Many financial advisors talk about getting the right advice on Portfolio management. To create the right portfolio investing in foreign indexes in the US equity markets is a step forward in the right direction. Many broking platforms promote investing in US markets, stocks or diversifying into foreign equities. But there’s always a dilemma: is it safe to invest in foreign equities for portfolio diversification or not.
As we know, to analyze the growth of a certain market the best indicator is their lead indexes which depict the correct picture in the long term because it shows the performance of the bigger players in the economy. This applies to investing in US or Indian indexes or china indexes or any country. The growth rate of Indian indexes will always be higher in the long run as it is a developed economy than the foreign markets. The only way to make more money than Indian indexes is to invest in other emerging economies.
According to IMF prediction, India and China will be the top two economies in the next 15-20 years and the US will not be there anymore. This indirectly states that investing in the US economy is not an ideal solution in order to make more money when it comes to Portfolio management.
The best way of Portfolio management and to diversify is to go for one time opportunities rather than SIPs (where money is invested on a monthly basis to average out-ups and bottoms of stock markets). Considering a similar situation for the US or any country’s market, one can diversify by investing in a lump sum format that too when the time is right (a decision based on valuations). Whereas India will continue to grow, being a developed country and having better growth results in the past, which is still a preferred place for long-term investing using monthly SIPs.
Tactical calls are those investment decisions where one invests in an existing or new asset in a lump sum format when you know it’s the right time for markets to shoot up. Hence investing in US markets should be a tactical investment and not a SIP.
Once you know your tactical call, it is important to know how and where you should be investing. There are 3 ways to do the same. The First method, Foreign Broker where you take 250 dollars or fewer and move your money out to India into a foreign brokerage account to further invest in US markets. The Second method, Indian brokers investing abroad where you tie up with brokers in India and they will help you invest in US markets while sitting at home. And the Third method, Index MF and ETF from your demat where you can buy the ETFs of the foreign indexes in your own existing broking account, without shifting, converting any of your money.
Out of the three methods, the third method is the safest to invest in India using ETFs or index raised mutual funds. Here you have your own account and can buy an ETF or US market or index funds of US or China markets.
The two best funds available in the market right now are Motilal Oswal S&P 500 Index fund with pleasant features such as low minimum investment, low minimum withdrawal, exit load and many more. The second option is Motilal Oswal NASDAQ 100 ETF with great growth returns, less expense ratio and it is an ETF, hence no restriction on buying and selling.
To conclude under Portfolio management while investing in indexes, we always look into the future and not in the past. The future and growth of India seem to be good enough as compared to the US market which has been confirmed by IMF and many other economists as well.