Unlock the potential of long-term US stock investments: Why they could work for you

Have you ever thought about diversifying your investments beyond Indian markets? If yes, investing in US stocks could be an excellent option. With some of the world’s largest companies listed in the US, the market offers unmatched opportunities.

Whether you are considering long-term wealth creation or a chance to hedge against currency risks, the US stock market has a lot to offer. Wondering if it is the right move for you? Let’s explore how you can invest in US Stocks for the long-term could help you achieve your financial goals.

Why does investing in US stocks make sense?

Learn in detail below why investing in US stocks could be a game-changer:

1. Access to global leaders

US giants like Alphabet (Google), Meta (Facebook), and Amazon have revolutionised industries and continue to grow. Owning shares in such companies allows you to benefit from their innovations and expanding market reach.

For example, Apple, known for its cutting-edge technology and loyal customer base, became the first US company to achieve a $3 trillion market cap in 2022. This milestone highlights the huge potential of investing in US stocks and the long-term value they can bring to investors.

2. Currency advantage

As the world’s reserve currency, the US Dollar (USD) is considered a safe haven during times of economic uncertainty. For Indian investors, this status carries an additional benefit due to the consistent depreciation of the Indian Rupee (INR) against the USD over time.

A weaker rupee means that the value of US investments increases when converted back to INR. This currency advantage adds to the returns generated by the growth of the stocks themselves.

3. Portfolio diversification

Adding US stocks to your portfolio helps diversify your investments, reducing reliance on a single economy. While the Indian market is influenced by local factors, the US market offers exposure to different industries and global trends.

A portfolio that includes both Indian and US stocks balances domestic volatility with global growth. This diversification can lead to more stable returns and lower risk.

4. Wide range of investment options

The US stock market offers countless investment opportunities across industries, including healthcare, finance, technology, and consumer goods. It’s home to global giants like Tesla stock in electric vehicles, Nvidia stock in Artificial Intelligence (AI) technology, and Pfizer stock in pharmaceuticals.

Emerging sectors such as green energy and space exploration also offer exciting growth possibilities. This diversity means you can choose from a mix of high-growth companies and stable market leaders to create a resilient portfolio. You can explore and analyse this diversity in US Stocks with the help of a US Stock Screener.

The power of long-term US stock investments

When it comes to US stocks, patience pays off. Know why in detail below:

1) Higher long-term returns

US stocks have historically delivered higher returns, and that too with lower volatility compared to many emerging markets. This could be partly due to the maturity and efficiency of the US markets, along with the global reach of its companies.

2) Compounding benefits over time

Long-term investments in stocks take full advantage of compounding. For instance, if Y had invested $1,000 in an index fund like the S&P 500 a decade ago, his money would have grown significantly.

Compounding allows earnings to generate more earnings, making investments grow exponentially over time. Staying invested long-term is key to realising the full potential of compounding and building wealth.

3) Reduced impact of market volatility

Short-term market investments can expose your portfolio to sudden fluctuations. Even well-performing stocks can experience sharp volatility due to market rumours, economic events, geopolitical tensions, or quarterly earnings reports. These unpredictable movements can lead to impulsive decisions like selling at a loss.

The longer you stay invested, the less impact short-term market fluctuations have on your portfolio. This is because you give your portfolio the much-needed time to benefit from market corrections and long-term growth trends.

4) Reduced investment cost

Frequent buying and selling of stocks can significantly increase your trading costs. Each transaction involves fees such as brokerage charges, taxes, and sometimes currency conversion costs for international stocks. Over time, these costs reduce your returns and impact the overall profitability of your investments.

A long-term strategy helps you cut down on trading expenses and allows more of your funds to remain invested and generate wealth.

5) Tax efficiency on long-term gains

US long-term capital gains tax offers favourable treatment than short-term investments. This can especially be beneficial when combined with India’s tax treaty benefits, which help reduce the impact of double taxation.

Holding investments for the long term allows you to take advantage of lower tax rates on gains. Consulting a tax advisor ensures you maximise these benefits and grow your wealth efficiently.

Ways to add US stocks to your portfolio for long-term growth

From India, you can invest in US stocks through several methods:

Direct stock investment: This method allows you to buy shares of individual US companies. You could choose industry leaders like Apple or Tesla or focus on emerging sectors such as green energy and artificial intelligence. The direct approach provides the potential for high returns but demands thorough research to manage risks.

Also, many investment apps let you own a portion of US stocks with just $1 through fractional investing. This makes expensive stocks like Netflix accessible to small investors.

Exchange-Traded Funds (ETFs): ETFs are funds that track specific indices like the S&P 500. ETFs are affordable due to their low expense ratios, offer instant diversification, and can be traded on stock exchanges like individual shares. This option can be ideal for those looking for extensive market coverage, high liquidity, and a passive strategy.

Mutual funds: Mutual funds focusing on US stocks are a convenient option for long-term investors. These funds pool capital from multiple investors to invest in a diversified portfolio of US companies. Professional fund managers actively select and manage these investments by analysing trends and sectors.

Moreover, with the Systematic Investment Plan (SIP) option, you can make smaller, periodic contributions to US stocks and steadily grow your portfolio.

Ending note

Investing in US stocks is not just about venturing into a new market. It is about finding opportunities for higher returns, leveraging currency appreciation, and diversifying your portfolio. With a well-thought-out long-term investment strategy, you can build wealth for your future goals.

So, do not wait, take the first step to invest in US stocks today, and watch your financial aspirations turn into reality. Remember, well-informed long-term planning can transform today’s decisions into tomorrow’s security.

Note to the reader: This article is part of Hindustan Times's paid consumer connect initiative and is independently created by the brand. Hindustan Times assumes no editorial responsibility for the content, including its accuracy, completeness, or any errors or omissions. Readers are advised to verify all information independently.