Want to get started with US stocks, but are hesitant to know where to start?
In fact, US stocks are not very different from domestic stocks. However, there are also significant differences that can be disconcerting if you do not know ahead of time. Here are the differences between US stocks and domestic stocks, and three things you must know before starting US stocks!
First, the trading hours are different!
There is a time difference between Korea and the US. As much as the time difference, the US stock market opens late. US stock trading hours are from 11:30pm to 6:00am in Korea.
During summer time (mid-March to early November), trading hours are advanced by one hour. You can trade between 10:30pm and 5:00am local time.
Like domestic stocks, the US market can be traded before and after hours. However, it should be noted that the pre-market and after-market hours, which allow after-hours trading, are different for each securities company.
Most brokerage apps show the market price with a delay of 15 minutes. These days, there are many cases where services are provided for a fee, but it is recommended to trade using a separate app that reflects real-time market prices.
Second, there is no upper or lower limit!
For domestic stocks, there is a set price limit and a range in which stock prices can move during the day. A stock cannot rise more than 30% or fall more than 30% from the closing price of the previous day. There is an upper and lower price limit.
However, there is no price limit in the US stock market. Just like cryptocurrency trading. So, there can be stocks that rise by more than 500% or 1000% in a single day, and the opposite happens very often.
In particular, in the case of 'meme stocks', which are the bane of the US stock market these days, there is no price limit, so keep in mind that sudden fluctuations are common!
📌 What is Meme Stock? A new word that refers to a sport that goes viral on social media or online community bulletin boards.
Third, sectors and tickers
There are many stocks listed on the US stock market. In order to easily categorize this, we have collected stocks in similar industries and grouped them into 'sector' units. Currently, it is classified into 11 representative sectors according to the Global Industry Classification Standard (GICS) method developed in 1999 by MSCI and S&P, global index calculation agencies.
Currently, there are 11 representative sectors of the US stock market: energy, materials, industrials, discretionary consumer goods, consumer staples, healthcare, finance, information technology, communication services, utilities, and real estate (REITs). The 11 sectors are classified into 24 industry groups, further subdivided into 69 industries and 158 sub-industries.
When you do domestic stocks, you enter the 6-digit 'stock name' or 'stock code' when searching for a specific stock. The US stock market is a little different. The item code is in uppercase alphabet. The formal name is 'ticker'.
For stocks listed on the New York Stock Exchange, the ticker consists of 3 digits, and for stocks listed on the NASDAQ, the ticker consists of 5 digits. TSLA for Tesla, AAPL for Apple is the ticker.
What is the representative ticker for each of the 11 sectors of US stocks?
✔️ Information Technology
This sector accounts for approximately 28% of the S&P 500. It includes companies related to hardware and software. One example is Microsoft (MSFT).
✔️ Health Care
This sector consists of companies that provide healthcare services, such as research and development of pharmaceutical and biotechnology products, supply and manufacturing of healthcare equipment. There are Johnson & Johnson (JNJ), which supplies Tylenol, and Pfizer (PFE), widely known for developing the Corona 19 vaccine.
✔️ Consumer Discretionary
Consumer discretionary goods refer to a variety of goods that are not essential but that people need. Automobiles, luxury goods, hotels and retailers are among the consumer discretionary sectors. Nike (NKE), famous for its sportswear brand, and Amazon (AMZN), which brought innovation to the distribution market, are representative companies.
✔️ Financials
This sector is made up of companies involved in banking, investment banking, wealth management, insurance and investment. JP Morgan (JPM), one of the world's oldest financial firms, and Berkshire Hathaway (BRKa, BRKb), Warren Buffett's investment firm, belong to it.
✔️ Communication Services
This sector consists of communication services, media and entertainment companies. There are Google (GOOGL) and Disney (DIS).
✔️ Industrials
The Industrials sector is made up of companies that produce products used in industry. 3M (MMM), widely known for its post-it notes, and Caterpillar (CAT), the world's largest construction and mining equipment company.
✔️ Consumer Staples
The consumer staples sector includes companies that provide goods and services that we use every day, such as food, hygiene and household products. There are Procter & Gamble (PG) and Coca-Cola (KO), which are well known for Head & Shoulders and Gillette razors.
✔️ Energy
Energy sectors such as oil and gas. Last year and this year, the volatility of crude oil prices was very large due to Corona 19. This includes companies such as ExxonMobil (XOM), which at one time suffered a severe blow in the aftermath of Corona 19.
✔️ Materials
This sector consists of companies specializing in materials such as chemicals, building materials, and metals. There are companies such as Linde (LIN), which is in the business of producing and distributing industrial gases, and Ecolab (ECL), which provides technologies and services related to water, sanitation and energy.
✔️ Utilities
The Utilities sector consists of companies involved in infrastructure businesses such as electricity, gas and water. Nextera Energy, the largest energy company in North America classified as a beneficiary of the Biden government's new renewable energy policy, belongs here.
✔️ Real Estate
This sector consists of companies that engage in real estate-related businesses, such as real estate investment trusts. Companies such as Realty Income, which is famous for monthly dividends, and American Tower, which leases telecommunications infrastructure, belong to it.