A defensive route into US stocks

The US stockmarket can be a tricky place to invest. But you’d be very foolish to ignore American equities completely. So what shuld you do? David C Stevenson explains.

There's a mountain of evidence to suggest that the US stockmarket is incredibly liquid, very efficient at day-to-day pricing and a perfect candidate for a passive investment strategy. There are some active managers who produce great results, but by and large trying to second guess who these might be in advance is probably a mug's game. Buy an exchange-traded fund (ETF) that tracks a major index, such as the S&P 500, the tech-centred Nasdaq, or the small-cap Russell 2000 index, and be done with it.

However, the American market can also be a tricky investment. Sometimes it becomes woefully overvalued, especially as global investors chase its top blue-chip global titans. At times like these, simply tracking the S&P 500 index might not always be the best tactic. Right now seems such a time. However, you'd be a very foolish investor completely to ignore American equities. So what to do?

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.