Why post this ETFs tracking US market topic? I wrote several articles about ETFs before and found that many investors are really interested in the topic of ETFs. According to my previous ETF articles, although I mentioned this topic, I think it is necessary for me to clarify my views on today’s topic because this title is too important.
U.S. is the only long-term operating stock market
The US stock market is the only stock market in the world that has operated continuously for more than 200 years, and has never been closed for a long time due to war or other major reasons. The most recent time was when US stocks were closed for a week in the year of 911. This is the only one in US stocks market I ever experienced.
Moreover, US laws stipulate that even if there are long holidays (such as Christmas), the stock market will not be closed for more than three consecutive days. US stocks must be opened during the holidays (so there will be no such situation that East Asian stock markets have a holiday of more than one week during the Chinese Lunar New Year because it violates the fundamental requirements of the stock market’s principle of capital market for liquidity). In the World Wars II, the stock markets of many European countries were closed for many years. The stock market in Shanghai, China, was closed after the Communist Party came to power and only recovered in the 1990s.
As long as the stock market has been closed for a long time, “basically” your stock will become wallpaper, because many laws and regulations have been completely different after the war, and most of the listed companies have disappeared. The biggest advantage of investing in the stock market is long-term compound interest, but the premise must be that the company you hold is still alive for a long time, isn’t it? If this is not there, nothing else needs to be discussed.
Cost, cost, and cost
Since decided to invest in ETFs, and only ETFs tracking US market are really worth investing in ETFs (for the reasons, please refer to my previous article “Most investors should invest ETFs“ ). As a result, the scope is reduced a lot, and the remaining main consideration is actually the cost. Mainly include the following two major expenses:
- Transaction fees for buying and selling: The current trading fees for US stocks are all zero. But what about Taiwan? The trading of ETFs issued locally in Taiwan requires a transaction fee of approximately 0.14% (approximately 1/3 of the trading fee of Taiwan stocks).
- Long-term holding cost: ETF investors will hold it for many years, so the annual storage fee will become your main holding cost after buying it. Taiwan’s most famous ETF Yuanta 0050 has an annual expense ratio of 0.42%; while the US’s SPY expense ratio is 0.094%, while VOO and IVV are as low as 0.03%.
Regardless of your calculations, investing in U.S. ETFs issued in the U.S. will be more cost-effective than buying ETFs not issued in the U.S.
Long-term outlook for the stock market
Just like my introduction in the entire subsections 1-6 in my book “The Rules of Super Growth Stocks Investing”, the long-term returns of U.S. stocks are the best in the global stock market. This is based on historical facts and prospects for country’s future. So does ETFs tracking US market.
And the conclusions drawn from the current world economic and business environment-because the United States is not only now, but for a long period of time in the foreseeable future, US stock companies will still control global technology and orders. I have talked a lot about this part in the book, so I won’t repeat it here.
The investment ETF must be held for a long time in order to exert its power and the power of compound interest. As I mentioned in my previous ETF posts, it is wise for investors to only invest in the major major index of the stock market, so it is very important to choose that stock market.
ETFs tracking US market are sufficiently diversified
ETFs tracking US market has an edge to active stock investment on diversification. There are more than 4,000 listed companies in the U.S. stock market (excluding the OTC market, if all the stocks available to for investors to trade are all included, there are nearly 12,000 U.S. stocks that can be traded), China has 4,000 stocks, only more than 1,700 in Taiwan, and more than 700 in Singapore. Even Hong Kong has only about 2,500.
But the point is that the market value of major listed companies in the US stocks is very large, and the regulation are strict and perfect, and for those stocks are included in the Dow Jones Index (with 30 constituent stocks), Nasdaq Index (with thousands of constituent stocks), or S&P 500 (with 500 constituent stocks), anyone want to manipulate these constituent stocks, the probability is very low. Moreover, the index of these major US stocks covers a wide range of industries, and the constituent stocks are sampled very evenly. It will not cause all the stocks in the entire index to be severely damaged because of any big news happens on the earth, unless the US stocks crash.
In comparison, 70% of the listed companies in Taiwan stocks are related to electronic communication, and every day the opening of the market must look at the face of the Nasdaq Index the night before. The Yuanta 0050 ETF, which represents Taiwan stocks market, has only 50 constituent stocks. Not only does it skew towards TSMC for a long time, it also does not strictly follow the trend of Taiwan stocks, the constituent stocks and individual stocks account for the majority of Taiwan stocks. I mean weight of the stocks have been long-term distorted, is not an ETF suitable for measuring Taiwan stocks.
It has nothing to do with English ability
I wrote an article before “What level of English proficiency is required to invest in U.S. stocks“, mainly to talk about the English skills required to invest in US stocks “individual stocks”. Of course, many conservative investors in the Chinese-language world will retreat because of this. In fact, this is not the case. For details, please see my blog posts before. ETFs tracking US market almost has nothing to do with your English proficiency.
But if you choose to invest in a ETF issued in the United States (especially ETFs tracking US market), you only need to open an online US brokerage account (the customer service speaks Chinese, even the forms are in Chinese, and even the main content of the trading website is also in Chinese), and then refer to my article of “Top 10 index ETFs and major US stock market indexes“, or the ETF you like, you only need to remember the capital letters that represent you to buy, and click a few buttons.
Then you turn off your computer and mobile phone, so you don’t have to track it again. The only thing you have to do is not to sell it, sit down and wait and ignore it. When you have money, you must buy more. When the stock market crashes, you must buy more strongly, so that all your spare money other than living expenses will be used to increase your weight.
The only thing to do: Do nothing at all
You don’t need English to sit on the other side of the Pacific Ocean, right? What about CNN, the United States or the financial news, watching the market, watching the market, tracking corporate dynamics, interest rates, inflation, the Sino-US war, the war happen somewhere else, the pandemic, etc., all ignore it, and it has nothing to do with you.
- “Most investors should invest ETFs tracking broader market“
- “US issued ETFs tracking US market is your best bet“
- “Top 10 ETFs and important major US stock market index“
- “Disadvantages of ETF investment“
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