How much of your portfolio should be in USD? Currency allocation for Indian investors

The rupee has lost roughly half its value against the dollar in the last 20 years. That structural depreciation is not noise — it's a predictable feature of an economy with higher inflation than the US. For Indian investors building long-term wealth, ignoring USD assets entirely means accepting currency erosion on your entire portfolio.

But how much is the right amount to hold abroad? This guide frames the decision. Use the currency hedge sizing calculator to model your specific situation.

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The rupee depreciation baseline

Period	INR/USD
2005	≈₹44
2010	≈₹46
2015	≈₹63
2020	≈₹75
2026	≈₹93

Annualised depreciation: roughly 3.2% per year over 20 years.

What does this mean for returns? A US investor earning 10% annually in a US ETF in USD would, when converted to INR, have earned approximately 13.2% per year — with 3.2% from currency tailwind alone. That's not a guarantee (currency can move against you in any given year), but the structural direction is well-established.

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Match currency to goals

The right framework: hold assets in the currency of your goals.

• Foreign education for a child in 10 years: costs in USD/GBP/AUD — hold a portion in US ETFs or foreign assets to avoid the exchange rate risk
• Early retirement in India: costs in INR — Indian equities, bonds, real estate make sense for most of this
• Potential relocation abroad: costs in USD — US brokerage assets are directly usable
• Travel goals: USD/EUR spend — a smaller USD position makes sense
• Domestic goals only: Indian market exposure is sufficient; USD is upside, not necessity

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A sizing framework

There's no universal right answer, but a reasonable starting framework:

5–10% of total portfolio in USD assets for an investor with purely domestic goals and no foreign currency obligations — as a structural hedge against extreme rupee depreciation events.

20–30% for investors with significant foreign currency goals (child's foreign university, likely relocation in 5–10 years).

Up to 30–40% for someone with a US salary history, existing foreign assets, or active LRS deployment who is comfortable with the added FX tracking.

The currency hedge sizing calculator asks for your expected USD-denominated expenses over 10–20 years and computes how much of your current portfolio to allocate to USD assets to cover those obligations without FX risk.

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The return argument (beyond hedging)

Even without a specific USD-denominated goal, US market returns justify some allocation. The S&P 500 has returned approximately 10–11% in USD annually over the last 30 years. Add 3% rupee depreciation and Indian investors holding VOO over the same period would have seen approximately 13–14% annualised in INR.

Comparison: Nifty 50 has returned approximately 13–14% in INR over the same period.

In pure return terms, the gap is small over long periods. But:

• US exposure diversifies away from Indian political/regulatory risk
• US tech concentration gives access to companies not listed in India (NVIDIA, Apple, Meta, Amazon)
• USD assets act as insurance against tail risk (India-specific shocks, currency crises)

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The LRS constraint

The $250,000/year LRS cap per person limits how fast you can build a USD position from scratch. At current rates (≈$250,000 = ₹2.3 crore/year), most retail investors won't hit this ceiling. But for HNIs trying to shift a significant portfolio offshore quickly, the cap is real.

TCS: Above ₹10 lakh in LRS remittances per year, 20% TCS is deducted at the bank. This is a creditable prepayment — you recover it in your ITR — but it creates cash drag. The LRS & TCS calculator shows the exact cash drag per remittance.

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Practical implementation

For most investors, the simplest USD position is a broad US market ETF:

• VTI (Vanguard Total Market, 0.03% expense ratio): entire US market
• VOO (Vanguard S&P 500, 0.03%): S&P 500 only
• QQQ (Invesco Nasdaq 100, 0.20%): tech-heavy

Accessible via Vested, INDmoney, Interactive Brokers, or similar platforms after LRS remittance from your bank.

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What not to do

Don't hold USD in a savings account for long periods. A US savings account earns 4–5% (currently) but you give up all equity upside and the account must still be declared in Schedule FA. For long-term hedging, equity assets are better than cash.

Don't size USD at 100% of your portfolio unless you have 100% USD-denominated expenses. You live, spend, and will likely retire in India. Your baseline liability is INR.

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The one-line version

3% annual rupee depreciation is structural — a 20% USD allocation makes sense for most Indian investors, larger if you have dollar-denominated goals. Use the currency hedge sizing calculator to match your foreign asset position to your actual USD obligations.