The way Indian investors think about global markets is changing in meaningful ways. While overall outward remittances under the Liberalised Remittance Scheme slowed in FY25, the investment story tells a different tale. The 235% MoM jump in equity and debt investments during March 2025, with annual investment flows reaching $1.7 billion, shows that Indian investors are moving beyond simple diversification toward building truly global portfolios with strategic intent.
The rupee’s 16% decline from ₹74.5 in January 2022 to ₹86.7 today has only reinforced this trend, effectively adding 3-4% to annual dollar returns.
Yet beyond these encouraging numbers lies a more critical decision that many investors overlook: the choice of investment vehicle. The difference between accessing US markets through direct ETF investments versus Indian mutual funds isn’t just about convenience—it’s about understanding how structural choices can significantly impact long-term wealth creation.
The Democratization of Direct Access
The traditional barriers to quality international exposure have largely disappeared. While Indian international mutual funds still require minimum investments between ₹5,000 and ₹25,000—with specialized funds often demanding much higher amounts—fractional investing has fundamentally changed the game.
Today’s platforms allow investors to own pieces of premium US stocks and ETFs starting at just ₹1. This isn’t merely about lowering entry barriers; it’s about precision in capital deployment. You can invest exactly ₹2,500 in Apple or allocate ₹1,200 to a semiconductor ETF, rather than being constrained by share price multiples or fund minimums.
The implications are profound. Assets like Berkshire Hathaway’s Class A shares, trading above $500,000 each, were historically accessible only to ultra-high-net-worth investors. Fractional ownership now allows any investor to participate in the same economic performance for amounts as modest as ₹100.
Understanding the Cost Architecture
The expense differential between US ETFs and Indian international funds reveals the true cost of intermediation. Leading US ETFs typically charge between 0.02% and 0.25% annually, with broad-market trackers like the SPDR S&P 500 ETF at just 0.09%. Indian mutual funds with US exposure generally levy fees ranging from 0.5% to 2.5%, with fund-of-funds structures often exceeding these levels.
To illustrate the wealth impact, consider a ₹15 lakh lumpsum over 15 years growing at a 12% annual returns:
US ETF route (0.1% average expense): Total cost impact of ₹7,500
Indian mutual fund route (1.5% average expense): Total cost impact of ₹13.50 lakh
The ₹13.42 lakh difference represents capital that remains invested and continues compounding rather than being extracted as fees. Over extended periods, such cost differentials often exceed the original investment, fundamentally altering wealth accumulation trajectories.
Operational Advantages of US listed ETFs
The technological and regulatory framework supporting direct international investing has reached institutional grade, fundamentally transforming how investors access global markets. US ETFs trade during market hours with real-time price discovery, enabling investors to respond to market developments immediately. This proved invaluable during periods like the March 2020 crisis or recent banking sector volatility, where timing mattered enormously.
Modern investment platforms like Appreciate now facilitate fractional investing from minimal amounts while the LRS provides clear guidelines for overseas investments up to $250,000 annually. Advanced platforms have democratised sophisticated global investing through AI-powered portfolio construction tools previously available only to institutions, eliminating traditional barriers of high minimums and complex processes.
Indian mutual funds, in contrast, execute transactions at end-of-day NAV pricing, introducing timing inefficiencies that can be costly during volatile periods. Additionally, US ETFs provide daily portfolio transparency—you know exactly what you own at all times. Most Indian funds disclose holdings monthly or quarterly, creating information gaps that sophisticated investors find limiting.
The market data reflects this operational transformation—outbound investments by Indian residents under the LRS have doubled from approximately $0.75 billion in FY 2021-22 to $1.5 billion in FY 2023-24, with substantial flows into US equities. This surge reflects increasing retail participation driven by GIFT City’s internationally regulated platforms and growing recognition of these operational advantages.
Thematic Precision and Innovation Access
Direct ETF access enables surgical precision in portfolio construction around specific investment themes. Whether targeting artificial intelligence through the Global X Robotics & Artificial Intelligence ETF, semiconductor exposure via the iShares Semiconductor ETF, or genomics through the ARK Genomic Revolution ETF, investors can achieve focused exposure aligned with their market outlook.
The performance differential is striking. Technology-focused US ETFs have consistently outperformed Indian international funds by 400-600 basis points annually. Semiconductor ETFs, benefiting from the AI infrastructure boom, have delivered returns exceeding 39% annually over three-year periods, while Indian funds with similar mandates have lagged due to structural constraints and higher costs.
This isn’t merely about chasing performance—it’s about accessing innovation cycles as they unfold. The US ETF ecosystem captures first-mover advantage in transformative sectors, from enterprise AI to quantum computing, in ways that local fund structures simply cannot replicate due to regulatory and operational limitations.
The Regulatory Arbitrage Challenge
A significant hidden cost in Indian international investing emerges during regulatory constraints. When SEBI’s overseas investment limits are reached—currently at $7 billion as of July 2025—domestic international funds often suspend fresh investments or trade at substantial premiums to underlying values.
These premiums can reach 15-25% during peak demand periods. Paying ₹125 for assets worth ₹100 creates an immediate disadvantage that must be overcome before generating positive returns. Even strong underlying performance may not compensate for this structural handicap.
Direct ETF investing through the LRS route avoids this problem entirely, ensuring investment returns derive from asset performance rather than domestic regulatory constraints.
Liquidity and Capital Efficiency
Contrary to common perception, US-listed ETFs offer superior liquidity compared to Indian mutual funds. The average daily volume on the SPDR S&P 500 ETF exceeds $40 billion, while even specialized thematic ETFs maintain bid-ask spreads below 0.10%—tighter than many domestic fund NAV deviations.
For investors seeking tactical rebalancing or systematic allocation strategies, ETFs provide unmatched flexibility with T+1 settlement and no exit loads, compared to Indian funds that often impose exit charges and limit redemption timing.
How the Benefits Add Up for US ETFs
The combination of reduced costs, enhanced transparency, superior liquidity, and precise thematic access creates compounding benefits that become substantial over investment lifetimes. For investors systematically allocating ₹15 lakh over 15 years at a 12% annual return, the cost differential alone can generate ₹10-15 lakh in additional wealth. Combined with better tracking accuracy and access to innovation themes, the cumulative impact often proves transformational.
This analysis isn’t about perfect market timing or security selection—it’s about systematically leveraging structural advantages that compound over decades. As Indian investors become increasingly global in outlook, understanding these structural differences becomes critical for serious wealth building.
The question facing today’s globally-minded Indian investors isn’t whether to diversify internationally, but how to structure that diversification most efficiently. For those focused on building substantial long-term wealth, the answer is becoming increasingly evident.
To know more about how to get started with global investing and US ETFs, click here.
The article has been written by Subho Moulik, Founder & CEO, Appreciate.
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