Viram Shah, CEO and co-founder at Vested Finance, feels that the proportion of allocation to global markets varies from investor to investor. In general, advisors recommend an allocation of 15-20% of portfolio.
Vested helps Indian investors to put in funds in US-listed global brands and theme-based ETFs in a simple, affordable and accessible manner.
Shah was previously an investment banker at J.P. Morgan. He has also worked with three startups in the fintech – AI, and analytics space.
Five US stocks that saw the maximum interest among Indian investors in FY21 on their platform were Tesla, Apple, Amazon, Microsoft and Shopify. Salesforce, Nvidia, and Square were some other popular stocks, he said in an interview with Moneycontrol’s Kshitij Anand.
Here are edited excerpts from that interview:
Q) The year 2020 was also the year when many investors joined D-Street but it was also a year when retail investors went global. How do you sum up FY21?
A) FY21 has been an exciting year for us at Vested. As you rightly said, a large number of Indian retail investors dipped their toes in the global markets for the first time.
As is the case with every new endeavour, investors tested the waters first, and as they built trust in the platform they kept coming back for more.
More than 1,80,000 people signed up on the Vested platform over the last 12 months. We processed close to $ 175 million in trades in FY21.
Q) Do you think the trend will continue in the next financial year?
A) We strongly believe that international diversification is here to stay. We’re still at day zero in terms of Indian investors diversifying their investments beyond our local market.
If you look at investors outside of India, a majority of them have at least 15-20% of their wealth invested in foreign markets.
We’re also witnessing a worldwide retail revolution. Aided by COVID and lockdowns, retail investor participation in the markets has increased by leaps and bounds.
These retail investors now want to own global companies and we want to give them the easiest platform to do so.
Q) Any new products which you plan to introduce in the coming year?
A) Our focus for the next year is primarily on creating a smooth end-to-end US investing journey. While the process has improved by leaps and bounds versus when we started our journey, it’s not as seamless and transparent as we would want it to be.
For example – loading funds into one’s Vested account is still a black box. Once the money leaves their India bank account, there’s no visibility on when it will get deposited into their brokerage account in the US. We want to fix things like this. We live in the UPI age and investors are used to having everything instantly. There’s no reason why international investing should also not be instant.
Q) What is the kind of Indian money invested in US markets? And, do you foresee other markets which could become investors’ favourite in near future?
A) The total funds deposited in Vested accounts grew at 30% month-on-month in FY21 and monthly new inflows into Vested accounts have crossed $ 5 million (RS 36 crores).
Interest in the US markets has been increasing over time. For now, we believe that the US markets provide a wide variety of global diversification opportunities, including options to invest in other markets via ETFs or via ADRs. Over time, though, we would want to provide access to the world’s other markets to our users.
Q) What is the average age of investors who usually invest in global funds in Vested? How many are male and female?
A) We see the highest interest among the 25 – 35 age bracket. However, that’s not to say that older investors don’t invest in the international markets. The large value accounts are often the older investors.
In terms of the gender split, unfortunately, a majority of the investors are male but slowly and steadily we are seeing an increasing number of female participants which is an encouraging sign.
Q) Top stocks which Indian investors added to their portfolio? Do you think FAANG(T) stocks will hog attention in FY22 as well?
A) The top 5 stocks in FY21 were Tesla, Apple, Amazon, Microsoft, and Shopify. Salesforce, Nvidia, and Square were some other popular stocks on the platform.
In terms of ETFs, the ARK ETFs were surprisingly popular. I do hope that investors focus beyond FAANGT (Facebook, Amazon, Apple, Netflix, Alphabet (formerly known as Google) and Tesla) in FY22, there are a lot of different opportunities available in the US markets.
We encourage investors that are not full-time investors to stick to ETFs or the pre-built portfolios called Vests that we have on the platform.
Q) Checklist for investors when they invest globally?
A) Here is the checklist that could follow —
1. Make sure to clearly understand why they’re investing internationally. Is it that they want to save for a future USD goal or they want to invest in global brands or they purely want to diversify their portfolio geographically. Because for each of these reasons, the portfolio allocation will look different.
2. Ensure that they start investing via a regulated entity. In my opinion, it’s better if the entity is regulated with the US regulator because that is the market in which you are actually placing the trades
3. Be mentally prepared to stick to your investments for the long-term. Don’t let short-term events such as Gamestonks and Fed rate changes affect your long-term investing strategy
Q) What should be the ideal percentage of portfolio aligned towards global diversification and why?
A) The percentage allocation to global diversification really depends on the investor’s situation and preferences. We have seen advisors recommend an allocation of 15-20%.
But, let’s say you are planning to send your child abroad for education, then you might want to allocate about 30% or 40% to global diversification because you will need the funds to pay for the expenses abroad.
Or if you believe that technology companies are the future and want to make a big bet on it then the US markets provide a lot more optionality and one might allocate a higher percentage in such a situation.
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