Why US stocks are a must-have in every investor’s portfolio

The stock market offers countless opportunities, but sticking to just one country might be holding your portfolio back. Market slowdowns, political shifts, or currency depreciation can quickly impact your returns. That’s why global diversification is important. The US stock market, with a market capitalisation of $55 trillion as of 2024, offers an excellent opportunity to diversify and strengthen your portfolio. 

Learn the top five reasons why these stocks must have a place in your investment portfolio.

1. Access to global economic leaders

The US, with a GDP surpassing $29 trillion in 2024, holds its position as the world’s largest economy, and its stock market reflects this dominance. By investing in US stocks, you get a share of top-performing companies known worldwide, including: 

• Tesla 
• Apple 
• Amazon  
• Netflix  
• Microsoft 
• Meta
• Alphabet (Google)

These companies dominate critical sectors like technology, e-commerce, renewable energy, and artificial intelligence. For example, Tesla leads the electric vehicle market, while Apple and Microsoft dominate consumer tech. Meta and Alphabet drive advancements in digital advertising and Artificial Intelligence (AI). Investing in these powerhouses helps you participate in the growth of industries that define the modern economy

2. Opportunity for greater returns

US stocks are known for their potential to deliver impressive long-term returns. 

For example, Tesla share price, which was just $18 during its IPO in 1997, has surged to above $200 today (December 31, 2024). Similarly, Tesla’s IPO in 2010 at $17 per share now trades above $400. Both these examples highlight the wealth-building power of US markets, where even small investments can grow exponentially over time. 

The best part is that you can invest in US stocks from India easily. Options like direct stock investing, mutual funds, and Exchange-Traded Funds (ETFs) make it simple to participate in the growth of these global leaders.

3. Portfolio diversification 

Diversification is a golden rule of investing, as it helps reduce risk and boost returns. Relying solely on Indian stocks ties your portfolio to the performance of a single economy. While India’s growth story is undoubtedly promising, no economy is immune to challenges such as market volatility, inflation, and policy changes.

US stock exchanges list companies not just from the US but also from global powerhouses like Canada, Germany, and China. This provides you access to industries and companies that may not exist or are underrepresented in India, such as advanced computing, electric mobility, biotechnology, pharma research, and energy sectors. 

This diversification could enhance your portfolio’s stability. For instance, if the Indian market is underperforming due to regional economic pressures, US stocks can stabilise your portfolio due to their global reach and diversified revenue streams.

4. Currency advantage

The US dollar, recognised as the world’s dominant reserve currency, is widely used in global trade and finance. Over the years, it has steadily appreciated against the Indian rupee, which highlights its strength and stability.

For example, in 2014, $1 stood at approximately ₹60, while as of January 8, 2025, it is ₹85.86. This means investing in US stocks not only generates returns from market performance but also adds value through currency gains. If the rupee weakens further, the value of your US stock investments grows in INR terms, and you enjoy more profits. This dual benefit, i.e., returns from the US stock market and currency appreciation, makes US stocks a strategic choice for diversifying any investment portfolio.

5. Accessibility via fractional shares 

A common perception among investors is that US stocks are prohibitively expensive and unsuitable for long-term investment. However, the US market offers a practical solution through fractional shares. This feature allows you to invest in high-priced stocks, like Tesla or Amazon, without having to purchase a full share. Instead, you can purchase a portion of the stock based on the amount you want to invest. 

Let’s understand this with an example: Suppose a US stock is priced at $300 per share. However, you are comfortable investing only $30. With fractional investing, you can buy 10% of the stock, as $30 is 10% of $300. This way, even the most expensive US stocks become accessible to investors with limited budgets.

6. Tax benefits

Dividends earned from US stocks are subject to a 25% tax deduction. For example, if you earn $200 as dividends from US stocks, $50 (25% of $200) will be deducted as tax in the US, and you receive $150. However, under the Double Taxation Avoidance Agreement (DTAA) between the US and India, this $50 tax paid in the US can be offset against your tax liability in India during ITR filing. This ensures dividends are taxed only once.

Moreover, foreign investors are not subject to capital gains tax in the US. Hence, your tax liability for capital gains will arise only in India, determined by the holding period. If you hold stocks for more than 24 months, the gains qualify as long-term capital gains and are taxed at a rate of 12.5%. For holding periods under 24 months, the gains are classified as short-term capital gains and taxed according to your income tax slab rate.

These tax advantages, combined with the diversification and growth potential of the US market, make these stocks a must-have component of every investor’s portfolio.

3 steps to begin your US stock investment journey

You can invest in US stocks online easily via mobile apps and online platforms. The steps are:  

Step 1: Open a free US stocks account

Sign up with an online platform that supports US stock trading and investments. Complete your digital Know Your Customer (KYC) by providing the necessary documents like PAN and Aadhaar card.

Step 2: Add money to your account

Next, transfer funds to your US stocks account. Online platforms usually allow INR deposits, which are then converted to USD for trading.

Step 3: Start investing

Browse available US stocks and Exchange-Traded Funds (ETFs). Begin your journey by investing in global brands you know and prefer, or explore innovative sectors like AI, renewable energy, and biotechnology.

Invest in US stocks today!

US stocks are a must-have in every investor’s portfolio as they combine high growth, diversification, and stability. They provide access to global market leaders, innovative industries, and economic cycles different from India’s. With a strengthening US dollar, investing in the US market can increase returns while protecting against rupee depreciation.

The availability of online platforms has made investing in US stocks easy, affordable, and accessible. You can choose from options like mutual funds and ETFs or even invest directly in individual stocks. So, if you haven’t already, consider making US stocks a part of your portfolio today!