Investing in the US stock market is more than just a diversification play

The US stock market provides access to investors globally to diversify their investment portfolios. From Apple, Tesla, and Microsoft to many other top global giants whose products and services are being used in India, the way to participate in the company’s growth as an equity partner doesn’t exist in the country. It is simply because, the likes of Amazon, Google, and many others are not listed on Indian stock exchanges.

One of the strongest reasons to diversify a portfolio is to bring in the advantage of diversification. When your stocks or other investments are not exposed to one asset class or to a single economy, the risks are hedged to some extent.

India and other emerging markets are still of great interest to international investors. However, geographic portfolio diversification adds a layer of protection and the possibility of a large return with little risk. Think again, if you believe your portfolio of investments in India is properly diversified across market capitalization, industries, and asset classes, then what could be missing?

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Diversification cannot be fully achieved without exposure to many geographic areas. The country risk is one of the biggest dangers to a portfolio over the long run.

When it comes to profiting from the stock market, one shouldn’t have any home-country prejudice. A portfolio exposed to more than one economy will struggle more than a portfolio with well-diversified global holdings.

And, if you are ready to diversify your portfolio with international stocks, what better approach than to consider investing in the US? The US stock market has all the necessary components in place, including the power of its 20 trillion dollar economy, the presence on their stock exchanges of multinational corporations from Holland, Japan, and other developed nations, a high volume of trades, a sizable market capitalization of stocks, which provides liquidity, open but stringent financial market regulations, and, above all, affordable investing options.

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Over the longer term, the correlation between the US and Indian economies is low. It means, that both economies do not necessarily move in tandem. For high risk-adjusted return, it is better to be diversified in both economies by participating in the equity of the top companies deriving the earnings from these economies.

You can own shares of the FAANG stocks—Facebook (Now META), Amazon, Apple, Netflix, and Google—as well as other significant US corporations like Microsoft. Start adding US stocks to your portfolio to reap the benefits over the long term. Investing in the US stock market is more than just a diversification play as it helps you own the brands you use in daily life.

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