But is creating wealth limited to holding high-value physical assets that give you a fixed rate of return regularly or a lump sum post maturity of the bond? well no.
Creating wealth now means making your money grow; beyond tangible assets and geographical locations.
Modern ways of growing money involve investing in stocks, ETFs, bonds, and commodities to tap the potential of the growing sectors and markets while contributing to the company’s net worth.
Regularly investing helps you take advantage of natural market fluctuations. When you invest a fixed amount consistently over time, you can create wealth that grows and acts as an alternate income source to invest in physical assets, family action plans and plan for your child’s overseas education.
So where should you start investing? Many Indian investors have chosen the US stock markets to be their first choice when it comes to exploring global markets.
It hosts the most developed, liquid, flexible, and efficient financial markets in the world. A wide range of funding sources – from banks and investment firms to venture capitalists and angel investors – enable innovation and expansion, giving companies in the United States an important advantage.
And what’s best is that you need not put a huge sum of money to be able to invest in the top stocks like Microsoft, Zoom, Amazon, Netflix, and Google.
You can do it by just owning a fraction of the share and reap the rewards of the company’s performance. Let’s talk about some of the best and the trusted ways you can create wealth in US markets and enjoy the benefits of regular returns.
1. ETFs: Direct equity investing requires a certain degree of expertise else it can lead to losses for investors. In such a case, you can opt for mutual funds and exchange-traded funds (ETFs) in which investment into a fund provides you access to several US stocks at one go.
2. Direct stocks: You can straight up open an overseas trading account with a domestic brokerage that has tie-ups with US brokers. These foreign brokers act as intermediaries and execute the trades on your behalf in the foreign market. This makes the whole process of investing in a global market seamless and secure.
3. Commodities: Stocks like oil, energy and gold are the best bet when investing in the US markets. The current volatility in the equity markets has seen increased investor participation in commodity markets along with crude oil and precious metals post the geopolitical tensions in Europe. These assets are safe haven for investors in comparison to risky assets and have seen a record hike the month of March.
Gold futures are currently hovering around the $1,840 per ounce levels and commodity traders are betting on the bullion trading above the $2,000 per ounce in the coming days. This makes commodities like gold have more of an upside from their current levels during any kind of crisis.
4. Mutual funds: One can also invest in foreign equities by investing in mutual funds that invest in stocks listed on exchanges outside India. This is perhaps the easiest approach to investing in foreign stocks as it does not require opening an overseas trading account or even maintaining a hefty minimum deposit.
5. Bonds and certificates: Government bonds are less risky and low-income yield securities that are best suited to investors looking for stable and secure growth in the markets. These bonds can be purchased either from a direct broker or through Exchange Traded Funds. Some government bonds come with special tax advantages making them attractive to conservative investors.
Now that we have understood the basics on stocks and how to invest in them, it is time to deep dive into portfolio management with US stocks:
a. Diversify a percentage of your existing portfolio to add global stocks: As an Indian investor, you may already have a profitable portfolio dedicated to Indian Stocks and Bonds. Venturing into global markets, need not require a different portfolio altogether. Instead, you can keep attributing 10-15% of your total portfolio to US Stocks. You can feel free to change the proportion based on your preferences and understanding of the market.
b. Diversify within the portfolio: Once you have diversified your portfolio geographically, the next step is to divide your global portfolio into sectors with little to no correlation with each other. For example, adding Pharma stocks with Gaming stocks allows you to balance your earnings if any of the sectors do not perform for any reason.
c. Rejig and revise your asset classes: While equities can be the most attractive investment vehicles, it is always advisable to spread your wealth across companies that you know and trust. Moreover, for a well-performing portfolio, you can venture into a variety of asset classes like Exchange Traded Funds, Real Estate Trusts or even Retail Stocks. You can consider adding new sectors based on their performances while keeping XX% of your global portfolio fixed and rejigging the rest.
d. Take timely actions to restructure your investment: US markets are subject to a variety of risks, be it dollar crashes, Inflation, Interest rate revisions by Federal Reserve, and labor reports. Being one of the leading markets across the world, many factors like trade cycles, global crises, and geopolitical conflicts can impact a sector or an entire industry. Hence making regular revisions in your portfolio will help you protect your funds from major losses.
e. Always strive for long term investments: No matter how exciting it might be to buy and sell your stocks based on the market volatility, it is always recommended to stay in for the long run. Holding well-performing stocks not only allow you to beat the inflation and losses due to business cycles but also help you save for big purchases or retirement. Although you can always add futuristic stocks to your portfolio, you must make decisions carefully under the guidance of an expert for higher profits.
(The author is co-founder, Stockal, a fintech enabling investments in international equities)