Indians are truly global citizens now. We travel overseas, we buy foreign products, we share global climate concerns, and we win test series overseas!
There are clear merits in building a globally diversified portfolio for every Indian investor. Winvesta enables Indian investors to open a US trading account in minutes, and start building an international portfolio. ETFs are a great way to add diversification in a portfolio at a low cost. Unlike mutual funds, they are usually passive investments and often cost as little as 0.1% p.a. in fee (expense ratio).
Here is a selection of 5 popular ETFs listed in the US:
1. SPY SPDR ETF (‘the Mighty S&P 500’)
SPY is the best recognized and the oldest ETF and typically tops the rankings for the largest AUM and greatest trading volumes. It tracks the S&P 500 Index. Microsoft, Apple, Amazon, JPMorgan, Facebook, Alphabet (Google) are some of the biggest companies in the Index. The annual expense ratio is only 0.10%. Investors looking for a lower fee can utilize Vanguard’s VOO ETF that also tracks S&P 500 index with an annual expense ratio of 0.03%.
2. QQQ Powershares ETF (‘the NASDAQ’)
QQQ tracks the NASDAQ 100, which provides access to some of the world’s most innovative companies: Microsoft, Google, Tesla, Starbucks, Netflix, eBay, and Intel. Due to the high weight of tech stocks, QQQ has outperformed SPY in 9 out of 10 years in the last decade (2010-2019). The annual expense ratio for QQQ is 0.20%.
3. BND Vanguard ETF (‘the Safety of US IG bonds’)
BND provides broad exposure to US investment grade bonds. This may be an ideal ETF for diversifying the risks of stocks in a portfolio and a reliable long-term USD income stream. Investors looking to add bonds to their portfolio for risk reduction can utilize the BND ETF. The annual expense ratio is only 0.035%.
4. GLD SPDR ETF (‘GOLD’)
GLD offers investors an innovative, relatively cost efficient and secure way to access the gold market, and to diversify any portfolio. Originally listed on the New York Stock Exchange in November of 2004, and traded on NYSE Arca since December 13, 2007, SPDR® Gold Shares is the largest physically backed gold exchange traded fund (ETF) in the world. With extremely tight bid/offers and a modest annual expense ratio of 0.40%, this is the most efficient way to invest in gold for Indian investors.
5. EWU iShares ETF (‘the United Kingdom equities’)
EWU tracks the MSCI United Kingdom Index which provides access to large and mid-sized companies in the UK. With the general elections providing a resounding win for Boris Johnson (biggest majority to a single party since 1987) and a clear route to Brexit resolution, the UK may be the contrarian bet for the year. It also provides diversification from tech and an attractive GBP dividend yield of 4.40%. The annual expense ratio is 0.47%. If the UK is a possible education destination in your family, this ETF needs consideration in your portfolio.