The funds of Indian stock market investors are largely exposed to one economy. The case for diversification is straightforward – whereas stocks outside of an investor’s home market often offer exposure to a wider range of economic and market forces, domestic equities tend to be more exposed to the more constrained economic and market forces of their home market. Returns from these many economies and markets can differ from those of an investor’s native market.
Every global economy has its own unique strengths and weaknesses, as well as some inherent hazards. Additionally, not all economies tend to expand or exhibit signs of fragility simultaneously. Having a piece of the non-domestic economy while the verdict is still out on whether the stock market accurately depicts the state of the economy is a step in the direction of diversification. In the event of financial challenges in any one economy, the probability of risk-adjusted returns remains high when funds are geographically spread.
The US holds close to 40% of the world’s equity and fixed-income markets, which together total more than $100 trillion in market value, making it the financial centre of the world. The US economy offers Indian investors a good chance to let some of the largest names in global businesses add a foreign flavour to their domestic portfolio. There is always a solid enough cause to purchase US blue chips like Google, Microsoft, Amazon, Apple, Tesla, and others if you are investing in and holding top Indian companies like Reliance, Bajaj Finserv, TCS, and HDFC Bank, among others. The US-listed stocks have the added benefit of serving a considerably wider worldwide market than the majority of Indian enterprises.
Some of the largest firms in the world thrive on the US stock market. The US stock market is centred on businesses that are pioneering technical improvements and consistently introducing new concepts and methods. History demonstrates that investment in some of these global companies has yielded favourable long-term returns for global shareholders. Many of these businesses are cutting-edge technologically and even work in new sectors including artificial intelligence, genomics, materials research, environmental science, and advanced pharmaceuticals.
The US continues to have the greatest economy in the world, with a 20 trillion dollar GDP, and some of the major global companies from China, Japan, and other developed nations are listed on their stock markets thanks to the NYSE, Dow Jones, Nasdaq, and Russell indices.
India continues to present a highly enticing prospect and is generally a desirable growth market. However, India still accounts for only 5% of the global GDP. Therefore, it is essential to diversify away from the risk associated with India. The US is the ideal market for doing so.
The US is rapidly emerging as the top choice for international investing for an increasing number of Indian investors. The US stock market offers opportunities for all traders, from novices to long-term investors, through individual stocks and exchange-traded funds (ETFs).