Investing in US stocks is a great way to build your wealth while leveraging the growth potential of top companies — even if you're a novice investor. With a few US stock market tips, you can get started hedging your risks against the comparatively more volatile Indian market.
When it comes to geographical diversification, the US stock market is undoubtedly your best bet. It gives you access to global tech giants like Google, Apple, Tesla, etc. Additionally, the consistently deprecating INR against the USD provides opportunities for higher returns. With RBI's Liberalised Remittance Scheme (LRS), you can invest up to $250,000 in US stocks. However, some particulars may change post the 2023 budget.
Once you've decided on your investment goals, time horizon, and risk tolerance levels, you can try these US stock market tips to navigate that market:
The best way to avoid losses is to be well-prepared. If you can't afford to conduct all the research, opt for a brokerage firm that will do it for you.
If you lack patience or time for research, index funds are perfect. Since index funds (like the S&P 500) have a diversified portfolio of assets and generally perform at par with the underlying index — you minimise your risks while ensuring more or less steady returns.
As a beginner, you may have to shoulder some losses. Be prepared for it by capping your investment exposure. You can always increase your exposure once you get accustomed to the market.
Don't simply buy shares on the advice of a friend or co-worker. Never make an investment decision unless you understand what the company does and how it generates profits. Instead, sticking to the tried-and-tested names like Amazon or Apple makes more sense for a beginner.
If you're starting out with a limited investment budget, consider buying fractional shares (less than one whole share) instead. With this you can diversify even a small portfolio by investing in companies that would otherwise be out of your reach.
While not immune from market forces, blue-chip stocks are better options for novice investors. Their strong balance sheets and consistently growing earnings-per-share ratio ensure protection from market volatility. On the other hand, Penny stocks have a high risk-to-return ratio, which means amplified volatility and the possibility of significant losses.
Since you'll be investing in US dollars, you need to keep the conversion charges in mind. Remitting money to a foreign trading account will cost you in the form of exchange and transfer fees. P.S. Be sure to keep a close eye on the 2023 Budget, as some tax-related implications may affect this.
Don't buy stocks when the price is low, anticipating an upward swing for the same, only to witness the price fall further. Instead of this futile exercise, you should focus on company financials and performance records to gauge the value of a stock.
If you want to start investing in the US stock market, there's no better time than the present. Also, remember that wealth creation takes time and patience. Thus, a long-term strategy may bring better results than a short-term one.
Armed with these US stock market tips, you can start your journey today and expand as you develop your skills and knowledge. If you're still overwhelmed with the complexity of the US market, you can count on Fi Money. Perfect for novice investors, the Fi Money app comes with in-app explainers and Curated Collections to ease the selection process. Psst... Fi has zero brokerage fees!
Your stock choices will depend on your investment strategy and risk appetite. As a beginner, proven blue-chip stocks - like Apple and Google - may be your best bet.
The best stock market investments are those that bring you high returns. Dividend and growth stocks are generally considered the best stock market investments. Index funds are also promising options for beginners.