energy, data-center buildouts) that help explain why many investors ask how to invest in the US stock market today. These reports provide context for market opportunity and liquidity but do not replace institutional filings or broker documentation for decision-making.

What you'll learn: market structure, instruments, strategies, step-by-step setup, order mechanics, research tools, portfolio construction, costs and taxes, cross-border access, and resources — with Bitget platform considerations where relevant.

Overview of the US stock market

The U.S. stock market is the world’s largest securities market by market capitalization and daily liquidity. Two leading U.S. exchanges host most listed stocks:

• New York Stock Exchange (NYSE): traditional auction-style listings for many large-cap companies.
• Nasdaq: electronic exchange home to many technology and growth companies.

Primary market vs. secondary market

• Primary market: companies issue new shares through IPOs or follow-on offerings to raise capital.
• Secondary market: investors buy and sell previously issued shares; price discovery and liquidity occur here.

Market hours and timing

• Regular trading hours: typically 09:30–16:00 ET (subject to daylight-saving adjustments).
• Pre-market and after-hours sessions enable extended trading but come with lower liquidity and wider spreads.

Market participants and their roles

• Retail investors: individuals trading through brokerages.
• Broker-dealers: execute customer orders, provide custody and platform services; regulated by FINRA/SEC.
• Market makers and liquidity providers: supply buy/sell quotes to facilitate execution.
• Institutional investors: mutual funds, pension funds, hedge funds — often large, high-volume participants.

Investment instruments available

Common and preferred stocks

• Common stock: represents ownership in a company, typically with voting rights and potential dividends. Returns come from price appreciation and dividends, but prices can be volatile.
• Preferred stock: hybrid equity/debt with priority on dividends and claims, often fixed dividend-like payments and less price upside than common shares.

Risk/return profile: common stocks usually offer higher long-term return potential with higher volatility; preferred stocks target income with lower upside and credit-like sensitivity.

Exchange-traded funds (ETFs) and mutual funds

• ETFs: pooled vehicles that trade like stocks on exchanges. Many track indexes (passive) but active ETFs exist. ETFs typically offer intra-day liquidity, low minimums, and transparent holdings.
• Mutual funds: bought/sold at NAV end-of-day; can be actively managed or index-tracking. Some mutual funds have higher minimums and sales loads.

When investors choose funds over individual stocks: to gain instant diversification, lower single-stock risk, access professional management, or implement exposure to sectors/strategies not feasible for individual positions.

American Depositary Receipts (ADRs) and international access

• ADRs allow foreign companies to list U.S.-traded certificates that represent foreign shares; they let U.S. investors access non-U.S. companies without cross-border settlement.
• International investors can access U.S. equities via U.S.-registered brokerages or brokers in their jurisdiction with U.S. market access.

Bonds, REITs, and other equity-like securities

• Corporate bonds and government bonds offer income and lower volatility than stocks.
• REITs (Real Estate Investment Trusts) trade like stocks and distribute income from real estate; used for yield and real-asset exposure.
• Convertible securities, preferreds, and closed-end funds are additional instruments for diversification.

Derivatives (options, futures) and margin

• Options and futures: derivatives that allow leverage, hedging, or directional exposure. They require specialized understanding and risk controls.
• Margin accounts enable borrowing against securities to amplify positions; margin increases both potential gains and risks, including margin calls.

Common investment approaches and strategies

Buy-and-hold / long-term investing

• Strategy: allocate across asset classes and hold for years/decades to benefit from compounding.
• Rationale: reduces timing risk, capitalizes on economic growth, and aligns with retirement and long-term goals.
• Passive index investing: low-cost ETFs or index funds track broad markets (e.g., S&P 500) for diversified, low-maintenance exposure.

Active stock picking and value/growth investing

• Value investing: focuses on undervalued companies using metrics like P/E, P/B, free cash flow, and margin of safety.
• Growth investing: targets companies with high revenue or earnings growth potential; metrics include revenue growth, gross margins, and TAM (total addressable market).
• Fundamental analysis and thesis-driven research are core to active selection.

Trading (day trading, swing trading)

• Shorter-term trading relies on technical setups, intraday liquidity, and rapid execution.
• Requires active monitoring, order types, and robust risk controls; transaction costs and taxes can be material.

Dollar-cost averaging and systematic investing

• Recurring contributions spread purchase price over time, reducing timing risk.
• Often paired with employer-sponsored retirement accounts, automatic brokerage deposits, or SIPs into ETFs/funds.

Steps to get started (practical guide)

Define goals, time horizon, and risk tolerance

• Goals: growth, income, capital preservation, retirement, or speculation.
• Time horizon: short-term (months), medium-term (years), long-term (decades) — determines liquidity needs and asset mix.
• Risk tolerance: behavioral willingness and financial capacity to absorb losses; informs allocation and position sizing.

Choose the right account type

• Taxable brokerage accounts: flexible, suitable for general investing.
• Retirement accounts (IRA, Roth IRA, 401(k)): tax-advantaged; contribution rules, withdrawal rules and tax treatment vary.
• Custodial/trust accounts: for minors or estate planning.

Research and select a brokerage

Key criteria:

• Fees and commissions: many brokers offer $0 commission stock/ETF trades, but other fees (options, margin, wire transfers) may apply.
• Platform usability: web, desktop, and mobile interfaces matter for execution speed and experience.
• Research tools: screeners, analyst reports, charting, news feeds.
• Order types and routing: ability to place limit, stop, conditional orders; transparent order handling.
• Margin availability and rates: if you plan to use leverage.
• Customer service and regulatory standing: check broker registration, FINRA/SEC oversight, and account protection (e.g., SIPC coverage).

Recommendation: when evaluating providers, consider regulated, reputable brokers and the specific features you need. For investors exploring crypto and cross-asset integration, Bitget provides brokerage and trading features with a focus on security and product breadth — consider platform compatibility and custody options such as Bitget Wallet for integrated Web3 needs.

Open and fund your account

• Typical steps: identity verification (KYC), address proof, tax ID (SSN or equivalent), and agreements acceptance.
• Funding methods: ACH bank transfers, wire transfers, check deposits, or transfers from other brokerages (ACATS). Funding times vary.
• Margin vs. cash accounts: margin accounts enable borrowing; cash accounts restrict use of borrowed funds. Understand margin agreements and interest rates before enabling margin.

Practice (paper trading / simulated accounts)

• Use paper trading or simulator accounts to learn order entry, platform features, and to test strategies without real capital.
• Practice helps build discipline and familiarity with slippage, order types, and the psychological stresses of live trading.

Placing orders and trading mechanics

Order types (market, limit, stop, stop-limit)

• Market order: executes at the current available price; useful for immediate execution but susceptible to price slippage in low-liquidity contexts.
• Limit order: executes at a specified price or better; useful for price control but not guaranteed to fill.
• Stop order (stop-market): becomes a market order once a trigger price is hit; used to limit losses or enter positions.
• Stop-limit order: becomes a limit order at the stop price; avoids market execution but risks non-fill.

Time-in-force options (day, GTC, on-close)

• Day order: valid only for the trading day entered.
• Good-Til-Cancelled (GTC): remains open until filled or cancelled (exchanges/brokers often cap duration).
• On-close: attempts execution near market close; useful for end-of-day pricing strategies.

Settlement, clearing, and custody

• Settlement cycle: most U.S. equity trades settle on T+1 (one business day) for many securities (historically T+2; many markets moved to T+1). Confirm current settlement rules with your broker.
• Clearing: a central counterparty (transfer agent/clearinghouse) ensures trade finality.
• Custody: brokerages hold securities for clients; account statements and trade confirmations provide the record of ownership.

Research and analysis tools

Fundamental analysis

• Core documents: balance sheet, income statement, cash flow statement, earnings reports, and management commentary.
• Valuation ratios: P/E, P/B, EV/EBITDA, price/sales; compare to sector peers and historical ranges.
• Earnings, revenue trends, margins, free cash flow, and debt levels inform company health and valuation.

Technical analysis

• Charting, trendlines, moving averages, support/resistance, and indicators (RSI, MACD) can be used for timing and trade management, especially in shorter-term strategies.
• Technical analysis is a toolset, not a guaranteed predictor; combine with fundamentals and risk management.

Screening and research platforms

• Use brokerage research tools, third-party screeners, financial news, earnings calendars, and regulatory filings (10-K, 10-Q, 8-K) to build investment theses.
• News flow and institutional filings can materially affect prices; keep a fact-based approach and verify primary sources.

Portfolio construction and risk management

Asset allocation and diversification

• Allocate across asset classes (stocks, bonds, cash, alternatives) according to goals and risk tolerance.
• Diversify across sectors, market caps, and geographies to reduce single-point risk.
• Rebalance periodically to maintain target allocations.

Position sizing and trade-sizing rules

• Simple rules: limit single-position exposure to a fixed percentage of portfolio (e.g., 1–5%), depending on risk tolerance.
• Volatility-based sizing: scale positions based on asset volatility; more volatile assets should be smaller positions.

Use of stop-losses, hedges, and rebalancing

• Stop-losses: automated triggers to limit downside; select levels that account for volatility to reduce whipsaw.
• Hedges: options or inverse instruments can protect portfolios but add cost and complexity.
• Rebalancing: return allocations to targets on a calendar or threshold basis to realize gains and control risk.

Behavioral pitfalls and discipline

• Common biases: panic selling, confirmation bias, overconfidence, chasing performance.
• Mitigations: written investment plan, diversification, systematic investing, and regular reviews reduce emotional decisions.

Costs, fees, and expenses

Trading costs and commissions

• Many brokers now offer $0 commissions for U.S. stocks and ETFs; check for options fees, broker-assisted trade fees, and platform fees.
• Hidden costs include bid-ask spreads and price improvement/poor routing; review broker execution quality disclosures.

Fund expense ratios and management fees

• ETF and mutual fund expense ratios compound over time and can materially affect long-term returns; prefer low-cost options for broad exposure.
• Active funds may charge higher fees; evaluate alpha after fees.

Margin interest, borrowing costs, and financing fees

• Margin interest accrues on borrowed funds; rates vary by broker and loan amount.
• Short-selling or borrowing shares carries fees (borrow rates) and potentially recall risk.

Taxes and reporting

Capital gains and dividends

• Short-term capital gains (assets held ≤1 year) are typically taxed as ordinary income; long-term gains (>1 year) often receive preferential rates for U.S. taxpayers.
• Dividends: qualified dividends may receive lower tax rates than ordinary (non-qualified) dividends; rules depend on holding period and issuer.

Tax-advantaged accounts and tax-efficient strategies

• IRAs, Roth IRAs, and 401(k)s provide tax benefits; use them for long-term savings when eligible.
• Tax-loss harvesting and asset location (placing tax-efficient assets in taxable accounts and tax-inefficient assets in tax-advantaged accounts) can improve after-tax returns.

Reporting requirements for U.S. and non-U.S. investors

• U.S. taxpayers receive 1099 forms (e.g., 1099-B) summarizing gains/losses and dividends from brokers.
• Non-U.S. investors may face withholding taxes on dividends and additional reporting obligations in their home country; consult tax authorities or professionals.

Regulation, investor protections, and market structure

Key regulators and rules (SEC, FINRA)

• SEC enforces securities laws and disclosure; FINRA oversees broker-dealers’ conduct.
• SIPC protects customers of member broker-dealers against loss of cash and securities from broker failure up to specified limits, but SIPC does not protect against market losses.

Market manipulation, insider trading, and compliance

• Insider trading and market manipulation are illegal; regulators monitor trades and corporate disclosures to enforce market integrity.
• Use reputable brokers and maintain compliance with rules around short selling, margin, and options trading.

Investing from outside the United States

Access routes (U.S. brokers, local brokers with U.S. access, ADRs)

• Non-resident investors often open accounts with U.S.-registered brokers that accept international clients, or with local brokers that provide U.S. market access.
• ADRs provide U.S.-listed exposure to foreign companies.
• KYC/AML requirements apply; expect ID verification and tax documentation (W-8BEN for many non-U.S. investors).

Currency conversion and foreign exchange risk

• Currency conversion fees and USD exchange-rate moves can add or subtract from U.S. equity returns for foreign investors.
• Some brokers offer currency-hedged products or multi-currency account features.

Cross-border tax implications and treaties

• Dividend withholding, double-tax treaties, and local reporting rules affect after-tax returns for international investors; seek local tax guidance for specifics.

Advanced topics and strategies

Options strategies (covered calls, protective puts)

• Covered calls: sell call options against owned shares to generate income; limits upside if shares rise above strike.
• Protective puts: buy puts to hedge downside while retaining upside; cost of puts reduces net return.
• Options strategies add complexity and require understanding of Greeks (delta, theta, gamma, vega).

Short selling and synthetic short positions

• Short selling involves borrowing shares to sell now and repurchase later; risks include unlimited losses and borrow recalls.
• Synthetic shorts (using options) can replicate downside exposure with defined risk in some strategies.

Margin trading and leverage

• Leverage can amplify returns and amplify losses; maintenance margin requirements can force liquidations during adverse moves.
• Understand broker-specific margin rules and stress-test scenarios before using leverage.

Common mistakes and best practices

• Overtrading: high turnover increases costs and taxes.
• Poor diversification: concentration amplifies idiosyncratic risk.
• Ignoring fees: expense ratios and transaction costs compound over time.
• Misusing leverage: margin without risk controls can produce catastrophic losses.

Best-practice rules:

• Create a written plan (goals, risk limits, time horizon).
• Diversify across assets and strategies.
• Keep costs low with passive vehicles where appropriate.
• Use systematic investing and continuous learning.

Tools, platforms, and resources

Broker platforms and mobile apps

• Broker types: full-service brokers (advice and custody), discount brokers (low-cost execution), and robo-advisors (automated portfolio management).
• Look for order types, execution quality, mobile stability, two-factor security, and educational resources.
• For investors interested in both crypto and traditional assets, Bitget offers multi-asset trading features and custody products; consider platform security, insurance coverage, and wallet integration such as Bitget Wallet when evaluating providers.

Educational resources and simulators

• Use broker tutorials, financial education sites, simulators and paper-trading tools to practice.
• Reputable providers of foundational education include investor education pages from major custodians and recognized financial-education platforms.

Professional advice and when to seek it

• Financial advisors (fee-only fiduciaries or commission-based) can provide tailored planning.
• Seek professional help for complex tax situations, estate planning, or large portfolios.

Glossary of common terms

• Brokerage account: an account used to buy and sell securities.
• ETF: exchange-traded fund.
• Limit order: an order to buy/sell at a specified price or better.
• Margin: borrowed funds used to leverage positions.
• Liquidity: the ease of buying/selling an asset without large price impact.
• Dividend: distribution of a company’s earnings to shareholders.
• P/E ratio: price divided by earnings; a valuation metric.
• Settlement: transfer of cash and securities to complete a trade.

See also / Related topics

• Personal finance
• Retirement accounts
• ETFs and index funds
• Options trading basics
• Foreign exchange and currency risk
• Investment risk management

References and further reading

This article draws on broker guides and investor education resources, including reported coverage of market events and sector trends. For timely regulatory and brokerage details, consult official SEC/FINRA materials and up-to-date brokerage disclosures. Notable reporting used for market context in this guide includes Motley Fool podcasts and market reporting:

• As of Dec. 15, 2025, according to Motley Fool, reporting on SpaceX and potential IPO valuation highlighted market debate about large tech IPOs and Starlink’s revenue prospects (reports cited estimates such as a potential $1.5 trillion IPO valuation and Starlink revenue estimates in the tens of billions). These numbers are for context and should be checked in official filings if a public offering occurs.
• As of Dec. 11, 2025, Motley Fool coverage summarized 2025 market winners and infrastructure themes (AI, data center and energy buildouts) that influence investor demand in U.S. markets.

Sources and further reading: broker documentation on order types and settlement, investor education pages on ETFs and mutual funds, and regulator pages from the SEC and FINRA. Always consult primary documents (prospectuses, 10-Ks, 10-Qs) for issuer-level detail.

Practical checklist: Getting started quick-reference

1. Clarify goals, time horizon, and risk tolerance.
2. Choose account type (taxable vs. retirement).
3. Compare brokers (fees, tools, security) and consider Bitget for multi-asset integration and Bitget Wallet for Web3 custody needs.
4. Open account, complete KYC, and fund via ACH/wire.
5. Practice in a paper-trading account.
6. Start with diversified ETFs or a small basket of stocks aligning with your plan.
7. Monitor, rebalance, and document decisions.

News context and market signals (timely notes)

• As of Dec. 15, 2025, according to Motley Fool, discussion around a prospective SpaceX IPO and estimates of very large valuations highlighted how single, transformative companies can reshuffle investor attention and capital flows; for example, commentators noted Starlink subscriber growth (reported at multiple millions of users) and speculative public-valuation multiples. This underscores how IPO windows and headline events can affect how investors choose to access U.S. equities.

• As of Dec. 11, 2025, Motley Fool coverage of market winners in 2025 emphasized technology-facing infrastructure (semiconductor memory demand, data-center buildouts, solar and electrical contractors) as sectors that supported market leadership in that period; such macro and sector trends can change portfolio positioning and liquidity preferences.

Note: news items are useful for context and timing but should not be interpreted as investment recommendations. Always verify numeric details (market caps, subscriber counts, revenues) against company filings and regulated disclosures before acting.

Final notes and next steps

Learning how to invest in the US stock market is a process: define objectives, choose appropriate accounts and instruments, use reputable brokers and tools, manage costs, and maintain disciplined risk controls. Use simulation to build confidence, consult tax/financial professionals for personal advice, and leverage platform features that match your needs — for cross-asset or crypto-integrated workflows, consider Bitget’s trading and wallet products to centralize asset management.

Further exploration: open a demo or paper-trading account to practice order types and execution, read issuer filings before buying new IPOs, and subscribe to regulated sources of market data for ongoing education.

Ready to explore platform features? Consider testing a demo environment or reading Bitget’s platform documentation and Bitget Wallet overview to understand custody, security, and cross-asset workflows.