In the era of globalisation, you have access to global markets and the opportunity to invest in international companies. You can invest in global companies either by directly investing in US stocks or through international mutual funds, which invest in foreign companies.
Depending on one’s risk appetite, investing directly in US stocks can offer a slightly different experience compared to investing in international mutual funds. For many, direct investment in US stocks may be riskier than international mutual funds, as it requires a strong understanding and research of the company, industry and the economic situation of the country.
Direct investment in US stocks vs international mutual funds/PMS
In this write-up, we will explore insights from Arindam Mandal, Head of Global Equities at Marcellus, to address the question: Is it better to invest directly in US stocks, or would it be more beneficial to invest in international mutual funds/PMS funds?
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Mandal explains, “It’s an age-old debate, and whether it’s India or global equities, one truth remains clear at the core of this debate: different solutions cater to different investors. In my experience, I don’t necessarily think anyone can win this argument on either side.”
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Before delving into the specifics, he notes an important observation: “Many do-it-yourself (DIY) investors thrive in bull markets but struggle in bear markets. Their portfolios often reflect gains that seem to validate their long-term strategies. Yet, as market conditions shift, the reality can be starkly different. When market downturns occur, many individuals panic, leading to hasty decisions that can exacerbate losses.”
He further points out that “when an investor is doing it independently, it’s difficult to clearly differentiate between investments and trading. The absence of clear goals or a proper financial strategy can lead to bias creeping in.” Mandal references a study,
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