With the ever-increasing craze to invest in the stock market in India, retail investors are warming up to investments in overseas markets too. The US stock market is the top attraction to such investors. Intelligent and confident investors no longer like to confine themselves to domestic market opportunities and want to bring diversity to their investment geography by investing in domestic and international markets. However, not all investment types or markets are suitable for every investor. One must know the demat account opening procedure and a detailed comparison of the Indian and the US stock market to make a profit-oriented decision on how and where to invest.
Comparison of the Indian and US Stock Markets
Here is a comparison of different factors for both markets:
- Portfolio diversification: The US stock market has several global companies listed on it. By investing in the US stock market, you get exposure to the growth of all such companies. Diversification of investment has traditionally proven to be beneficial for investors. The S&P 500 index had already recovered from the pandemic-induced losses by 8th June 2020. Investors who held a diversified portfolio and had invested in the US stock market stood in a better position at that time.
- Currency: The currency in which an investor trades and invests can have a positive or negative impact on his investment portfolio. This effect gets further heightened in the case of the US stock market. The value of the Indian Rupee has been constantly declining against the US Dollar. For an investor having investments in the Indian market, it is an adverse situation. It is because the value of his investments has declined over time. If one chooses to invest in US stocks from India, the value of his investment is likely to increase with the increase in the value of the US Dollar against the Indian Rupee.
- Global Factors: The start-up ecosystem in our country has been rising. However, the US market is still the preferred platform by most businesses that are leaders in their sectors. Investors in the Indian stock market cannot become a part of the growth stories of start-ups in the country because Indian laws make it compulsory for a company to register profits for three consecutive years to go public. It devoid investors from participating in the growth of new businesses. The US laws are relatively relaxed in this respect and investors can show their confidence in new business models in the US markets.
- Research and effort: Investing in two markets requires much more time and effort than investing in a single market. It can be daunting and time-consuming, especially for a new investor. Investing in the Indian market offers an edge to the investors in this case, as one does not need to research two economies together. An investor may be ready to forego a higher profit potential and invest exclusively in the Indian stock market to lower his efforts.
- Volatility: Market experts recommend diversification of portfolios to spread out and diminish risk since different markets have diverse volatility. The US markets have been less volatile than the Indian markets in the long run, therefore, investing in the US markets will help you watch your portfolio move differently from the Indian indices.
Investing in both the US and Indian markets has its advantages. If one has the time and experience required to study two different markets together, he can invest in both markets. A wise approach to investing would be to start with the Indian market. As one gains confidence and knowledge, he can make a place for the US stock market in his portfolio for enhanced returns.