You too can make 50%+ returns by investing in USA!

As a retail investor it is difficult to invest across geographies due to the added foreign exchange charges, bank charges, broker charges, capital gains tax, TCS and more. There are very few brokers who cater to this market, and it is even difficult as a retail investor to delve deeper into the intricacies of these charges. At the end, after putting efforts to create an alpha for our portfolio, we end up with nominal to less returns, losing the purpose of geographical diversification. Hence, if you are not investing substantial amount above 60+ Lakhs, the cost-reward equation is not balancing, and it is not favorable.

I personally promote investing abroad, as it diversifies our systematic risk and on top of that it can help generate an alpha if we invest in right sectors in that geography.

For example, in India we cannot have the changing dynamics of Technology, as most of the innovations are happening abroad. By investing in USA Technology companies, you will be benefitting your portfolio.

As for Example - our simple FAANG Stocks have delivered returns over 72% in one year.

FAANG Stocks Investment Returns

But if you say, I will invest in USA, for companies like Walmart, Target, or Bank of America, then you might be defeating the purpose.

Walmart

Why?

Then in India you have the corresponding companies available like D-Mart where both the companies are catering to the same segment of customers in their respective geographies.

D-Mart

So, it doesn't make sense to put in extra efforts to go and invest in USA for Walmart, unless it is doing something drastically different than Dmart.

We need to be very selective when it comes to investing in other geographies if you want to have a positive cost-benefit. Otherwise, you are adding costs just to satisfy yourself, but not the portfolio.

But still our question remains unanswered?

With very few brokers present and with these added costs, how can we invest profitably and with ease in USA or Abroad.

I will explain my journey.

I am a student currently, and you can imagine what max my portfolio size can be. If I start investing in USA through the brokers present, my capital might erode till the time it gets reflected in those broker accounts.

It was around 2022 end. I was analyzing USA Market, and I was seeing a massive panic which was leading to unjustified correction in the market.

Everyone at that time was worried due to the rising inflation (which was said to be Transitory by US Central bank, but was not the case), rising debt of USA, possible recessionary visions, Russia-Ukraine worries and supply chain disruptions. Although all the worries were genuine, I believed that these are not new issues which USA is facing, and hence they have a clear roadmap on how they can proceed to address these crises.

What all I checked?

• USA is still the largest economy and due to covid disruption, the bipolarization was decelerated, and world had no choice but focus on their own countries first.

• USA Central Bank was very clear on their goals and were ready to slowdown the economy if needed to control the inflation. (Although this is negative for markets, but one think what markets like is certainty, which FED was providing).

• China was showing signs of revival, and the supply chain situation was improving. Showcasing the supply demand curve can normalize from here.

• US Job Market although was early to assess but was very strong compared to what US Central Bank was estimating.

• Lastly, major US Tech Companies were playing with the buzzword of AI, Cryptocurrency, and they were massively correcting post Covid euphoria.

With all these points in mind, my only aim was to invest in US Tech Sector and gain exposure to the changing dynamics of these sector.

Looking at my requirements, the US Nasdaq Index which constitutes the technology sector was the right fit for me. I then looked up if any relevant Mutual Fund is present or not.

And bingo, there were a bunch of mutual funds catering to my requirements.

Indian Mutual Funds

I then ranked the Mutual Funds. Again, in ranking, we need to be clear. I was looking for a short-term trade on US Market due to the massive correction. I then needed a fund whose Exit Load and Expense Ratio was minimum and is having the right assets for investment.

I selected the Navi Mutual Fund Nasdaq 100 FOF.

Here, you can see I didn't go the SIP route for investing as I was clear that US markets were undervalued, and it was at an important support zone technically. (Refer Nasdaq Technical Chart).

Navi Nasdaq - Investment Thesis

I bulk bought the Mutual Fund at every dip till Jan 2023 and then enjoyed the rally thereafter. Later at some decent corrections, I again bought. Today my absolute returns in 1.2 years are 49.23%, and I am pretty satisfied with it.

Now my targets are achieved as per the technicals and have started SWP (Systematic Withdrawal Plan) for the fund, booking partial profits regularly.

Nasdaq - Weekly Technical Chart

Lessons I learnt -

• Clear vision about your investment is must and then find the instruments which can help achieve the vision.

• Understand when to SIP and when to bulk buy.

• Don't believe in Timing the Market but have an intelligent estimate about where markets can head from here. (As seen during my initial investments, the markets were still correcting which I downward averaged).

• When target is achieved, start systematic withdrawal, don't be greedy.

• Investing through Mutual Fund, due to scale of AUM, we are not impacted hugely by those costs.

Now it might not be the right time to bulk buy USA Market, but you can still do Step Up SIP for every decent correction.

Disc. - Consult your financial advisor.

Thank you for reading!

Let me know about your investing journey as well.