Investing in Apple to Amazon: Why US stocks deserve a place in your portfolio
Should you invest in US markets for global diversification and exposure to tech giants like Apple, Amazon, and Nvidia? Can USD-denominated assets help hedge against INR depreciation and balance your portfolio risks?
If you’re looking to build a robust and internationally diversified investment portfolio, consider incorporating US stocks into your strategy. The United States is home to some of the world’s largest companies, including Apple, Netflix, Tesla, Meta, Amazon, and Alphabet (Google). These industry leaders have a global footprint and a significant impact on worldwide markets.
By investing in US stocks from India, you gain exposure to high-growth multinational firms whose revenues are not confined to one economy—adding an extra layer of stability to your portfolio. While India continues to post strong economic growth, diversifying internationally can help mitigate country-specific risks such as policy shifts, economic slowdowns, or market volatility.
Incorporating US equities into your portfolio reduces risk and offers the reliability of an established market. The US economy spans diverse sectors like technology, healthcare, and financial services. This sectoral breadth ensures that weakness in one area can potentially be offset by strength in another.
Advice by Akhil Rathi, Head – Financial Advisory at 1 Finance
Diversification plays a crucial role in building a resilient financial portfolio, but it is important to understand what true diversification means. Simply spreading investments within the same asset class—such as investing in multiple stocks—does not provide real diversification. Instead, it can increase the overall risk because these investments may be affected by similar market factors. True diversification involves allocating assets across different classes, including equities, real estate, commodities, alternative investments, and debt instruments. This variety helps reduce risk by balancing the different factors that influence each asset class.
Investing in US markets can be a valuable part of a global diversification strategy, as it provides exposure to a different economic environment and market dynamics than domestic markets. However, directly investing in just two or three US companies can create concentration risk, where your portfolio depends heavily on the performance of those few stocks. While individual stock investments can offer attractive returns, they often come with higher volatility and require patience and a strong risk appetite.
For most investors looking for global exposure, a more prudent approach is to invest in passive funds or ETFs that track broad US or global indices. These funds spread investments across many companies and sectors, which reduces the risk associated with any single company or sector. Additionally, passive funds typically come with lower fees and require less active management, making them ideal for long-term investment goals.
Holding USD-denominated assets can also help hedge against potential depreciation of the Indian Rupee (INR). When the INR weakens, the value of USD assets tends to rise in INR terms, providing a natural currency diversification benefit. This can help balance your portfolio risks and improve its overall stability. However, it is important to maintain a well-diversified portfolio and avoid overconcentration in stocks.