US stock investing advantages
The American stock market is the real happening place for investors today as they give the spread and variety that few other markets can. As an investor in the US markets, you can either actively in stocks, indirectly in mutual funds or passively in the US stock market indices. The US market offers a variety of Indices. There are a number of US indices like the Dow, the NASDAQ and the S&P 500 where investors can put money passively .There are also sectoral US indices, which can help take a more aggressive and concentrated view.
In short, there are a number of advantages of investing money through the US stock exchanges like variety, diversification and a richer portfolio. Let us look at some of the key benefits of investing in US stocks amid the current global headwinds. Here are some of the biggest benefits of investing in the US markets, sitting right here in India.
Major advantages of investing in the US markets
Here are some of the big advantages of investing in the US markets, sitting right here in India.
- By investing in the US markets, you get single point access to some of the most iconic companies in the world. The formidable list reads of names like IBM, Microsoft, Intel, Amazon, Meta, Google, Chevron, Exxon etc. The list can go on but the bottom line is that you get access to a large number of world beating companies.
- With the Liberalized Remittance Scheme, the RBI has made the process a lot simpler. More so, when the US allows investing in fractional shares, it is possible to buy even high priced stocks in fractions. This reduces your entry barrier to investing in the US stocks, especially since it needs to be eventually converted into dollars.
- The normal benefits of investing in Indian equites is also available in US equities like dividends and capital gains. In addition, many of the frontline companies have been absolute multi-baggers and you can look at some fantastic examples of this trend in companies like Apple, Amazon, NVIDIA etc.
- Investing in the US markets is like hitting two birds with one stone. That is because, the US markets not only lists American companies but a large number of global companies. By investing in the US markets, you get access to all these markets simultaneously.
- If you are invested in the US equities, then the returns will be dollar returns. If you are an investor, you would gain from a weakening rupee, as has been the trend in the last one year. The weak rupee automatically makes the US investment more valuable since for every dollar, you get more rupees. To that extent, it also serves as a hedge against inflation and currency risk.
- Diversification is a big benefit of investing in the US. Indian markets have often been uncorrelated with the Indian markets. However, sitting in India and investing only in Indian equities, you cannot handle that. The answer is to invest in US companies since it diversifies your portfolio and reduces overall risk.
- US has the best start-up ecosystem and many of the trillion dollar companies in the US like Amazon, Google, Facebook and Netflix were all start-ups just a decade or two decades ago. By investing in the US, you get access to an unmatched start-up and digital ecosystem not available anywhere else in the world.
- US has been one of the safest and most well-regulated markets in the world. Hence investors don’t have to worry about the safety and security of their money. Investing in equities is risky by default. The last thing you need is a huge inherent risk in the US market. The US investing strategy bypasses that risk.
- US markets and US assets have been among the top performers in at least 4 out of the last 15 years. That is contrary to the popular belief that US markets does not generate good returns due to its size. In fact, in the last 14 years since the global financial crisis, it is markets like the US that have done a lot better.
- The double taxation avoidance agreement between the US and India ensures that there is no dual taxation since the investors gets credit offset for the 25% dividend tax deducted at the time of payment in the US. On a net basis, you don’t lose anything due to double taxation.
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