The United States is home to the world's biggest financial market. It is a leading indicator of global economic news and growth projections.
With Apple iPhones and Samsung mobile phones most in demand around the world, these companies must be making lots of money as well. Therefore, won’t it be a good idea to own their shares and grow rich with them? Being an Indian investor, this thought most probably would have crossed your mind. If yes, relax! You too can own these shares or those of any global company by participating in the US stock market – the biggest gateway to investing abroad.
The US stock market has all the essentials in place – the strength of its 20-trillion economy, global firms of China, Japan and other developed countries listed on their stock exchanges, the high volume of trades, the huge market capitalisation of stocks, thus providing liquidity, transparent, yet strict financial market regulations and above all, low-cost investing options. The good part is – you can actually invest and own shares of all the big global firms, irrespective of their listing or presence in India.
Market-cap – the leading indicator
If market capitalisation is one of the many parameters that an investor considers before investing in stocks – this stat is for you. The US stock market is home to some of the top global firms with the highest market cap. Of the Global Top 100 companies in terms of market capitalisation, the US share is nearly 63 per cent and has been rising over the last decade.
Also, according to a PWC report titled, ‘Global Top 100 companies by market capitalisation 2019’, among the top 100 corporates globally, 54 are of based in the US, the maximum in the world. The top slot is occupied by Microsoft ($905 bn), which has overtaken Apple to take the top position.
Interestingly, of the top 100 global firms that have seen the highest increase in market capitalization, only one of the top ten risers was from outside the United States and that was Reliance Industries from India.
Betting on the Unicorns
Money making opportunities are not to be missed. The multi-baggers of tomorrow are the sleeping giants today. Some of the top unicorns (any privately-held start-up firm which is valued at over $1billion is considered a unicorn company) are US-based. Sample this – Nearly half (48 per cent) of the top 100 unicorns valued at $1billion or more as on 31 March 2019 were from the US. As on 31 March 2019, there were 326 unicorns around the world.
The IPO segment in the US has already worked wonders with several firms translating into huge profits for the shareholders. The New York Stock Exchange (NYSE) is considered a premier platform raising global capital by firms. Nearly 75 per cent of all US tech proceeds raised, with companies including Uber, Twitter, Slack and Spotify, have been on the NYSE.
From Facebook, Amazon, Apple, Netflix to Google, popularly known as FAANG stocks, you can own shares in these and other big US firms such as Microsoft. Further, there are non-US global blue-chip companies listed on the US stock exchanges such as Chinese giants Alibaba, Tencent Music, Baidu and many more. The consumer-led demand in these companies is overwhelming and it’s time to profit from their growth.
Your money is in safe hands. There are several regulatory bodies overlooking investors’ interest in the US. The US Securities and Exchange Commission (SEC), a United States federal government agency and the Financial Industry Regulatory Authority (FINRA), a regulator of stock and bond brokerage firms, together have some of the strictest rules in place for financial reporting and for ensuring transparency.
Return on your money
When it comes to generating returns, the stock markets in the US have delivered higher returns over the last ten years. A comparison between BSE Sensex and Dow Jones Industrial Average, both of them being 30-stock index, shows that over a 10-year period, the return has been about 6.18 per cent and 8.48 per cent, respectively. The currency exchange rate fluctuations will also have an impact on actual returns for the investor.
Are you missing out?
The United States is home to the world’s biggest financial market. It is a leading indicator of global economic news and growth projections. No wonder, it is also the top choice for global investors for investment. Without a finger in the US-pie of stock markets, you are not only exposing your portfolio to country-risk, but are also losing on the opportunities the global investors beckon.