Best Investment Opportunities in the United States for Indians Wanting to Grow Their Wealth Quickly
- Investing in bonds allows Indian investors to own a share of leading or up-and-coming American companies.
- Mutual funds and ETFs can be suitable investment options if you value a diverse portfolio.
- Real estate investments can yield healthy returns, and there are several options available if you don’t want to purchase your own properties.
Investing in the U.S. market could be a wise move if you’re keen to grow your capital as fast as possible. The wide range of investment opportunities available in the States allows investors to diversify their wealth while enjoying favourable trade rules. Furthermore, the continuing health of the U.S. markets helps Indian investors mitigate the rupee’s decreasing strength. Take a look at some of the best opportunities for Indian investors in the United States.
1. S&P 500 Index Funds
The Standard & Poor’s 500 Index, generally referred to as the S&P 500 Index, is one of the most popular benchmark indexes for mutual funds. This index tracks the performance of the United States’ leading 500 companies, including market leaders in the healthcare, communications, and technology sectors.
Annual returns can fluctuate significantly, so the S&P 500 Index is a better option for Indian investors looking for long-term opportunities. The average yearly return over the last decade was 14.7 percent, a marked improvement on the index’s 10.7 percent annual return average since its introduction in 1957.
2. SPDR ETFs
SPDR ETFs (Spiders) are an alternative to investing in an S&P 500 Index mutual fund. These funds track the S&P 500 Index but at 10 percent of the trading value, making them an accessible option for Indians with relatively small amounts of capital. Returns fluctuate significantly year on year, and the SPDR S&P 500 ETF Trust yields a 10.06 percent three-year average.
SPDR funds differ from S&P 500 funds because they allow you to concentrate your investment in specific sectors. For example, SPDR S&P Regional Banking funds track S&P 500 companies operating as banks.
3. Treasury Bonds
U.S. Treasury bonds, also known as T-bonds, could be a good option if you want to add risk-free investments to your portfolio to plan for retirement or your family’s future. The U.S. federal government issues the bonds to fund government spending in minimum denominations of $100, and they have relatively long maturities of between 10 and 30 years.
When you purchase Treasury bonds, you receive a fixed interest return rate and two interest payments per year. As of May 2022, the average 10-year yield on treasury bond investments was 2.90 percent.
4. Corporate Bonds
Corporate bonds work similarly to Treasury bonds except they’re issued by public or private companies. Unlike Treasury bonds, corporate bond investment isn’t risk-free, although it can offer significantly higher returns. You can mitigate the risk by purchasing bonds rated AAA (the least risky) by groups such as Standard & Poor or Moody’s. The 10-year average par yield for high-quality corporate bond investments was 4.43 percent as of May 2022.
Investors can typically purchase corporate bonds in $5,000 denominations with terms starting at five years. Most corporate bonds pay interest twice yearly.
5. High-Yield Bonds
High-yield bonds (or junk bonds) are corporate bonds deemed below investment grade by credit-rating agencies. In other words, the issuing company has a higher risk of defaulting on its debts than investment-grade companies. Typically, companies in financial difficulty and start-ups issue bonds categorized as high-yield bonds.
Junk bonds are risky investments, but they offer significantly higher yields than investment-grade bonds because companies are willing to offer more interest to fund their activities. Therefore, they could be a good option if you can tolerate risk and have the capital to spare. According to Lazy Portfolio ETF, a typical high-yield bond portfolio offers an average annual return of 7.19 percent over 30 years.
6. Gold ETFs
Gold ETFs are exchange-traded funds that invest in gold futures assets or gold bullion. Investing in a gold ETF is often more affordable than purchasing gold products or investing in mining companies, and the funds yield returns based on market prices.
Currently, the price increase of gold is roughly on track with the S&P 500 Index, with gains of 4.6 percent and 4.7 percent, respectively. There are currently 10 U.S.-based gold ETFs available, and the SPDR Gold MiniShares Trust fund offered an annual yield of five percent in 2022. However, the price of gold is relatively volatile, making it a riskier choice.
7. Direct Stocks
Many domestic brokers in India allow investors to open overseas trading accounts and invest directly in American stocks via intermediaries known as fintechs. These companies receive your instructions and carry out trades for you in the American market. Investing in direct stocks could be a suitable option if you have a solid grasp of the U.S. market or you want to invest in specific companies.
The performance of your direct stocks portfolio depends on which companies you choose to invest in. However, the INR-USD exchange rate is highly favourable to Indian investors, considering that the U.S. dollar is currently up six percent on the rupee.
8. Nasdaq ETFs
Investing in Nasdaq ETFs is an excellent way to instantly create a diverse portfolio, especially if you’re interested in investing in America’s technology sector. These funds often track the Nasdaq Composite Index, which contains thousands of new and established technology-related companies. Alternatively, some funds track the Nasdaq-100 Index, which follows the performance of the leading 100 companies in the broader Nasdaq index.
Opportunities for investing in Nasdaq ETFs are more limited than opportunities in other indexed ETFs. Your options are the Invesco QQQ and the Invesco ESG Nasdaq 100 ETF, which yielded annual returns of 3.2 percent and 3.3 percent respectively as of February 2022. Both funds’ holdings include some of America’s technology heavyweights, including Apple and Microsoft.
9. Balanced Funds
Balanced funds are mutual funds that spread your investment over a mix of stocks and bonds. These funds provide a regular income stream through the bond component while accumulating cash value to protect the buying power of your initial investment. They typically spread your investment over various assets, making them a relatively low-risk option.
Some balanced funds allocate investments across stocks and bonds using a fixed ratio, while others reallocate ratios to react to market conditions. Therefore, investing in fixed-ratio funds often offers a lower expense ratio. The low-risk nature of balanced funds means they provide slow but steady yields, with the Fidelity Balanced Fund offering a 7.80 percent five-year return as of June 2022.
10. Money Market Funds
Money market funds are mutual funds that invest in near-term securities. Generally, the assets involved are high-quality, investment-grade instruments and cash, making money market funds very low-risk investments. As the assets are near-term, these funds are unsuitable for long-term investing. However, they could be a good choice for earning an income on your capital while you plan to invest it elsewhere.
Generally, money market funds may offer returns of between two and three percent. However, some funds may invest in higher-risk instruments to provide higher returns to investors.
11. Target-Date Funds
A target-date fund could be a good option if you’re saving for a particular life event, such as retirement. These funds tend to have maturity dates ending in five-year increments (2025, 2030, 2035, and so on) and invest in other mutual funds. Therefore, the expense ratios can be relatively high as you must pay expenses associated with your investments and the fund itself, although these funds are gradually becoming more affordable.
A target-date fund’s initial investment strategy usually focuses on higher-risk, higher-yield investments to accumulate capital quickly earlier in the term. Allocations gradually switch to lower-risk investments as the fund’s maturity date grows closer. Yields depend on market conditions, but the Vanguard Target Retirement 2030 Fund has produced annual returns of 7.68 percent since 2006.
12. Real Estate
Finally, Indian investors have various options available for investing in American real estate. The most obvious is to purchase private or commercial properties and rent them out, but not everyone has the time or capital to buy and maintain multiple overseas properties. However, doing so could net you a healthy annual return of around 10.3 percent with a diversified residential and commercial property portfolio.
An alternative way to invest is via mutual funds or ETFs that exclusively track the performance of the real estate sector. You could also invest in real estate investment trusts, which fund a company’s properties. These trusts provide a regular income stream without accumulating significant capital, and they could be a good option if you can’t afford to purchase your own property.