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Very few investors look beyond investing in Indian stocks, even after knowing the absolute benefits of diversification.
The time of the pandemic saw volatility in the stock markets worldwide. Some markets have recovered pretty quickly; however, some are still recovering.
The US stock market was one of the markets that recovered soon and reached new heights.
It is home to one of the topmost global companies, making them the best stocks ever. These stocks include Facebook, Apple, Amazon, Netflix, Microsoft, Tesla Google, to name a few.
Buying these stocks enables you to leverage their profits and become a part of their growth stories. It also helps you diversify your stock portfolio beyond the Indian stock market.
In fact, you can invest in the US stock market by sitting in India. The process has become all the easier as the Indian government does not have stringent restrictions for the same.
Here are a few more reasons why you should consider investing in the US stock market –
- The Reserve Bank of India permits Indian citizens to invest up to $2,50,000 (around 2 crore rupees) every year. So, as an investor, you have a good bandwidth to invest in the US stock markets.
- If we go back in history, the US stock markets have been less volatile than the Indian stock market. This is why investing in the US stock market will ensure more profits compared to losses.
- Most mega-global corporations have their headquarters in the US. This will help you not only diversify your portfolio but drastically enhance it by investing in big reputed giants.
- The US stock market has clearly outperformed the Indian stock market in the past decades.
- We all know that the US is most definitely a superpower. Being the center of global innovation and technical enhancement, you can have the opportunity to invest in an up-and-coming company as it establishes. In the future, you never know, they might just be the next Facebook or Apple!
How to invest in US stocks from India?
You can invest in the US stock market in these two ways –
- Directly investing in stocks.
- Indirectly investing in stocks via mutual funds or exchange-traded funds.
Being a part of direct investments
You can invest in US stocks directly. This happens by opening an overseas trading account with a domestic or foreign broker. Choosing a domestic or foreign broker is totally up to you and depends on what suits you best.
Step 1 (a): Open an overseas trading account with a domestic broker:
Many domestic brokers in India have tie-ups with stockbrokers in the US. The domestic brokers only act as intermediaries and execute your trades.
Only a few Indian brokerage houses have these tie-ups, such as ICICI Direct, Kotak Securities, India Infoline, Reliance Money, and Religare. You can easily open this trading account by submitting some important documents. These documents include a duly filled account opening form, along with your KYC documents.
The KYC documents must have your PAN card and resident proof (voter ID or latest bank statement). Once this is done, your account opening takes place.
You need to transfer some funds under $2,50,000. Once you transfer the funds, you can begin investing in foreign stocks.
However, you must remember that the cost of investment can be high due to high brokerage charges and conversion rates, so it is important for you to know all the costs involved before opening the account, the ongoing conversion rate, and the speculations in the same.
Step 2 (b): Opening an overseas trading account with a foreign broker:
If you do not want to have an intermediary making your trades, you can directly open an overseas trading account with a foreign broker.
However, this foreign broker must have some presence in India. Some of these brokerage houses are Charles Schwab, Ameritrade, Interactive Brokers, etc. Once you decide on the brokerage firm you want to open the account with, ensure that you understand all their charges and the fee structure, affecting your investment cost.
The further process remains the same as stated in the process of opening an account with a domestic broker.
Investing indirectly
You can also choose to take an indirect position in the US stock market by not investing in them directly. Here is how –
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Mutual funds:
This is one of the easiest ways to be a part of the foreign portfolio without directly investing in any single foreign stock. This does not require opening an overseas trading account or maintaining a minimum deposit to begin investing.
There are several mutual funds in India that invest in the US stocks and/or their mutual funds as a whole. Investing in such a mutual fund helps you escape the hassle of choosing the right stocks for investing.
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Exchange-traded funds (ETFs):
You can also befriend the US stocks through exchange-traded funds.
There are both indirect and direct ways in order to invest through ETFs. You can directly purchase a US ETF through a domestic or a foreign broker. What you can also do is purchase Indian ETFs of international indices, garnering similar benefits.
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New age apps:
Investing via new-age apps has become a very popular thing nowadays. More and more people are trying their hands at it, solely because of the gains and the ease of doing it.
Since mobile apps’ evolution is emerging for different types of services, several startups have launched their own apps. These apps help Indian investors invest in the US market in a hassle-free and secure way.
Vested is one of the most prominently mobile apps that allows you to invest in US stocks from India. It does not take any commission from the investor and does not require any minimum deposit, either. It is a secure medium to invest in reputed companies like Apple, Amazon, etc., at affordable prices.
On Vested, you can create an account within minutes and withdraw your profits at any time through fractional investing.
it is a legal method as Vested follows the RBI Liberalised Remittance Scheme guidelines.
How to invest in US stocks with Vested
Vested offers both direct investments in stocks and ETFs and investments through curated portfolios, called indirect investments.
Investors open an account through a virtual process with no minimum balance and commission-free investing. However, other fees do apply, such as an account opening fee, withdrawal fee, vest upfront fee, etc.
All you need to provide for an account opening is your PAN card number and copy and address proof.
You can invest directly by opening a US brokerage account. To facilitate this, Vested offers a dedicated platform where Indian investors can easily and directly purchase stocks and ETFs in the US stock market.
This method lowers overall costs for the investor since there are no commissions involved. However, you must wire funds to the US. The Liberalisation Remittance Scheme (LRS) allows this, with the annual upper limit capped at $250,000 per person, as set by the Indian authorities.
Read our full Vested review here.
These are the direct and indirect ways of how you can basically invest in US stocks from India. However, there are certain things you must remember while preparing yourself to invest in these foreign stocks –
- Only open an overseas trading account if you have the time and expertise to analyze the US market, organizations, and the news. You must be aware of analyzing the US economy critically and be informed about the ongoing matters over there to make informed decisions.
- Be aware of the time difference since you might want to access the US market as they open and close. The tie difference between that of India and the US is a whopping 10 and a half hours. This might result in a disrupted schedule, so only opt for investing in the US markets if and only if you are ready to make the desired changes in your routine.
- International investing involves higher costs compared to domestic investments. This is major because of the conversion rates. Ensure that you are informed about the account charges, brokerage fees, and currency conversion changes, too. It is imperative for you to understand all these charges in a detailed manner.
- Investing, compared to trading, is more cost-efficient in the US. This is because trading involves high charges, which can eliminate the marginal profits that traders make. Long-term investing, however, allows you to earn reasonable returns after the fees and charges, too.
- Ensure that you thoroughly read the applicable taxes as per the US and Indian laws. Make sure you have all the compliance cleared, and there is no rule breakage.
- Do not be over-excited and always start small. It will take some time for you to understand the US markets and play along as a beginner. Every economy’s market is different, which is why you should start by trading/investing small amounts instead of jumping in with a pocket filled with money. Once you get the hang of the US market, you can slowly raise your investment amounts.
EndNote:
The moment you decide to go beyond Indian borders and allow yourself to invest in foreign markets, you introduce yourself to things you never thought were possible.
There is an additional element of diversification with a superior enhancement of portfolio, growth, and learning. Every piece of information is available online, and news, through medium of the internet, is only a click away.
As an investor, this helps you analyze stocks overseas easily and be informed about the ongoing management decisions that the companies make.
However, every type of investing has its own fair share of pros and cons. As an investor, you need to make a rational decision considering all aspects before expanding your investment.