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Here is the question that’s been keeping Indian investors awake at night: Should I keep investing in US stocks when everyone’s talking about how expensive they’ve become?
The answer might surprise you. Let’s look at some hard data that cuts through all the noise.
Over the last 20 years, US stocks have delivered an annual return of 10.1% compared to 8.4% for the rest of the world combined. That might seem like a small difference, but here’s where it gets interesting – that 1.7% annual difference compounds into something spectacular over time.
If you had invested ₹1 lakh in US stocks 20 years ago, you’d have ₹6.82 lakhs today. The same investment in global markets? Just ₹5 lakhs. That’s an extra ₹1.82 lakhs – almost doubling your additional wealth – from a seemingly small annual outperformance.
But the real magic happens when we look at risk-adjusted returns. US stocks haven’t just delivered better returns; they’ve done it with better consistency. The Sharpe ratio – a measure that tells you how much extra return you get for the extra risk you take – shows US stocks at 0.72 versus 0.65 for global markets. Translation: American stocks give you more bang for your risk buck.
The Performance That Speaks Volumes
Let’s break down these numbers in a way that makes sense for your portfolio:
Last 10 Years: US stocks returned 13% annually while global stocks managed 10.6%.
Last 5 Years: The gap widens. US stocks delivered 15.2% annual returns versus 13.8% for global markets. In absolute terms, ₹1 lakh became ₹2.03 lakhs in the US and ₹1.91 lakhs globally.
Even Last Year: Despite all the talk about US market frothiness, American stocks returned 16.5% versus 15.7% for global markets.
The pattern is clear and consistent: US stocks don’t just outperform occasionally – they outperform regularly.
Why This American Advantage Isn’t Going Anywhere
The superior returns aren’t just luck or a temporary bubble. There are fundamental reasons why US markets have maintained their edge:
The Innovation Powerhouse: American companies don’t just participate in technological revolutions – they create them. From the internet to smartphones to artificial intelligence, the companies driving global transformation are predominantly American. This isn’t changing anytime soon.
The Profitability Culture: Here’s a stunning statistic – 72% of the world’s profitable large-cap growth companies are based in the US. American companies are simply better at turning revenue into profits and profits into shareholder returns.
Scale Advantages: The US domestic market of 340 million consumers provides American companies with a massive home base to achieve scale before they even think about going global. This natural advantage is impossible to replicate elsewhere.
Capital Allocation Excellence: American companies are masters at returning cash to shareholders through dividends and buybacks. They’re also better at reinvesting profits into high-return opportunities rather than empire-building.
The Diversification Debate: Missing the Forest for the Trees
Now, you’ll often hear investment advisors preaching about global diversification. “Don’t put all your eggs in one basket,” they say. “International diversification reduces risk,” they argue.
Here’s the thing – they’re not wrong, but they’re missing a crucial point. When the “basket” you’re concentrating in consistently outperforms other baskets with lower volatility, the conventional wisdom needs rethinking.
The research is clear: while international diversification can protect you during short-term market crashes, over the long term, it often just diversifies away your returns. Since 2000, every major market correction has been global anyway. In 2008, 2020, and other crisis periods, correlations between markets approached 1.0 – meaning diversification provided little protection when you needed it most.
What diversification does provide is protection against any single country experiencing a prolonged period of underperformance. But here’s the key question: what’s the probability that the US – with its structural advantages in innovation, market size, and capital allocation – will suddenly become the next Japan?
The Vested Revolution: Making US Investing Accessible
For Indian investors, the game has completely changed thanks to platforms like Vested Finance. The barriers that once made US investing complex and expensive have disappeared:
Fractional Investing: You can own a piece of Amazon or Google for as little as $1. No need to buy full shares worth thousands of dollars.
Zero Account Maintenance: Most platforms don’t charge annual maintenance fees, making long-term investing cost-effective.
Systematic Investment Plans: You can set up SIPs in US stocks just like you do for Indian mutual funds, taking advantage of dollar-cost averaging.
Tax Efficiency: While you’ll pay taxes in India on your US stock gains, the returns have historically been high enough to more than compensate for the tax burden.
The Long-Term Investor’s Advantage
Here’s what separates successful investors from the rest: they focus on decades, not quarters. The data shows that US market outperformance isn’t a recent phenomenon – it’s been consistent across multiple decades, economic cycles, and technological shifts.
More importantly, the structural factors driving this outperformance are strengthening, not weakening. American companies are leading the AI revolution, dominating cloud computing, and setting the pace in biotechnology and clean energy.
Making It Work for Your Portfolio
The practical steps for Indian investors are straightforward:
Start Small: Begin with 10-15% of your total portfolio in US stocks through a platform like Vested or INDmoney.
Build Systematically: Set up monthly SIPs to take advantage of rupee-dollar fluctuations and market volatility.
Focus on Quality: Whether buying individual stocks or ETFs, prioritize companies and funds with strong track records and sustainable competitive advantages.
Stay Patient: The US market advantage compounds over time. Don’t expect instant gratification, but do expect superior long-term returns.
The Bottom Line
The data doesn’t lie. US stocks have delivered superior risk-adjusted returns across every meaningful time period. They’ve done this while providing access to the world’s most innovative companies and benefiting from structural advantages that aren’t going anywhere.
For Indian investors, the question isn’t whether to invest in US markets – it’s how much to allocate and how to do it intelligently. With platforms making US investing as easy as buying Indian stocks, and the historical evidence overwhelmingly supporting US market outperformance, the American dream portfolio isn’t just accessible – it’s essential.
The next time someone tells you not to concentrate too heavily in US stocks, show them the numbers. Sometimes, the best diversification strategy is concentrating in the best-performing, most consistent market in the world.
