Swastik Nigam, CEO & Founder – Winvesta, has over 10 years of trading experience in equities, ETFs, fixed income, and currencies. He is of the view that 2020 was an active year for overseas investments from India. However, we are just scratching the surface here. Less than 0.1% of India’s wealth is currently invested overseas, , he said in an interview with Moneycontrol’s Kshitij Anand.
Swastik Nigam is an IIM-Ahmedabad graduate and chairs the IIM-A Alumni London Chapter. He expects global diversification to pick further pace in the coming years.
Edited excerpts:
Q) The year 2020 gave rise to many new avenues of investments and geographical diversification tops the list. What should be the strategy of investors for 2021? And someone wants to place fresh money in US markets – should they wait for a dip or deploy at current levels?
A) 2020 was an active year for overseas investments from India. However, we are just scratching the surface here. Less than 0.1% of India’s wealth is currently invested overseas.
We expect global diversification to pick further pace in the coming years as Indian investors shed home-bias.
Investing in US markets comes with the usual risks of investing in equity markets. Investors should consider their risk profile to allocate appropriate weight to international investments.
Long-term investors should look at it as portfolio allocation rather than worrying about timing the market. As the popular saying goes - ‘Time in the market is more important than market timing’
Q) Which products can one look at for international diversification?
A) US markets are home to some of the largest companies in the world. Over 40 percent of revenues of the S&P500 companies comes from outside the US.
Through those companies, investors can get exposure to the global economy without even selecting individual countries. Investors can also look at other stock markets in other countries for specific opportunities.
Beyond the stock markets, investors may also look at international real estate which may offer better yield than domestic real estate, depending on the location.
Q) What will be in store for Indian investors with Biden in power – how will his policies impact the markets?
A) While there has been some apprehension about market performance in case of a blue wave (Democrat control of both the house and the white house), history shows that market performance under such a scenario has not been worse than the overall average. Some sectors may react more favorably under the Biden administration.
Sector winners on Biden's victory would include industrials, tech, and materials - cyclical industries that benefit from accelerating economic growth.
Infrastructure-related stocks, including the construction and transportation sectors, would be longer-term winners. A Democrat control also likely means more stimulus and a greater emphasis on policies to address climate change and health care.
That puts the spotlight on biotech and cleantech companies. On the other hand, Trump's regulatory policies and support for defense spending are less likely to continue.
Q) How can one invest in German, UK or Japanese markets by investing in ETFs in the US markets and how will it help in diversification?
A) Winvesta has many geographical ETFs listed in the US such as EWU (UK), EWJ (Japan), and DAX (Germany) that investors can utilise for exposure to specific markets.
We also have geographical theme ETFs as well, like the EEM that provides exposure to the emerging markets. These low-cost ETFs make diversification across many markets easy and affordable.
Q) What is the kind of charges which Indian investors have to give when investing in a fund in the US? Both entry and exit – if any. Help us with an example of $1000 being invested.
A) US ETFs carry no entry or exit load when traded in the secondary market (exchanges). The expense ratios of the ETFs are also a lot lower than what Indian investors are used to.
The VOO ETF which tracks the S&P500, for example, has an expense ratio of 0.03%. An investor putting in $1000 in VOO would pay $0.30 in fee annually assuming a constant investment size.
However, there may be other costs involved in remitting the money to the US or a trading commission depending on the platform used.
We, at Winvesta, don’t charge any fees for incoming deposits, and have a certain number of commission-free transactions per month, making it extremely affordable to invest in such ETFs.
Q) How are Robinhood investors different from India’s New Age investors? Do you think Indian investors are more matured when it comes to investing/trading?
A) We can’t yet compare India’s investors to those who invest through US-based investors through Robinhood. We have a very small investor base compared to Robinhood’s large investor base.
For e.g. Indians only sent an approx. USD 500m in total to invest in US stock markets last year. Robinhood had a total of USD 150bn of transactions on their platform.Q) Which sectors are likely to remain in focus in US 2021 and why?
A) 2021 should see a return of travel (fingers crossed) and thus stocks, especially the one focused on leisure travel. Pharma and Biotech are also expected to remain in focus as significant advances continue to be made in this sector.
Retail and consumer discretionary should also be active as the buying patterns move back to normalcy.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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