Nasdaq hits 20,000: Are you feeling FOMO?

The Nasdaq recently touched the 20,000 mark, catching the attention of investors globally.

Although regulatory limits have made accessing global markets increasingly challenging for Indians, the two investor-friendly options, aside from the Liberated Remittance Scheme route, to invest in US stocks are:

• US-focused ETFs
  
• International mutual funds

Let's take a closer look at each of the two options.

US ETFs

US-focused ETFs listed on Indian stock exchanges provide a straightforward way to access international markets, including exposure to the Nasdaq 100.

However, these ETFs are currently trading at significant premiums to their net asset values (NAVs), making them an expensive choice.

They are prohibitive because either they are in high demand or there is less supply, which is the case this time.

Why shouldn't you buy ETFs at a premium?

• Buying at a premium reduces the potential long-term returns of your investment.
  
• You could be paying more than the ETF is worth, and a price correction could erode your capital.

How to check the real price of an ETF
Always check the iNAV. It can tell you whether an ETF's price is inflated or not.

You can check the iNAV on the stock exchange's website or the respective fund house's website during market hours.

International mutual funds

These can be a more cost-effective option.

These may not focus exclusively on the Nasdaq but can provide diversified exposure to the US and global equities, including sectors like technology, healthcare and consumer goods.

Quick recap

The Nasdaq's rise to 20,000 is impressive, but chasing this milestone without evaluating costs and risks can hurt your financial health.

• ETFs trading at a premium may seem like the easiest way to invest internationally, but their higher costs and potential overvaluation warrant caution.
  
• Mutual funds offering diversified international exposure are worth considering.

By aligning your investments with long-term goals and carefully evaluating costs, you can achieve meaningful global diversification without falling into the FOMO trap.

For personalised guidance on building a well-diversified portfolio, consider subscribing to Value Research Fund Advisor. With expert recommendations and insights, it helps you make informed investment decisions.

Also read: Is Nasdaq better than Nifty?