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U.S. Stock Market Reaches New Highs: Two Effective Ways to Participate

EBC Financial Group

Opening the news this morning, we see that the three major U.S. stock indices have risen again, with the Nasdaq and S&P 500 hitting new highs for the third consecutive trading day. The anticipation of tax cuts under the Trump administration seems to have had an immediate impact. If favourable policies continue, further upward movement appears foreseeable. Here’s an interesting data point you might have missed: MSCI USA, which tracks the 50 largest U.S. stocks, has recently outperformed gold, making it one of the best-performing assets of the year. It looks like this advantage over gold may continue to grow in the short term. So, how can we participate in this market?

1. Trading the "Magnificent Seven"

The first method is directly trading U.S. stocks. However, I recommend that you first gain a basic understanding of the U.S. stock market—such as identifying trending stocks and sectors—so you can avoid potential pitfalls. If you find it difficult to get started, the easiest approach is to trade the "Magnificent Seven" stocks: NVIDIA, Apple, Microsoft, Google, Meta, Amazon, and Tesla. Even if you haven’t traded before, you’ve likely heard of these companies, and they’re undeniably strong performers. For example, in 2023, the "Magnificent Seven" contributed two-thirds of the S&P 500's gains. NVIDIA has surged 170% this year, and Apple has hit record highs for four consecutive days. With technology stocks benefiting from Trump’s policies, the "Magnificent Seven" offer a simple and direct entry point if you’re unsure where to invest. Recognizing the opportunities in the U.S. stock market, EBC has recently launched U.S. stock CFDs (Contracts for Difference), including the "Magnificent Seven." Compared to opening a U.S. stock account, EBC's U.S. stock CFDs allow 24-hour trading with leverage, enabling smaller investors to participate in high-priced stocks. Importantly, EBC’s U.S. stock CFDs also provide dividend payouts. If you hold a contract on the ex-dividend date, you can receive dividend income.

2. Investing in U.S. Stock Indices

If picking individual stocks seems overwhelming, a simpler option is to invest in U.S. stock indices. As long as the indices rise, passive tracking can generate long-term returns. For example, the S&P 500 has been on an upward trend since 2008. Even during significant corrections, the overall decline was limited when viewed over a long period. For conservative investors, stock indices are a highly recommended option. However, indices also have drawbacks. Since they track the entire market, the returns are averaged, which might not be as impressive as investing in strong individual stocks. My suggestion is to use leverage wisely and choose a platform with low trading costs. For instance, at EBC, popular indices have enhanced liquidity, significantly reducing spreads. The Nasdaq spread, for example, has been cut by 85%, providing a better opportunity for investors to participate. Additionally, EBC offers up to 100x leverage for index trading, enabling participation in U.S. stock index movements with minimal capital.

Conclusion

These are two ways to participate in the U.S. stock market. Stock indices are better suited for conservative investors, while individual stocks are more appropriate for active investors. Regardless of your approach, managing risk and minimizing costs will help maximize your returns.

Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.

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