Increasingly, they are diversifying their equity portfolios by investing in the exchange-traded funds available in the US stock market given the variety and low costs as well as portfolio diversification benefits.
Over the past six months, international stock trading platform Winvesta has seen the share of ETFs grow from 9 per cent to 13 per cent in its assets under management. ETF assets on the brokerage’s platform grew at 325 per cent in the past six months compared with 185 per cent growth in the AUM of stocks.
“This is despite a sharp rise in interest from traders and younger investors due to the meme stock phenomenon in the US. ETF investing remains more popular among matured investors, but younger investors are also increasing participation,” Winvesta said in a recent report.
Within the ETF space, however, preference among Indian investors is predominantly for the technology sector. Among the top five most-owned ETFs, technology investing czar Cathie Wood’s ARK ETFs dominated the list, with two entries while the other three held the majority of their assets in technology stocks.
ETF investing is considered by many as a useful tool for portfolio diversification because of its low cost and low risk and higher liquidity. The rising popularity of ETF investing in India can be gauged from the fact that one of India’s biggest mutual funds, Kotak Mahindra AMC, filed draft papers for three separate ETFs on the same day.
Besides rising allocation of assets to ETFs, Indian investors are also allocating a larger share of their overall portfolio to global assets. Many investors are looking at overseas investing for portfolio diversification, and allocating 10-20 per cent of their total portfolio to international stocks, Winvesta said.
The brokerage firm has seen the average account size on its platform more than double over the past 12 months to $4,700 reflecting the growing understating and preference among Indian investors for international investing.
