Equity Markets, they say, have a way of their own that is often difficult to explain using rational arguments.
Take the massive crash in Mar-Apr 2020 as a result of the pandemic which saw global equity markets lose as much as 50% in no time. Now even as COVID-19 continues, most global markets have shown more than a V-shaped recovery and especially Indian equity markets seem to be on a tear, touching new all-time highs.
While equity markets touching new highs is music to any investor’s ears, caution has to be thrown to the wind whether the ride will continue or a correction is coming especially when the macroeconomic trends aren’t really as positive.
One might even say that Indian equity markets are currently overvalued and the biggest question then is to consider how to diversify and potentially de-risk one’s portfolio.
Portfolio Diversification with Global Equity Exposure
The world we live in is now truly global so why shouldn’t our investment portfolio be global as well. For the longest time, Indian investors only had Indian Equity Markets to look to as an avenue for investing and then via some Mutual Funds which allowed you to get some foreign equity exposure.
However, times are changing and increasingly new opportunities are opening up for investors sitting in India to get direct exposure to global equity markets.
Does exposure to U.S. Equity Markets seem like a great opportunity?
Well, let’s unpack this!
U.S. Equity Markets have been showing higher returns/growth in the short-term
A quick look at the YTD performance of the Dow Jones Industrial Average (benchmark of the U.S. Stock market similar to BSE Sensex) clearly shows that,
- A $100 invested in BSE Sensex would have returned you returns close to ~11% v/s ~15% invested in the U.S. Equity Markets
Macro Trends in Favor of U.S. Equity Markets
- U.S. job growth has been picking up which is generally a good macro trend of economy picking up and has an impact on the stock markets
- The U.S. Dollar has been strengthening and is expected to continue staying strong through the rest of the year. This in turn signals a stronger push in the US equity markets
The macro trends and the performance of U.S. equity markets as compared to Indian equity markets clearly signal that this might be a great time to directly pick some exposure to U.S. equity markets.
How To Invest Easily in U.S. Equity Markets From India?
Well, there are quite a few companies that now allow you to invest in U.S. equity markets sitting out of India. However, for a few key reasons as I detailed earlier on the blog as well I prefer investing in U.S. equity markets via Stockal.
A few key considerations to make before choosing a platform to invest in U.S. Equity Markets for me include,
- Ease of Use: This is the basic premise for me to evaluate any technology platform and more so with a platform that helps me invest in financial markets. Here are some aspects that Stockal offers me
- No Account Minimums & Fractional Shares: The INR-USD conversion rates can make it difficult for retail investors to experiment with small amounts. With Stockal, not only are there no minimums they also allow you to buy fractional shares. For instance, a single Amazon stock trades at ~$3400USD. However, with Stockal I can just buy a fractional share in Amazon even with just $1
- Safety & Compliance: For me to trust anyone with my finances, I expect the platform to be well secured and also take care of compliance for me. For instance, Stockal helps with a digitized LRS procedure and W8-BEN tax form that are critical for ensuring all the necessary compliance is taken care of
- Education & Support: Investing in U.S. equity markets sitting out of India can be a challenging task given that this is fairly new for a lot of retail investors. With Stockal, their premium plans not only offer 24/7 support but also their products like Stacks are a great way for new retail investors to get exposure to pre-defined sets of stocks based on their risk profile where Stockal does the hard work in making it simpler to build exposure for people with little or no knowledge of which specific stocks to buy. Check out my detailed review of Stockal Stacks and why they are a great way to start your U.S. equity investment journey
In addition to these, one aspect that often becomes a small issue trying to invest in U.S. equity markets via Stockal and other platforms is the sometimes the matter of high fees that Indian banks charge when sending/receiving funds to U.S. accounts.
To that effect, I am extremely happy that Stockal is launching a cash management account very soon and they have a waitlist already that is filling in fast.
In essence, a cash management account allows me to have a fairly functional U.S. bank account which I can use to transact in U.S. dollars without needing to convert them back and forth to INR. While extremely relevant and useful for people who travel frequently to the U.S..I am excited about the same as well given I work with U.S. clients and often get paid in U.S. dollars.
Now, instead of receiving that money in INR (pay fees to my Indian bank) and then convert it into U.S. dollars again to invest via Stockal (pay fees to my Indian bank), I will be able to directly receive U.S.D in my Stockal cash management account and directly use that $ to invest in Stacks.
As a hardworking retail investor, I owed it to myself to do what’s best for my portfolio and learning about Stockal and as a result, increasing my exposure to U.S. equity markets has been a rewarding experience not just personally but also towards my future. I am in fact, increasing my allocation to U.S. equity markets in the last few months to capture the potentially higher upside that I foresee in the U.S. equity markets in the coming years.
Are you still on the fence with respect to U.S. equity market exposure? The data clearly says that you might be missing out and with a platform like Stockal making it super easy for anyone locally in India to invest globally, one really has no excuse.