May 15, 2019
Why Investing in the US has given superior returns
If you had invested ₹ 4,921 (USD $100) in January 2010 in the SENSEX, your investment would have grown to ₹ 11,564 (USD $162) over a 10 year period. But had you invested the same ₹ 4,921 or USD $100 in the US stock market, the investment would have grown to ₹ 19,149 (USD $268). Why the large discrepancy in return performance? There are two key reasons.
Reason 1: The US market has performed better than the Indian market. The US stock market (DOW Jones Index for example) outperformed the Indian stock market (BSE SENSEX) over the last 10 years. In this time period, the DOW has returned 169%, while the SENSEX returned 135%.
Reason 2: The Rupee has depreciated compared to the USD. In the past 10 years, the USD to INR exchange rate has declined by 44%. Compounded over 10 years, this has a significant negative impact towards your return, widening the performance gap.
Because of these two aforementioned effects, the SENSEX, on a USD basis, grew only 51% over this 10 year period. This significantly underperforms the DOW JONES.
Note the USD based SENSEX is the DOLLEX-30.
This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.
Our team members at Vested may own investments in some of the aforementioned companies. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.