Why US Stocks?
If you were to summarize the characteristics of US stocks in one sentence, it would be that they are a safe and easy way to invest.
Below, I will explain in detail why investing in US stocks is safe and easy, and why it is a good investment destination to consider for your long-term financial planning.
Understand the Characteristics of US Stocks.
The biggest characteristic of US stocks is that their annual charts consistently trend upward. The three major US stock market indexes – the S&P 500, Dow Jones, and NASDAQ – all show an upward trend in their annual charts. Comparing them to the annual charts of the Korean KOSPI and KOSDAQ indexes reveals a clear distinction. Just by looking at these charts, it becomes evident why long-term investment in high-quality US stocks guarantees success for anyone, without needing further explanation.
Invest in the US Economy, Which Drives Sustainable Growth.
I believe everyone will agree that the US economy is the safest and most sustainable growth driver in the world. The US leads the world not only in the economic sector but also in all other fields. If we were to feel uneasy about the US economy, we wouldn't be able to invest in any country in the world. I am confident that if you invest in safe US stocks, you will never fail.
Pay Attention to the Trends in the US Market, the Source of Cutting-Edge Technology.
The starting point for all cutting-edge technologies is the US. New technologies spread from the US to the rest of the world. Therefore, if you invest in the stocks of companies that are in the nascent stages of a new technology in the US – that is, if you invest at the very beginning – you can maximize your returns.
Recognize that the US Market Is an Honest Market Driven Solely by Market Principles, Free From the Manipulation of Big Players.
Based on my experience in the Korean market, I have observed that retail investors often follow trends too late and face a high risk of losses. In contrast, the US market is an honest market driven solely by market principles, free from the manipulation of major players. Those who have invested in Korean stocks will likely have experienced this firsthand. If the US market is a true investment destination, then the Korean market could be described as a speculative market. Although I have invested in Korean stocks in the past, I have observed countless times that retail investors are always sacrificed in the games of major players or institutional and foreign investors. I have decided to no longer invest in Korean stocks.
Don't Look at the Trees, Look at the Forest. (Instead of Focusing on Daily and Weekly Charts, Always Base Your Decisions on Annual Charts.)
Don't look at the trees, look at the forest. Instead of getting caught up in daily and weekly charts, always base your actions on the annual charts. In the stock market, you will often see that those who are impatient, younger, and less experienced in the market become saddened, angered, and overjoyed by the daily fluctuations in stock prices. However, what is important is not the daily or weekly movement. The world doesn't change drastically and major fluctuations don't occur from one day to the next. When you look at annual charts, especially those of high-quality US stocks that consistently trend upward, you realize, 'This is where I need to invest.'
Don't Overlook the Fact that the Annual Charts of the Three Major US Market Indexes (DOW JONES, S&P 500, NASDAQ) Have Been Trending Upward for Decades. In Particular, Understand the Difference Between These and KOSPI and KOSDAQ.
The annual charts of the three major US indexes – Dow Jones, S&P 500, and NASDAQ – have been trending upward for decades. If you compare them to the KOSPI and KOSDAQ, the answer will become clear. You will realize for yourself that the US stock market truly is a place for long-term, generational investment.
Keep in Mind that When the Annual Chart of a Stock Index or High-Quality Stock Shows a Downtrend, It Represents a Great Opportunity.
Remember that when the annual chart of a stock index or high-quality stock shows a downtrend, it represents a great opportunity. It is said that 2022 was a once-in-40-years opportunity. Throughout my years of experience, I've encountered the IMF crisis, the Lehman Brothers collapse, and the COVID-19 pandemic, but due to my lack of experience at the time, I failed to buy stocks when they were at rock-bottom prices and instead ended up selling them at a loss. I acted like an inexperienced beginner. However, what I've realized now is that no matter how big the disaster, if you invest in high-quality US stocks, if you take advantage of these opportunities to buy at low prices, you will surely be rewarded handsomely in the future. Never forget this truth.
Establish Your Own Principles and Criteria.
If you stick to the principle of long-term investment in high-quality US stocks and employ a strategy of buying more during downturns to lower your average purchase price, your market response skills will improve. To put this strategy into practice, you'll need to prepare accordingly. For instance, keeping 30-40% of your total funds in cash will allow you to buy more stocks during a downturn. If you don't have enough cash, you can employ a clever strategy of gradually selling a small portion of your holdings, say 1-2% a day, during a bull market to build up your cash reserves. However, even in the worst-case scenario, you should always keep at least 50% of your portfolio invested in stocks.
Focus on Defensive Investing, Not Offensive Investing.
Especially when you're new to the stock market, it's common to feel a sense of urgency to buy when stock prices surge. I no longer buy when stocks are rising. When stocks fall, no one knows where the bottom is. Only God knows that. So, when you believe that a significant decline has occurred, establish a set of criteria – for example, at what percentage decline you will buy a certain amount of shares – and stick to that principle. As prices fall further, you can gradually increase your buying volume in stages. Those who create such principles and adhere to them diligently will reap greater rewards in the future.
The goal of long-term investment is to capture both safety and growth. If you need funds for a specific purpose, you might consider selling some of your stock holdings. However, if that's not the case, when you invest in US stocks, you should adhere to the principle of never selling, even if it's a small amount of money.
Impatient individuals, those with limited stock market experience, and younger investors often struggle to stick with long-term investing. They become anxious, excited, and angry about the daily fluctuations, leading to selling and eventually leaving the market. However, as mentioned earlier, the US stock market is a truly reliable market for long-term investment. You need to stay in it for life. Long-term investing means never selling your holdings unless absolutely necessary and ensuring that your children and future generations can continue to invest in it. This requires wisdom and a well-defined strategy.
While we may often forget, as stock prices rise and dividends are paid, the increased funds become part of your principal for the following year, resulting in compounding. Although we tend to overlook this in our daily lives, we realize years later that our funds can grow exponentially. Additionally, US stocks also provide benefits from exchange rate fluctuations when the US dollar strengthens.
In my case, I only invest in companies ranked within the top 10 in terms of market capitalization, primarily focusing on technology and innovative companies. This is because companies with higher market capitalizations are not only more stable but also tend to experience significant growth driven by innovative technologies like AI, as seen in the case of NVIDIA. Given that the tech sector offers the potential for such lucrative returns, I primarily focus my investments in this area.
Conclusion
Three Principles of US Stock Investment: 1. Buy Good Stocks 2. Buy Them When They're Cheap 3. Hold Them Forever.
In essence, everything I've discussed can be summarized in one sentence: buy good US stocks, buy them when they're cheap, and hold them forever. I hope this is helpful for your investment journey.
Thank you.
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