- S.-focused investment opportunities provide growth opportunities for Indians.
- Equity funds help investors build a diverse portfolio.
- Franklin Templeton, DSP and Nippon are among the top managers of international mutual funds.
It was once difficult for Indian individuals to invest in companies or funds in the international markets. Today, there is a wealth of investment products aimed at the average retail investor. If you’re looking to diversify and put money into international funds, you may wish to consider mutual funds that include American companies. These funds have good growth records and complement more domestic investments.
Why Invest in International Markets?
When you invest in stocks and shares, you’re most likely hoping for the long-term growth of these investments rather than seeing them as a short-term savings account. Over a long enough period, a diverse portfolio should provide good returns. However, unforeseen events, such as natural disasters, wars or even the financial crisis of 2008, can cause companies across a variety of sectors to lose value. One way to hedge against the possibility of such events is to invest in global companies covering both developed and emerging markets.
Why Consider U.S. Investment Opportunities?
Investing in companies with a strong U.S. presence can provide good growth opportunities. The U.S. is home to companies covering a variety of sectors, from tech to construction to mining to pharmaceuticals. The country is startup-friendly, which means there are high growth potential investment opportunities available. This means you can build a portfolio that covers all industries. Alternatively, some trackers take away the challenges of choosing individual companies, giving investors a simple way to get exposure to the potential gains those companies offer.
Top Funds That Cover U.S. Markets
Many well-known mutual fund managers offer funds focused on American markets. These funds provide exposure to companies in the Nasdaq-100, S&P 500 or specific industries such as U.S. blue chips. Over the last few years, these funds have offered robust performance. While past performance does not guarantee future returns, an exchange-traded fund’s (ETF) or a mutual fund’s relatively broad nature means it shields investors from the risks of poor performance at individual companies.
1. Nippon India U.S. Equity Opportunities Fund
The Nippon India U.S. Equity Opportunities Fund1 has been available since 2015 and has a strong track record. Since its inception, it’s offered a 14.2% compound annual growth rate (CAGR), outperforming BSE’s Sensex fund. You can get started with this fund easily via a desktop/mobile-friendly application page or by downloading and printing a paper application. If you prefer to seek advice face to face, you can contact a local Nippon advisor to discuss your financial plans.
2. Franklin Templeton U.S. Opportunities Fund
Franklin Templeton’s India Feeder – U.S. Opportunities Fund2 is another attractive option for Indian investors. As of May 2022, the fund is temporarily closed to new investors due to Reserve Bank of India (RBI) regulations relating to overseas investments. However, when the fund reopens, it’s well worth considering. It advertises recent annualized returns of over 17%. This makes it one of the top performers in terms of U.S. investment options for Indians. The fund pitches itself as a relatively tax-friendly option for long-term investment (held for more than 36 months) or as an addition to a more traditional retirement investing plan.
3. DSP U.S. Flexible Equity Fund
The DSP U.S. Flexible Equity Fund3 offers exposure to U.S. tech companies such as Google (Alphabet), Amazon and Visa. It does this by investing in the BGF U.S. Flexible Equity Fund rather than directly into the companies. DSP markets this fund toward experienced investors looking to diversify their portfolio and recommends Indian investors consider putting 10–15% of their funds into the U.S. markets. The fund includes some of the world’s most powerful tech giants, making it attractive for those interested in that sector.
4. ICICI Prudential U.S. Bluechip Equity Fund
Another tech-heavy investment option is the ICICI Prudential U.S. Bluechip Equity Fund.4 This fund doesn’t exclusively focus on tech companies such as Alphabet or Amazon. It also includes non-tech companies such as Kellogg’s and Campbell’s. The fund aims to provide stable, long-term returns and help international investors diversify their portfolios. Since its inception, the fund has gained 15.8% and has seen five-year returns of 15.53%. Short-term performance may vary, as with any other investment opportunity.
5. Motilal Oswal Nasdaq-100 ETF
The Motilal Oswal Nasdaq-100 ETF5 is a growth fund with a minimum investment requirement of 10,000 Rs. It has an impressive performance record with gains of over 21% in the last five years. If you want exposure to the Nasdaq as part of your portfolio, this is a simple way to get it. There’s no need to manage individual shares. The fund is an established one, having first launched in 2011, and the company offers online trading and the option to work with advisors via the telephone.
Real Estate Investing in the U.S.
In addition to equities, Indians have the option to invest in real estate, including foreign real estate. This option is a challenge because real property is highly illiquid, and the capital requirements for starting can be substantial. This means real estate is only a practical option for those with a significant startup fund who can sell other investments or use an emergency fund in a financial crisis. The five-year ROI6 on U.S. real estate is 8.1%, lower than that seen in equities, but it’s still attractive because of the comparatively low risk.
U.S. Versus Domestic Investments
It’s possible to invest in the Indian domestic markets either directly into companies or in the major Indexes — Sensex and Nifty 50. These can be good options if you’re an investor who doesn’t know a lot about foreign companies and the market conditions they operate in. However, if India was in a local recession, investing entirely in domestic companies could mean losing money in the short- to medium-term. Having some global investments offsets that risk.
Direct Investment Is Only for Knowledgeable Traders
Some investors enjoy picking stocks and shares to trade directly. This can sometimes lead to good returns, especially if:
- The investor knows the company or market well.
- The company is undervalued.
- The investor is looking for dividend stocks with a good price/earnings ratio.
However, picking stocks can backfire if a company has a poor earnings report or a hyped-up product launch fails. It’s particularly hard to select individual stocks when investing internationally. The due diligence required is time-consuming, and many retail investors don’t have the time or resources to do it well. Trackers and funds are a safer option for most individuals.
Other Investment Opportunities to Consider
Commodities can be an appealing option if you’re looking to add some low-risk investments to a diverse portfolio. Precious metals, such as gold, silver and palladium, have historically worked well as a hedge against inflation and poor market conditions. It’s possible to purchase them directly or through ETFs. These are nonproductive assets and typically make up just a small part of a person’s portfolio. However, they’re a popular safe haven for financial assets during difficult times.
Opportunities for Older Indian Savers
If you live in India and are over the age of 60, you may benefit from the Senior Citizens Saving Scheme. Investors can open accounts at post offices and banks. This scheme offers 8.6% interest per year on savings as a flat rate. While it may be possible to get higher returns by investing in U.S. equities, those investments come with higher risk. Older investors who want easy access to their funds on short notice might prefer a slightly lower-risk but steady and inflation-beating rate of return.
Pensions and Low-risk Savings
A national pension scheme is another option to look at when planning your retirement scheme. This is a highly tax-favorable scheme, but it comes with the downside of locked funds until you turn 60. You can have your savings auto-invested across a variety of assets or manage the fund yourself. If you can afford to lock up funds long-term, you may find the tax-free interest appealing.
Seek Advice About Larger Investments
Before investing in international equities, seek expert advice from a financial advisor. An investment that makes sense for one individual may not be as desirable for someone else based on their age, family circumstances, or near-term goals and plans. Investing always carries risk, so it’s vital to understand the nature of any financial product and any tax implications the investment might have before you tie up large sums of money.