Why Investing in the US has given superior returns
If you had invested â‚¹ 4,921 (USD $100) in January 2010 in the SENSEX, your investment would have grown to â‚¹ 12,933 (USD $175) over a 12-year period. But had you invested the same â‚¹ 4,921 or USD $100 in the US stock market, the investment would have grown to â‚¹ 20,044 (USD $272).Â Why the large discrepancy in return performance? There are two key reasons.
Reason 1:Â Â The US market has performed better than the Indian market.Â The US stock market (DOW Jones Index for example) outperformed the Indian stock market (BSE SENSEX) over the last 12 years. In this time period, the DOW has returned 172%, while the SENSEX returned 162%.
Reason 2:Â Â The Rupee has depreciated compared to the USD.Â In the past 12 years, the USD to INR exchange rate has declined byÂ 57%. Compounded over 12 years, this has a significant negative impact towards your return, widening the performance gap.
Because of these two aforementioned effects,Â the SENSEX,Â on a USD basis, grew only 60% over this 12-year period. This significantly underperforms the DOW JONES.
Note the USD based SENSEX is the DOLLEX-30.