Introduction to Foreign Stock Investment: What You Need to Know Before Getting Started

Want to participate in the international financial market but don’t know where to start? 2025 is a great opportunity for Vietnamese investors to diversify their portfolios with foreign stocks, especially high-value stocks on Wall Street.

The US Stock Market Is the Ideal Choice

Many investors choose foreign stocks because of their unparalleled scale. The US has over 6,300 traded stocks, concentrated on the two largest exchanges in the world: NYSE (New York Stock Exchange) and NASDAQ. The total market capitalization here reached nearly $24.6 trillion by mid-2022, hosting global giants like Apple, Microsoft, Amazon, Google.

Why are foreign stocks attractive to Vietnam?

First, the diversity of companies cannot be compared to any local market. Second, superior returns: the S&P 500 index has increased over 39% from May 2018 to now, while VNIndex is down more than 9%. NASDAQ has even surged over 64% thanks to the explosive growth of the tech sector. Third, this is an optimal way to diversify risk when the economy faces pressures.

Differentiating NYSE and NASDAQ: Two Main Axes

NYSE - The Market of Business Tycoons

Founded in 1792, NYSE is the first stock exchange in the US. Today, it lists long-established, stable, and large-scale companies. Trading occurs from Monday to Friday, 9:30 AM to 4:00 PM (New York Time). In 2022, the daily trading volume reached 5 billion shares.

NASDAQ - The Playground of Tech Startups

Started in 1971 as the world’s first electronic stock exchange, NASDAQ is now the second-largest stock market in the US. Its listing requirements are more lenient than NYSE, attracting many startups, new technologies, and smaller-cap companies. NASDAQ stocks are more speculative but also have higher growth potential.

Three Representative Indices of the Market

Instead of tracking over 5,000 different indices, investors should focus on three main indices:

S&P 500 - Comprising 500 of the largest companies, accounting for 80% of the total market value. This is the most comprehensive measure of the US economy’s health, calculated based on market capitalization weights.

Dow Jones (DJIA) - The classic index of 30 blue-chip companies, representing about 25% of the total market value. Calculated by price weight, so high-priced stocks have a stronger influence on overall fluctuations. Dow is famous for companies with stable, reliable dividends.

NASDAQ Composite - An aggregate index including all stocks listed on NASDAQ, leaning towards technology. It reflects the performance of the tech sector and investor sentiment towards speculative stocks.

Top 10 Stocks to Start With

If you’re new to the market, here is a list of highly-rated stocks:

Note: Values are constantly changing; data is for reference at the time of writing.

Two Main Tools for Owning Foreign Stocks

Foreigners cannot open direct accounts on NYSE or NASDAQ. Instead, you must go through derivative instruments.

1. ETF - A Safe Long-Term Choice

ETF (Exchange Traded Fund) is a fund that trades on stock exchanges like regular stocks. Instead of buying individual stocks, you own a “basket” of securities based on a specific index.

Benefits of ETFs:

• Easy diversification at low cost
• No need to deeply understand each stock
• Reduces risk through broad diversification

Some popular ETFs: Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF (SPY), iShares Core S&P 500 ETF (IVV)

2. CFD - More Flexible, Higher Returns

Contracts for Difference (CFD) allow you to invest in specific stocks without owning the actual shares. You only trade the price difference.

Advantages of CFDs:

• Profit from both rising (long) and falling (short) prices
• Leverage up to 1:200 to maximize profits with small capital
• 24/5 trading, beyond regular hours
• Lower costs

Warning: Leverage is a double-edged sword—it amplifies both gains and losses. Use cautiously!

Practical Guide: Five Trading Steps

Step 1: Choose a Reputable Broker

This is the most important decision. Your broker directly impacts the maximum returns you can achieve. Look for licensed, internationally reputable companies such as those regulated by ASIC (Australian Securities & Investments Commission).

Step 2: Equip Yourself with Knowledge

Don’t rush to invest early. Use demo accounts with virtual money to learn. Many platforms offer $50,000 in virtual funds to familiarize yourself with market operations.

Step 3: Explore Opportunities

Use technical analysis tools, economic calendars, and market signals to identify optimal entry points. Start by observing major trends first.

Step 4: Deposit Initial Capital

Once confident, deposit real money. Adjust the amount based on your trading volume and leverage used. If unsure, start small with low leverage.

Step 5: Execute Trades

You can buy (long) when expecting prices to rise or sell short short when predicting a decline. With CFDs, you have two ways to profit from the same market.

Step 6: Manage Positions

Since leverage amplifies gains and losses, constantly monitor your positions to take profits or cut losses promptly, avoiding catastrophic risks.

Prepare Mentally and Financially

Choose a Trustworthy Broker - This is the foundation of your entire investment journey. A good broker provides excellent analysis tools, quick customer support, and although they don’t directly influence the market, they can enhance or diminish your trading performance.

Invest in Education - Anything you learn today helps you avoid significant opportunity costs later. Use free resources, webinars, and demo accounts.

Create a Specific Financial Plan - Determine how much you can deposit without affecting your daily life. For those with limited capital, leverage 1:200 can be a lifesaver, but must be used wisely.

Start Your Journey

Investing in foreign stocks is no longer a dream reserved for the wealthy. With modern derivatives tools, anyone can participate in the global financial market.

If you are a long-term investor seeking safe wealth accumulation, ETFs are suitable. If you want active participation, are not afraid of risks, and aim for higher profits, CFDs open new opportunities.

Whatever path you choose, remember: research thoroughly, select reputable brokers, start small, and keep learning. The US stock market has proven its appeal over decades. 2025 is the time for you to join that success story.