Creating wealth from the stock market is a time taking process and involves a lot of patience. Stock prices may go up and come down over different periods which may or may not be necessarily due to reasons inherent to the company as external factors are also at play. Still, the fundamental strength of the company comes to the fore if the stock holds the potential to generate value for the shareholders. A challenge is to identify such stocks and even then you need to diversify across sectors and geographies.
As an investor in Indian stocks, the need to diversify arises if your portfolio only holds domestic companies. Diversification across boundaries brings in the necessary element of risk adjustment to your portfolio. As no two global economies will be closely co-related, the impact on the stock market will also be different. The net effect of geographical diversification is visible over a longer time frame.
Holding US stocks in your portfolio provides a solution in diversifying your portfolio internationally. The US stock market presents some of the best investment ideas, especially to Indian investors who want to diversify their portfolios across geographies.
From investing in individual US stocks to buying ETF units, there are numerous investment ideas for an Indian investor in the US stock market. There are five leading US indices as Dow Jones Industrial Average (DJI), Nasdaq-100 Index (NDX), Nasdaq Composite Index, S&P 500 index, and RUSSEL 2000 index. As an investor one may want to stick to them through ETF or pick individual stocks from them.
A well-diversified global portfolio is in a position to withstand any stock market gyrations much better than a portfolio exposed to one economy. In addition to diversifying across sectors, themes, asset classes, and market capitalization, unless your portfolio is exposed to international equities, the diversification is not complete.
Today, when the US stock market is flirting with a bear market, maybe it’s time to track the stocks and sectors again. By adding US stocks, you can bring in the advantage of global diversification with the potential of high risk-adjusted returns to your portfolio.