Why Should Indians Invest in the US?
The combined market capitalization of the seven largest global markets is $35.5 trillion, barely more than half of the US market capitalization of $60.4 trillion. This shows the strength and resilience of the US markets and their economy.
The primary reason for such growth is America’s strong focus and support for innovative industries. While sectors like Artificial Intelligence, Robotics, Machine Learning, Space Exploration, and Quantum Computing are still in their infancy in many countries, US companies in these fields are well-established, with some even turning profits.
The US Dollar is still resilient and can be beneficial as a hedge against the everfalling INR. In the past year, the USD has gained around 4% against the INR and it continues to appreciate.
Hence, given the global growth opportunities and overall economic scenario, the US market presents an attractive diversification opportunity for Indian investors.
Why Should You Consider US ETFs?
For Indian investors, the US market might seem like a distant dream. But this has changed, trading apps like Appreciate are helping lakhs of Indians to realize their global portfolio dreams. Retail investors usually depend on Indian-mutual funds to diversify their portfolios in the US. But these come with a high expense ratio, typically in the range of 0.5 to 1.5%, with some even going up to 5%. On top of this fund houses apply exit load to prevent investors from liquidating investments before a certain period.
But now, Indians can invest in the US markets through a relatively new investment vehicle: ETFs.
ETFs, or Exchange-Traded Funds, combine the best of stocks and mutual funds. Their benefits include:
- Diversification: Like mutual funds, ETFs represent a basket of multiple assets or companies following a particular trend or strategy
- Ease of Trading: ETFs can be bought and sold on stock exchanges just like stocks
- Lower Expense Ratios: Compared to mutual funds, ETFs typically have much lower expense ratios, ranging from 0% to 0.2%
Top US ETFs for Indian Investors
Now that we know what ETFs are and why US ETFs are a good option for Indian investors seeking diversification in the US – let’s take a look at some of the popular US ETFs for this purpose.
Index-Based ETFs
The S&P 500 is a largely unbeaten index when we compare it with the other global indices. With gains exceeding 51.3% in the last two years, this index is one of the best-performing indices in the world. Index-based ETFs track indices like the S&P 500 and try to beat their returns.
According to Axios data, the S&P 500 index fund’s returns have far outpaced those of billionaires. While the average wealth of billionaires worldwide has compounded about 121% since 2015, a simple S&P 500 index fund’s total return during the same timeframe has yielded a much superior 241%!
Investing in ETFs that track index funds is not only lucrative but also a safer option. This is because, unlike other ETFs, which are usually sector or commodity-focused, index-based ETFs include companies from multiple sectors composed within the benchmark index. This diversification minimizes risks and ensures more stable returns. Here are some of the most reliable ETFs that track the S&P 500:
| Index-Based ETFs | 5-Year Returns | Expense Ratio |
| Vanguard S&P 500 ETF | 78.40% | 0.03% |
| iShares Core S&P 500 ETF | 78.30% | 0.03% |
| SPDR S&P 500 ETF | 78.23% | 0.09% |
*returns as of Jan 17, 2025
Information Technology ETFs
AI stocks have taken over Wall Street. It began with the release of OpenAI’s groundbreaking AI chatbot, ChatGPT, in 2022, which thrust the AI industry into the spotlight. Wall Street took serious notice of this space when Nvidia, one of the pioneers of the AI revolution, crossed the $1 trillion market capitalization mark in 2023.
A year later, Broadcom Inc. followed suit, surging by 45.8% in six months to hit the trillion-dollar milestone. Information Technology ETFs or IT ETFs benchmark their performance against a tech-specific index such as the Nasdaq-100 or the MSCI IT Index aiming to beat the returns of those indices.
According to Statista Research, the AI market will touch $243.7 billion in 2025 and steadily grow at 27.57% CAGR till 2030. Looking at this, we can confidently believe that AI is here to stay. For Indian investors looking to capitalize on this growing industry, here are some ETFs to consider:
| IT ETFs | 5-Year Returns | Expense Ratio |
| iShares US Technology ETF | 152.87% | 0.39% |
| Fidelity MSCI Information Technology ETF | 136.18% | 0.084% |
| Vanguard Information Technology ETF | 134.90% | 0.10% |
*returns as of Jan 17, 2025
Cryptocurrency ETFs
Bitcoin recently became the youngest asset class to cross the coveted $2 trillion mark. While global giants like Apple and Microsoft took 42 and 44 years for global giants to cross $1 trillion, Bitcoin achieved it in just 13 years.
But the cryptocurrency market is highly volatile and not fully regulated, the crash of FTX in the US and the hacking of WazirX in India have impacted investor confidence, making them skeptical about the market. The primary reason behind such losses is the lack of regulations in the space. Cryptocurrencies, by design, operate in a largely unregulated domain, which has led to pump-and-dump schemes, misrepresentation, fraud, and other irregularities.
For Indian investors wary of these risks, Cryptocurrency ETFs are regulated in the US and can prove to be an alternative.
Cryptocurrency ETFs are traded on stock exchanges, eliminating the need for investors to hold cryptocurrencies directly. This eliminates the need for crypto wallets and avoids the risks of being associated with unregulated crypto exchanges. Moreover, these ETFs fall under the purview of the Securities and Exchange Commission (SEC)—the US equivalent of SEBI—ensuring they are heavily regulated and safer than holding cryptocurrencies directly.
| IT ETFs | 1-Year Returns | Expense Ratio |
| iShares Bitcoin Trust ETF | 151% | 0.25% |
| Fidelity’s Wise Origin Bitcoin Fund | 121% | 0.25% |
| Grayscale Bitcoin Trust ETF | 109% | 1.50% |
*returns as of Jan 17, 2025
Conclusion
Once a conservative market, India has grown into a country with one of the highest stock market participants in the world. As more and more people enter the market, it is wise for Indian investors to potentially look beyond the pond and diversify. With companies involved in advanced technologies and sectors, the choices available to an Indian investor looking to invest in the US are immense.
However, investors must do their own due diligence before making any investments. They can take help of online apps and platforms that enable them to study and research various investment vehicles, be it stocks, mutual funds, or ETFs.
Disclaimer:
Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.
