How to Invest in The US Stock Market from India ?

Know to Invest in The US Stock Market in few easy steps from India – The recent pandemic has boosted the stocks market around the world and almost all the indices has grown with a good returns to the investors. The S&P BSE Sensex might have more than doubled in the last 10 years but S&P 500 index rose more than 200 percent in the same period. 

This is a big factor that makes global investing attractive. The advantage of putting money into US markets is that it gives access to investors to deploy money in companies that have a global presence like Facebook, Google, Apple, GM, Tesla etc.

Global investments are also a tool to minimize the risk. Investors are investing a small part of their portfolio towards global markets.

Due to Digital era, it is now easy to invest in the US markets. There are numerous apps and various discount brokerage firms that has opened the doors to Indian investors to invest directly into stocks of US markets at the most easiest ways.

RBI Guidelines to Invest in US Stocks from India

The Reserve Bank of India (RBI) released guidelines under the Liberalized Revenue Scheme (LRS) that permitted an Indian Resident to invest up to $ 250000 per year without any special permissions but not directly but through brokerage firm. 

Benefit of Investing in the US stock Market from India ?

  • The US stock market indices have been less volatile as compare to any other stock market indices including Indian markets
  • Most of the global companies are headquartered in the US that offers you a more diversified investment avenue
  • The US stock market has outperformed the Indian stock market over the last decade in pure dollar terms
  • With the US being at the center of global innovation, you can invest in a promising company during its initial stages

How to Invest in the US stock Market from India?

There are two distinct ways of investing in the US stock market from India:

  1. Direct investment in stocks
  2. Indirect investment in stocks via mutual funds or ETFs

Direct Investments in US Stocks

You can invest in US stocks directly by opening an overseas trading account with a domestic or foreign broker.

Also Read – How to Calculate Haircut in Stocks Trading ?

1. Opening an Overseas Trading Account with a Domestic Broker

Many domestic brokers have tie-ups with stockbrokers in the US. They act as intermediaries and execute your trades. You can open an overseas trading account with any such broker. You will have to submit a set of KYC documents like PAN Card, Aadhaar, Passport etc  to open this account. 

The cost of investing will be higher considering brokerage and currency conversion charges. There may be certain restrictions on the investments based on the different brokerage firms. Hence, ensure that you know all the costs before opening an account.

2. Opening an Overseas Trading Account with a Foreign Broker

You can also open an overseas trading account directly with a foreign broker with a presence in India. They are having the higher charges and you must ensure that you understand the fees and charges before opening the account.

Indirect Investments

As like local investments, you can take an indirect position in US stocks without investing in them directly. Here are two options to consider:

1. Mutual Funds

MFs are the easiest way to invest in stocks listed on exchanges outside India. You don’t need to open an overseas trading account or maintain a minimum deposit that can be the case with some stockbrokers offering direct international investments.

There are many mutual funds that invest in US stocks and/or mutual funds as like I am investing in ICICI Prudential US bluechip equity funds etc.. 

2. Exchange-Traded Funds (ETFs)

Another way to invest in the US stocks is through ETFs. There are direct and indirect routes available for ETFs. You can purchase US ETFs directly via a domestic or international broker or purchase an Indian ETF of international indices. 

3. Investing via Digital Apps

These are the smartest ways to invest in the US stocks but the effectiveness is to be considered about. 

Important to know before investing in the US stocks From India

  • As far as possible, open an overseas trading account, this will help you to analyze the US market and economy and make informed decisions.
  • Always look for the account charges, brokerage, and currency conversion charges, etc. It is to remember that the high charges can eat away the marginal profits. 
  • Investing is more cost-efficient than trading in the US market.
  • Consider applicable taxes as per the US and Indian taxation laws.
  • Start small and increase your investment as you gain an understanding of the US markets.

Tags:

We will be happy to hear your thoughts

Leave a reply

Digital Banking FAQs & Helpdesk