Complete Guide to US Stock Brokerage Accounts: Investment Methods Comparison and Platform Selection Tips

U.S. stock market continues to rise, and more and more investors want to participate in the world’s most mature stock market. But for beginners, from opening an account to stock selection, each step is full of questions. This article will detail the entire process of opening a U.S. stock securities account, choosing an investment method, and how to select a broker that suits you in five steps.

Must-Know Before Opening an Account: Cash Account vs. Margin Account

When preparing to open a U.S. stock securities account, the first thing to understand is the difference between account types. Overseas brokers typically offer two account options:

Cash Account features relatively controlled risk. Investors can only trade with available funds, without overdraft, short selling, or margin operations. Some brokers also restrict options trading. This type of account has a low threshold and is suitable for conservative investors and beginners.

Margin Account offers more flexibility. Investors can borrow securities to short sell, use leverage for T+0 day trading, and these tools provide more profit opportunities for experienced traders, but the risks also increase. Improper operation may lead to the total loss of principal.

Five Investment Methods for U.S. Stocks Explained

Before officially opening an account, understanding different investment methods is crucial.

Method 1: Direct Purchase of U.S. Stocks

The U.S. stock market is the largest in the world, gathering many high-quality listed companies. U.S. stocks have advantages such as high liquidity and substantial company size, but note that there are no daily price limits (though circuit breakers exist).

There are two ways to buy U.S. stocks: through domestic brokers via re-entrustment (domestic broker entrusting overseas broker as agent), or directly opening an account with an overseas broker.

Re-entrustment account opening process:

1. Prepare ID card, secondary ID, bank passbook, seal, etc.
2. Go to a domestic broker branch to open a re-entrustment account
3. Open a re-entrustment settlement account at the bank
4. Choose settlement currency and complete the account opening

Note: The handling fee for re-entrustment is usually between 0.5%-1%, which can be costly for long-term investors.

Method 2: Bond Investment

Bond investments generally have lower expected returns than stocks but also carry relatively lower risks. This is a more conservative asset allocation choice.

Method 3: Investing in U.S. Stock ETFs

Index stock funds (ETFs) are special funds listed on exchanges that track the underlying index’s changes, such as well-known products like VOO.

For risk-averse investors, ETFs are a better choice. The two main advantages of buying U.S. stock ETFs are:

• Risk Diversification: Reduces risk of individual stocks through a diversified portfolio
• Trading Flexibility: Can be purchased directly on the secondary market or subscribed through fund companies, with multiple options

U.S. stock ETFs can also be purchased via re-entrustment or directly through overseas brokers.

Method 4: Trading Options

Options are leveraged derivative contracts that give investors the right to buy or sell assets at a predetermined price on a specified date. Common types are call options and put options.

Options trading usually requires a margin account and has certain requirements for account funds and trader level.

Method 5: Trading U.S. Stock CFDs(CFD)

CFD stands for “Contract for Difference,” a financial derivative instrument. Traders do not actually hold U.S. stocks but trade on price fluctuations. The unique advantages of CFDs include:

• Use of leverage, allowing larger trading volume with initial capital
• Two-way trading: long and short positions
• Relatively lower threshold compared to options

Leverage trading comparison example: For a product valued at $20,000, the impact of different leverage ratios:

CFD trading process example (using S&P 500):

1. Open a trading account and deposit funds (supports multiple payment methods)
2. Find the target instrument on the platform (e.g., U.S. S&P 500)
3. Enter position size, set take profit and stop loss
4. Open the position
5. Close the position based on market changes

Important reminder: Although CFD is flexible and convenient, leverage trading carries high risk. If the account net value falls below the maintenance margin, some or all positions may be forcibly closed. Investors must choose regulated platforms and enable risk management tools like stop-loss, take-profit, and negative balance protection.

Different Investment Approaches for Investors

Long-term investors are suitable for systematic investment strategies, choosing U.S. stocks, bonds, or ETFs for dollar-cost averaging. This can reduce risk, achieve compound growth, and lower transaction fees.

Medium- and short-term traders may consider U.S. stock CFDs or options trading, leveraging to improve capital utilization. However, they need risk management skills and basic technical analysis knowledge.

It is recommended that investors build a diversified portfolio, learn risk management, and establish their own trading system.

How to Choose the Right U.S. Stock Broker

When selecting a broker, multiple factors should be evaluated:

Key considerations:

• Legitimacy and regulatory compliance of the platform
• Convenience of depositing and withdrawing funds
• Variety of trading products
• Smoothness of the user interface
• Availability of Chinese language support

Comparison of common U.S. stock brokers:

Selection tips:

• For buying U.S. stocks and ETFs: choose mainstream brokers with zero fees and low minimum deposits
• For short-term trading of derivatives: choose platforms offering CFD trading with low fees and flexible leverage
• Re-entrustment method: higher fees, not recommended for frequent trading

How to Select Quality U.S. Stock Investment Targets

After opening an account, the key question is: what to buy?

Beginners lack the ability to analyze company fundamentals and may easily fall into traps when choosing stocks. It is recommended to adopt the following strategies:

Track major stock indices:

• S&P 500 Index(S&P 500): a collection of 500 large U.S. companies, representing the overall U.S. economy
• Nasdaq 100 Index(Nasdaq 100): the most important tech stock index in the U.S., including Apple, Microsoft, Google, and other tech giants
• Dow Jones Industrial Average(Dow Jones): an average index of 30 of the largest and most well-known U.S. companies

Invest in high-quality individual stocks: Focus on industry leaders like MSFT, AAPL, AMZN, GOOG, which have solid fundamentals and high liquidity.

ETF investment advantages: Investing through ETFs tracking stock indices allows sharing in U.S. economic growth while effectively diversifying risk.

Building a Personalized Investment Portfolio

The second step after opening an account is to plan asset allocation that matches your risk tolerance and investment goals.

Sample allocation (assuming a $30,000 investment):

• $10,000 in U.S. stocks
  • 40% in tech stocks (high growth)
  • 40% in ETFs (moderate risk)
  • 20% in CFD trading (high risk, high return)

Dynamic adjustment principles:

• Regularly review portfolio performance
• Adjust holdings based on industry changes
• Gradually increase high-risk allocations as your investment knowledge grows
• Prioritize risk control

Five Steps for Beginners

Summarizing the core points of U.S. stock investment:

Step 1: Understand account types Retail investors are recommended to start with cash accounts; consider margin accounts after gaining experience.

Step 2: Understand investment methods Choose based on your risk tolerance among U.S. stocks, ETFs, CFDs, options, etc.

Step 3: Select a suitable broker Compare fees, minimum deposits, trading products, and service quality to choose a reputable, regulated platform.

Step 4: Study the market Focus on analyzing major stock index components and researching the fundamentals of industry leaders.

Step 5: Optimize your holdings Regularly review and adjust your portfolio based on market conditions.

Important Risk Reminder

Although the U.S. stock market is the most mature global trading market, investing still requires caution. Keep in mind:

• No daily price limits; individual stocks may experience sharp declines
• Leverage trading amplifies risks and may result in losses exceeding initial margin
• Beginners should focus on learning, starting with small amounts
• Control the proportion of high-, medium-, and low-risk assets
• Choose regulated, reputable trading platforms

U.S. stock investing is a long-term process of learning and practice. Start by understanding the basics, familiarize yourself with the process through simulated trading, and gradually invest real funds. Only then can you steadily profit in the world’s largest stock market.