Posted by US stock market knowledge
A Quick Look at the U.S. Stock Market Basics
The US securities market is currently the most developed in the world, attracting many excellent companies and a large amount of global investment funds. In this section, we will introduce the development of the US securities market, major exchanges, and major stock indexes.
1. Development Overview
The U.S. securities market originated in the late 18th century. In 1790, the first stock exchange in the United States, the Philadelphia Stock Exchange, was established, marking the official start of the U.S. capital market.
Since then, with the strong growth of the US economy, the US securities market has also risen strongly and become the world’s largest capital market. By the end of 2021, the number of listed companies on various stock exchanges has exceeded 6,000, with a total stock market value of more than 50 trillion.
In addition, the U.S. securities market also has almost all financial products such as funds, bonds, derivatives such as futures and options, foreign exchange, digital currencies, etc. Through these financial products, the investment scope covers almost all major capital markets in the world.
2. Major exchanges
There are two major exchanges in the U.S. securities market, namely the New York Stock Exchange and the Nasdaq Stock Exchange.
New York Stock Exchange
The history of the New York Stock Exchange can be traced back to 1792 and it is one of the earliest exchanges in the United States. Based on the total market value of listed companies as of the end of 2021, the New York Stock Exchange is the world’s largest stock exchange, with a total number of more than 2,400 stocks and a total market value of more than US$27 trillion.
A large portion of the companies listed on the New York Stock Exchange are large-scale enterprises with a long history and relatively stable development, such as Coca-Cola, Walmart, IBM and other companies that are well known to many people.
Nasdaq
NASDAQ is an electronic stock exchange in the United States. It was founded in 1971 and is now the second largest stock exchange in the world.
As of the end of 2021, the total number of companies listed on Nasdaq exceeded 3,700, with a total market value of more than 24 trillion US dollars. The Nasdaq exchange was previously the preferred place for listing of fast-growing technology stocks. Some technology giants such as Apple, Google and Amazon have chosen to list on Nasdaq.
3. Stock Indices
Currently, there are three major indices in the U.S. securities market, including the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite Index.
Dow Jones Industrial Average
The Dow Jones Industrial Average was first published in May 1896, and it has a history of more than 120 years.
When the Dow Jones Industrial Average was first compiled, it included the 12 most representative stocks in the U.S. industry. After continuous updates, it now includes the 30 largest and most well-known listed companies in various industries in the United States. Most of these companies are no longer related to heavy industry, but are distributed in the food, finance, pharmaceutical, software and other industries. Apple, Boeing, Disney, McDonald’s and other well-known companies are all its constituent stocks.
Since its establishment in May 1896, the Dow Jones Industrial Average has risen from an initial value of 40.94 points to 36,338 points at the end of 2021, an increase of 887.6 times in 125 years, with an average annual return of 5.58%.
S&P 500
The S&P 500 Index was compiled by Standard & Poor’s in 1957 and is a stock index that records the stock performance of 500 major listed companies in the United States.
The constituent stocks covered by the S&P 500 index are almost all the 500 most actively traded stocks in the U.S. Many well-known industrial stocks such as Boeing and General Motors, consumer stocks such as Coca-Cola and Procter & Gamble, and technology stocks such as Apple and Google are all included.
From its creation in 1957 to the end of 2021, the S&P 500 index has averaged an annual increase of more than 12%. Buffett once said that for most people, the best way to invest is to invest in the S&P 500 index.
Nasdaq Composite Index
The Nasdaq Composite Index is the most influential market index in the U.S. stock market. It is calculated based on the common stocks of all domestic and foreign listed companies listed on the Nasdaq market. The components of the Nasdaq are mainly composed of fast-growing advanced technology, telecommunications and biotechnology companies. Microsoft, Intel, Amazon and other household-name high-tech companies are all components of the Nasdaq.
Since its establishment in February 1971, the Nasdaq has risen from an initial value of 100 points to 15,645 points at the end of 2021, an increase of about 156.5 times in 51 years, with an average annual return of about 10.4%.
Bottom line
The above is a brief introduction to some aspects of the U.S. securities market. The U.S. securities market is a large market with many investment opportunities, but it also comes with many investment risks. Before participating in the U.S. securities market, investors should make investment decisions based on their own circumstances or seek professional advice.