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Consider all these factors before you start investing in US Stock.

When it comes to investing in the Indian or the US stock market, you must get complete knowledge of how the two stock markets differ before you put your money in. Based on certain key factors that set the two stock markets apart, the return you earn on your investment and the risk involved differs.

It is essential to consider these factors based on which the US stock market differs from the Indian stock market:

Market volatility

The Indian stock market is more volatile than the US stock market when you are looking at it from the point of view of long-term investments. This means that share prices can go up and down very quickly, and investors may find it difficult to predict which way the market will move.

Size and valuation of the market

The US stock market is much larger in size as well as valuation. The US stock market is about 15 times bigger than the Indian stock market. This difference in size also affects the liquidity of the two markets. The US market is much more liquid than the Indian one. This means that it is easier to buy and sell stocks in the US market as there is always someone willing to trade.

Currency of exchange

When you invest in the US stock market, you will be dealing in terms of US dollars (USD). This is because most of the companies listed on US exchanges are based in the United States. Similarly, when you invest in the Indian stock market, you will be using Indian rupees (INR) as the currency of exchange.

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Research requirement

Investors in the Indian stock market may need to spend more time on the research than investors in the US stock market. This is because there is less information available about Indian companies. On the flip side, the research may need to be more extensive for the investors in the US stock market because of the large number of companies listed on the exchanges.

Global exposure

A vast majority of the multinational corporations are listed on the US stock exchange, including big names like Amazon, Meta, Google, and many more. These multinationals operate across the globe and are affected by the events in many different countries. This gives the US stock market a lot of global exposure.

Portfolio diversification

Portfolio diversification is important because it helps to reduce risk. By investing in a variety of different asset types, you can protect yourself from the losses that might be incurred if one particular investment fails.

The Indian stock market is still relatively young, and it has a long way to grow before it catches up to the US stock market. Moreover, because of the large size of the US stock market, there are a lot more investment avenues available in it as compared to the Indian stock market. This means that investors in the US have more options when it comes to diversifying their portfolios.

To understand diversification of portfolio in India in greater detail, read our blog on ‘stock investing in India – what is diversification of portfolio?‘ on the Teji Mandi blog.

Return on Investment

The return on investment in the two stock markets can be compared by looking at the average returns over the long term of the major indices of each stock market.

Overall, it is seen that the long-term average return in the Indian stock exchange has been higher than that in the US stock exchange. Both the markets are highly volatile, however, if you are a long-term investor, you can successfully ride out the highs and lows of the market to earn good returns on your investment.

Listing requirements

The listing requirements for companies are stricter in the US than they are in India. This means that companies that list on US exchanges must meet higher standards than those that list on Indian exchanges.

These standards include requirements regarding the disclosure of financial information, corporate governance, and other matters. As a result, companies that list on US exchanges are typically larger and more established than those that list on Indian exchanges.

The above-mentioned factors influence the trends in the two stock markets, which further has an impact on the way you invest, the returns you can earn, and the potential risk involved.

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Choose a suitable portfolio that matches your investment objective

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Subscribe to the portfolio & get access to the constituent stocks & weights.

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Invest in the portfolio & apply regular portfolio updates. Set up SIP for disciplined investing.

FAQs

Indian stock investing differs vastly from US stock investing. It is thus vital to do your research before you decide to step into the US stock market. That said, exposing your portfolio to this global market in a calculated and risk-analyzed manner may benefit in terms of geographical diversification and in returns too

Yes. Note that while investing in foreign markets comes with its set of challenges, it does not render it unsafe. However, you need to be aware of currency fluctuations when you are investing in foreign markets. In fact, you may also use this to your advantage. For instance, if the rupee loses value and a portion of your investment is in USD, your investment value will rise in terms of INR, which is the currency of your home country. If you cash in your investment, you will get more rupees per dollar as compared to the rate at which you invested. Similarly, if the USD rises, your investment value (in USD) will rise, even if there is no change in your portfolio.

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