Why should you add international stocks to your portfolio?
Last updated: 19 Apr, 2021 | 07:38 am
Adding international stocks to your portfolio can give you immense advantages such as diversification benefits, and additional currency return due to depreciation of the rupee.
- Different geographies outperform in different years: As seen in the below chart, winners keep rotating across geographies. For example: While the US outperformed India in 2016, Indian stocks beat the US in 2017.
Source: Bloomberg, based on MSCI country Indices (Large cap + Midcap) ; Asia excludes Japan, all the return are computed in INR based on FBIL INR/USD value
- Diversification benefit: Indian stocks have very low correlation with equities in other countries. This provides a very good diversification benefit.
Source: Bloomberg, based on MSCI country Indices (Large cap + Midcap) ; Asia excludes Japan, all the return are computed in INR based on FBIL INR/USD value. Data from 01st Jan 2009 to 31st Dec 2020 is considered for computing correlation between the returns
- Additional benefit due to depreciating Rupee: When you invest in international stocks, you not only earn the return on the appreciation of that stock, but also get additional benefit due to depreciation of Rupee against that particular currency.
If you are looking for international diversification, Mirae Asset NYSE FANG+ FOF could be an exciting opportunity.
What is NYSE FANG+ Index?
- The NYSE FANG+ Index is an equal-weighted index designed to represent a segment of the technology and consumer discretionary sectors consisting of highly traded growth stocks.
- Stocks are selected on the basis of criteria that the full market capitalization of the stock should be at least USD$ 5billion, and the tailing daily traded volume should be at least USD 50 million
- ICE Data Indices Governance Committee will oversee a process to select FANG (Facebook, Amazon, Netflix and Google) and FANG-related stocks.
- Stocks selected for the Index should exhibit characteristics of high-growth technology and internet/media stocks.
What works for the fund?
- NYSE FANG+ Index has historically outperformed S&P 500 and NASDAQ 100. Also it has exhibited lower correlation with the Nifty50 Index. An investor in INR will get additional benefit due to currency depreciation
- 12M forward P/E of FANG+ constituents are relatively lower than India’s highest P/E stock forming part of Nifty50 Index. This is because consumer durable and consumer staple in India continue to have high P/E. Hence, the FANG+ Index is available at a relatively better valuation than top Indian companies.
- The fund has delivered better Returns and Risk adjusted returns than NIFTY 50 and NASDAQ 100, across tenures ranging from 3 months to 5 years.
Details of the NFO