How to Invest in the Stock Market in the United States?

What is stock market investing?

Investing in the stock market involves buying financial securities – mainly stocks or bonds – with the goal of making a profit in the medium or long term. These securities are traded on financial markets, where buyers and sellers meet.

Investing in the stock market allows you to become a shareholder in a company (through stocks) or a creditor (through bonds). In return, the investor can receive income (dividends or interest) and hope for a capital gain when reselling the securities. This type of investment is therefore a way to grow your savings by taking advantage of the development of companies and the economy.

Unlike speculation, which relies on short-term operations that are often riskier, investing in the stock market is part of a long-term logic. It requires a good understanding of how markets work, accepting a share of risk, and diversifying investments to limit exposure to losses.

What are the different accounts for investing in the Stock Market in the United States?

To invest in the stock market, you need a suitable account to hold your financial assets (such as stocks, bonds, ETFs) and to manage your transactions. In the United States, several types of investment accounts are available, each offering different tax treatments, contribution limits, and investment objectives:

Here’s a comparative table updated with an "Investor Profile" column to help better target accounts based on your goals and experience level:

Once your investment account is open, you must choose a financial intermediary to place your stock market orders. Here are the main options in the U.S.:

• A financial advisor: Provides personalised investment advice, holistic wealth management strategies, and tailored portfolio construction. Well-known firms include Merrill Lynch, Edward Jones, and Morgan Stanley.
• An online broker: Ideal for self-directed investors looking for low-cost access to a wide range of domestic and international assets. Top platforms include Fidelity, Charles Schwab, TD Ameritrade, and Robinhood.
• A robo-advisor: Offers automated, algorithm-driven portfolio management based on your risk profile, often with low minimums (e.g., Betterment, Wealthfront).
• A CFD broker (international only): Available to active traders using offshore platforms, offering leveraged products on a wide range of assets (note: CFDs are restricted in the U.S. for residents).

What to Invest in on the Stock Market?

The stock market offers a wide range of financial products that allow you to diversify your portfolio based on your objectives, risk appetite, and investment horizon. Here are the main types of assets you can invest in:

Stock Trading

Stocks represent a share of a company's capital. By buying a stock, you become a shareholder and can receive dividends (a portion of the profits) as well as hope for a capital gain on resale if the price increases. Stocks are investments with high potential returns, but also high risk, as their value depends on many factors (company results, economic situation, geopolitics, etc.).

The best stocks to invest in depend on your goals and investment style. Thus, you won’t invest in the same stocks whether you’re looking for a regular return or a significant capital gain.

• For a regular return: we will favor the most stable stocks such as Astrazeneca, Total or McDonald's.
• For significant capital gain potential: we will favor growth stocks like Tesla, NVidia, Apple or Airbus.

Our Opinion

Stocks are suitable for investors willing to accept market volatility in exchange for the prospect of higher long-term gains. Sectoral and geographical diversification is essential to limit risks.

ETF (trackers)

ETFs (Exchange Traded Funds) are index funds listed on the stock exchange. They replicate the performance of an index (such as the S&P 500 or the MSCI World) by investing in all the securities that compose it. ETFs are traded like stocks, in real time, and allow broad diversification at a lower cost.

Our opinion

ETFs are particularly suitable for beginner or intermediate investors wishing to easily gain exposure to a market or sector without having to choose each stock individually. It is an excellent tool for long-term passive management.

Mutual Funds

Mutual funds are collective investments actively managed by professionals. They pool the savings of multiple investors to create a diversified portfolio, according to a defined strategy (stocks, bonds, mixed, thematic, geographic, etc.). Unlike ETFs, their valuation is done once a day, and their fees are generally higher.

Our opinion

Mutual funds are designed for investors who prefer to delegate the management of their portfolio to experts. They are well suited to those who wish to benefit from a structured management framework, at the cost of a return that is often lower than ETFs, due to fees.

Obligations

Bonds are debt securities issued by governments or corporations. By purchasing a bond, you lend money to the issuer, who commits to repay you at maturity, with the payment of regular interest (coupon). Bonds are generally less risky than stocks, but offer a more moderate return.

Our opinion

Bonds are an essential component of a balanced portfolio, especially for cautious investors or those close to retirement. They help stabilize overall performance and ensure regular income.

How to invest in the stock market when you are a beginner?

More and more young people are getting into stock market investing today, but there is no age limit to starting in this field. However, as a beginner investor, it is necessary to take some precautions before getting started.

• The easiest solution is to entrust the management of your investments to a third party whose job it is, such as a financial advisor, or to software specially developed for this purpose, such as a robo-advisor.
• It is also possible to make your own investments in the stock market, but in this case, it is preferable to take the time to train and learn about how the markets work before you start investing your money.
• Since an investor does not become profitable overnight, it is also preferable to not invest money in the stock market that you may need to live on or to cope with unforeseen expenses.
• In the same way, it is necessary to put in place a precise investment strategy and ideally over the long term by setting achievable objectives and taking risk into account.

When to Invest in the Stock Market?

While it is possible to make stock market investments at any time, it is necessary to know how to identify good opportunities before buying securities. To know if it's the right time to buy a stock or shares in the stock market, you should ask yourself these simple questions:

• What is the current economic situation? Is there growth, or are we in a period of crisis?
• What level of risk are you willing to take? An investor with a high-risk appetite will frequently find interesting opportunities in the stock markets, while a cautious investor will prefer to wait to invest.
• What is the real value of a stock listed on the stock exchange? The intrinsic value of companies listed on the stock exchange must be defined to know if it is the right time to acquire their shares.
• When does the company pay its dividends? Finally, if you have opted for a yield strategy with stocks that pay a dividend, you must hold these stocks no later than the day before the ex-dividend date.

Why Invest in the Stock Market?

Investing in the stock market offers numerous advantages for growing your wealth, protecting your capital against inflation, and diversifying your income streams. Here are the main reasons to invest in the financial markets:

• Grow your savings over the long term: Stock markets have historically generated attractive returns over several decades. Regular, long-term investment allows you to benefit from the growth of businesses and the economy.
• Protect your capital against inflation: Savings that are not invested lose value over time. By aiming for a return higher than inflation, the stock market allows you to maintain or even increase the purchasing power of your capital.
• Generate passive income: Some stocks pay regular dividends. Bonds pay coupons, offering a stable income to the investor.
• Diversify your portfolio: The stock market allows you to complement real estate investments or secured savings products.
• Good diversification reduces exposure to a single type of asset or risk.
• Easily access global markets: With online brokers and ETFs, it is possible to invest in thousands of companies around the world. This allows you to position yourself in different sectors, geographical areas, and levels of economic development.

Good to know

The stock market is a powerful tool for investors willing to adopt a long-term vision. Well managed, a stock portfolio can become a lever for sustainable growth and a pillar of your wealth strategy.

Which broker to choose for investing in the stock market in the United States?

To invest in the stock market, it is essential to go through an approved financial intermediary, called a broker. They transmit your buy and sell orders to the markets. The choice of broker directly influences your investment experience, the fees you pay, the products you can access, and the tools at your disposal.

Here are the main categories of brokers available in the United States, with their characteristics:

Expert Opinion:

• An independent investor looking to diversify at a lower cost will favor an online broker.
• An active trader will opt for a CFD broker, being aware of the risks.
• A beginner or long-term saver will prefer automated management with a robo-advisor.
• Finally, a cautious profile or someone attached to their bank will use a bank broker, despite higher fees.

How Much Money Do You Need to Invest in the Stock Market?

The amount of money needed to invest in the stock market depends on various factors, especially your personal financial situation. Here are the rules to follow if you want to get started:

• Invest a portion of your savings in the stock market: It's important not to put all of your savings into your stock market investments. You should keep some of your savings to use in case of need. Ideally, and if you can, keep 20% of your capital in a secured investment or a classic savings vehicle and invest 80% in the stock market.
• Invest in the stock market with a small budget: It is entirely possible to invest in the stock market with a small budget. It is not necessary to have a large capital to start building a stock portfolio. $500 to $1,000 will be enough to create the basics of it and you can then reinvest your income from dividends or capital gains to buy new securities.
• Don't put all your eggs in one basket: While the stock market is attractive in terms of returns and investment, it is necessary to properly distribute the money you invest in the stock market by ensuring that your portfolio is diversified. For example, you can invest part of it in stocks, another part in one or more funds, and another part in bonds.

Investing in the Stock Market with a Small Budget: Our Advice

If you are a beginner investor and want to invest small amounts in the stock market, you have two solutions:

• Invest your current savings: This is possible from $500
• Invest a small amount each month: You can also freely make payments to your stock market investment accounts such as a securities account to gradually fund it.

What are the Tax Implications of Stock Market Investment Income in the United States?

Income generated from stock market investments — such as capital gains, dividends, and interest — is subject to taxation in the United States. Taxation depends on the type of income and the duration of asset holding. Here’s an overview of the applicable rules depending on the account type and nature of the income:

1. Capital Gains and Dividend Taxation

In the United States:

• Short-Term Capital Gains (STCG) (assets held for one year or less) are taxed at ordinary income tax rates, ranging from 10% to 37%.
• Long-Term Capital Gains (LTCG) (assets held for more than one year) benefit from preferential tax rates:
• 0%, 15%, or 20%, depending on taxable income and filing status.
• Qualified Dividends are also taxed at the favorable long-term capital gains rates (0%, 15%, or 20%).
• Non-Qualified Dividends are taxed at ordinary income tax rates.

Note:
In addition, high earners may be subject to a 3.8% Net Investment Income Tax (NIIT) on capital gains, dividends, and other investment income.

2. Tax Treatment by Type of Account

3. Treatment of Losses

If you incur an investment loss:

• Capital losses can be used to offset capital gains in the same year.
• If total capital losses exceed gains, up to $3,000 ($1,500 if married filing separately) can be deducted against ordinary income per year.
• Unused losses can be carried forward indefinitely to offset future gains.

4. Special Case: Dividends

• Qualified dividends meet IRS requirements and are taxed at the lower long-term capital gains rates (0%, 15%, or 20%).
• Non-qualified dividends are taxed at the individual's ordinary income tax rates.
• Dividend-paying investments held in tax-advantaged accounts like IRAs grow tax-deferred or tax-free depending on the account type.

Example

If you receive $1,000 in qualified dividends and fall into the 15% long-term capital gains bracket, you would owe $150 in taxes on those dividends.

Our 5 Tips for Investing Well in the Stock Market

Now that you know the basic rules of stock market investing, here are five simple tips to follow to quickly become a profitable investor:

• Set achievable goals: Every investor should set financial goals for their various investments. These goals will depend on the purpose of the investment. Is it to prepare for retirement or to finance a purchase or specific project? A motivating goal will be a driving force that allows you to dedicate yourself to your investment with passion.
• Learn about the stock markets: A good understanding of the stock markets and how they work is essential if you want to make profitable investments. So take some time each week to educate yourself. There are many online training modules that allow you to learn analysis methods, and you can also consult targeted financial news feeds.
• Favor a long-term investment horizon: Unless you are an expert in the financial markets and want to speculate in the short term to generate maximum profits in a short amount of time, it is wiser to invest with a long investment horizon. Speculation presents many risks that you can avoid with progressive investment.
• Know your risk tolerance: You must define as precisely as possible the level of losses and variability of your capital that you are willing to assume. Remember that the higher the potential return of an asset or market, the higher its level of risk. A strong aversion to risk should guide you towards the least risky instruments such as bonds or certain secured funds. If you have a high tolerance for risk, you can try riskier investments such as stocks or https://hellosafe.fr/investissement/crypto-monnaie/prometteuses.
• Don't let your emotions take over: Finally, investing in the stock market is an activity that can generate all sorts of emotions such as stress, infatuation, or fear. A good investor should not let these feelings lead them to make bad decisions and should always keep their initial strategy in mind and stick to it.

Do you want to invest in the stock market yourself and independently? Join a quality online broker without delay and start placing your orders on the market.

All our guides on stock market investing

P. Laurore

Finance expert

Co-founder of HelloSafe and holder of a Master's degree in finance, Pauline has recognised expertise in personal finance, which she uses to help users better understand and optimise their financial choices. At HelloSafe, Pauline plays a key role in designing clear, educational content on savings, investments and personal finance. Passionate about financial education, Pauline strives, with every piece of content she oversees, to provide reliable, transparent and unbiased information for independent and informed financial management. To this end, she has tested over 100 trading platforms to help internet users make the right choices.