The number of new investors in India is growing exponentially due to the expansion of digital services across the country. Many first-time investors are familiarizing themselves with the basics of investing, and they are more interested than ever to experiment with their choices. There are several new investment options available and investors are showing keenness to explore them to maximize returns and diversify risks.
Several new dynamics have been at play following the pandemic, as the markets aided the growth of emerging industries. Players belonging to non-traditional industries such as e-commerce, pharma, FinTech, etc. have done better than usual, thanks to the digitization of services in the form of mobile apps and online platforms. Further to this, listed companies have a stake in delivering essential services during crisis times, and it bodes well for them in terms of market performance. It is common knowledge that the US has been a pioneer in kick-starting new industries and all startups and young businesses seek investments and clients from their ecosystem. Moreover, startups and emerging unicorn companies rose due to high demand online, altering the status quo and generating interest across continents. In addition to this, retail investors are also willing to diversify their portfolios by looking at opportunities beyond the borders.
Due to the proliferation of smartphones and DIY apps, it has become easier to study global markets and invest online at the click of a button. Many are convinced about better returns if they are to invest in the US and other international markets. While there is a renewed focus on investing abroad, people are not fully aware of the procedures or options they can pursue.
Investing in US markets, and the what to lookforward to
The United States continues to be the global financial hub and the center of new-age innovations. Everyday developments in the US and its markets often impact the price of goods, manufacturing output, and trade across the world. For this reason, it draws investors from all over the world. Investing in US stocks could also open up investors to possibilities in the rest of the world. Most of the companies listed on US markets are major global conglomerates, which conduct their regional operations in parts of Asia, Europe, and Australia, etc. Understandably, decision-making at the headquarters will have consequences for operations in other parts of the world.
A question that is often asked by Indian investors, concerns the affordability of shares on the US market. While major American corporations elicit interest among Indian investors, the high share value discourages them from betting on the stocks. However, several brokerage firms and financial institutions are offering alternatives. Through them, investments could be made in US stocks, while ensuring that Indian investors are not burdened by high pricing, and the answer to this could be fractional trading.
The other option is to open a brokerage account in the US, as several Indian financial service providers are facilitating it for Indian investors. Further to this, they could also invest in ETFs and US-specific international mutual funds in rupees. Options like these encourage investors to rethink their portfolio diversification strategy, as they provide a window of opportunity to bet on global innovators. Fortunately, digitization has made investing easier, and the processes have become leaner and faster for international investing as well.
Fractional trading and the advantages of investing in US markets
The concept isn’t new, but it has only gained popularity in recent times. It allows individuals to allocate as little as $1, which is just a small fraction of a share and receive returns as per the amount invested. Every time a big-ticket company’s share value increases exponentially, returns could be made as per the amount invested. There are regulatory limitations imposed by RBI through the Liberalized Remittance Scheme, which puts a cap on the total amount of money that can leave the country through investments in the stock markets. The limit is currently $250,000 per year, which is reasonably high for the average Indian investor to explore US stocks.
A comparative analysis of US and Indian indices can show why investing in US markets could be advantageous. If we take the performance of the Dow Jones and BSE Sensex indices over the previous decade into consideration, we get a clear picture of the returns from each. Dow Jones provided returns to the tune of 196%, while BSE Sensex returned around 150%, over a 10-year timeframe between 2010 and 2020.
Dollar vs. Rupee currency dynamics and the forecast
Since the US stocks trade in dollars, the likeliness of your investments providing valuable returns in dollars increases. Moreover, the US Dollar vs. Indian Rupee currency differential in the last ten years indicates how the rupee depreciated by almost 45% against the dollar. In addition to these stats, the fact that several tech giants coming out of emerging markets are betting their futures on US markets will give us an idea as to where the fortunes of corporations lie.
By expanding the diversification process beyond domestic lines, investors can stabilize the risk scenarios further, and the US markets offer the best opportunities. With relatively lower market volatility, higher returns, and access to other global markets, it is a perfect option for investors keen to participate in one of the most vibrant and mature economies of the world.