By Raj Gandhi
Investing around 15-20% of your portfolio in US markets is a good investment strategy against two major risks: rupee depreciation and inflation. It also works well for aligning financial goals with future dollar goals — higher education for kids, destination wedding, international vacations, buying real estate overseas.
Diversification is not only synonymous with minimizing risk. US markets offer investment opportunities among the best companies in the world. It is not necessary to be limited to companies that operate in the same geographical area and in fact include the megaliths that have the largest market capitalization in the world.
As a beginner, here are some sectors that one can consider investing in the US stock market.
Banking and financial services
It’s no wonder Warren Buffett likes bank stocks. The legendary billionaire investor holds more than $80 billion of Berkshire Hathaway’s (NYSE: BRK.A) (NYSE: BRK.B) $330 billion equity portfolio invested in this sector alone.
The reason is simple: Bank stocks have many of Buffett’s staples. First, banks serve an important societal need that will never go away. Second, banking business models are relatively simple to understand. Third, despite the dramatic improvement in the health of many banks since the 2008 financial crisis, some bank stocks are trading at a premium – a key indicator that now is the best time to invest.
Pharmaceuticals and biotechnology
Early-stage biotech companies are prone to sharp swings in revenue due to the fact that they go from almost no revenue to a significant revenue stream once a drug is approved or a partnership with another company is concluded. This means that growth numbers should be seen more as an indication that the company has achieved some sort of breakthrough with regard to research, corporate partnerships or other events in its business life cycle, rather than the way you normally think of growing up. .
Alpha generation: For companies seeking organic growth through outperformance, the adoption of alternative datasets and artificial intelligence (AI) has proven to be a differentiator for generating additional alpha.
Improved operational efficiency: Companies will continue to deploy AI and advanced automation to continuously improve the efficiency of their operations. Beyond that, companies can turn these traditional cost centers into AI-powered “as a service” offerings.
Improve the distribution of products and content: Customer experience is a new battleground, and AI is helping advisors generate more insights, personalize content more efficiently, and deliver it to customers with greater agility and speed.
Risk management : AI is a game-changer for risk management. AI provides businesses with the tools to strengthen compliance and risk management functions, augment and automate data analysis, and anticipate and manage ambiguous events.
AI is created through machine learning, which involves training a system with massive amounts of data. It then uses the trained system to make inferences about new data it has never seen.
The simplest example is a system designed to detect objects in images. Images with these objects are provided to the system, which “learns” how to detect these objects in other images. The more objects it detects in the images, the more accurate the detection system becomes.
Businesses use artificial intelligence in two main ways. Many tech companies are using AI to make their existing operations more powerful, for example through high-level applications including robotics, self-driving cars and virtual assistants. Google, a subsidiary of Alphabet (NASDAQ:GOOGL), (NASDAQ:GOOG), uses AI to filter spam for Gmail users. Amazon (NASDAQ: AMZN) uses AI to recommend products to customers, while Netflix (NASDAQ: NFLX) uses AI to guide content creation and recommendations.
These are companies that serve the cloud and contribute to its operation. They provide the software, hardware, and services needed to run the cloud. Companies like Dell Technologies and Intel are part of this group. They own the largest data centers and control the flow of information through the cloud. These include companies such as Meta (formerly Facebook), Alphabet (parent company of Google), Apple, Amazon.com and Microsoft.
Another faction of cloud computing includes cloud service companies. They are the main players providing information and services on the Internet – often they offer services that were not possible before the development of the Internet, or have migrated their services to be Internet-based. Salesforce.com and Netflix.com are examples of web-based companies that rely on the cloud for their core business model.
(The author is co-founder of DollarBull Fintech Platform, which provides Indian investors with global investment solutions)