Investing in US Stocks from India Explained: If you’re wondering if Indians can invest in the US stock market, the answer is yes. There are many Indian investors who buy stocks listed on US stock exchanges. These are generally those investors who want to diversify their portfolios beyond Indian equities, and not limit themselves to only stocks listed on NSE and BSE. In this article, we will look at the reasons why would someone need to invest in US stocks and how can they do so.
Why do you Need to Look at US Markets?
Experts of the Industry say Indians should be looking at investing overseas to diversify their portfolio. Today, Indian investors are known to be one of the biggest consumers of global brands like Amazon, Facebook, Google, and Netflix.
However, when it comes to investing, they restrict themselves to domestic companies. Along with that, the US Stock Market amounts to 50% of the world stocks by market capitalization. Investing in US markets gives Indian investors access to one of the world’s largest and most liquid stock markets.
In the internet world, accessing overseas markets is not inexpensive or a complex proposition. Regulatory and technological changes have democratized investors to invest small amounts and diversify their portfolios with expensive stocks like Amazon and Google.
An investor who is looking for long-term Investments and can handle volatility should also be investing overseas. Someone with future overseas expenses for an educational travel retirement should consider overseas investments to reduce the Indian Rupee depreciation risk.
An investor who aims at adding large growth stocks as a portfolio could also consider investing in the US market.
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Investing in US Stock Market from India
On an overview there are two distinct ways to invest in US Stock Market:
- Direct investment in the stock
- Indirect investment in stocks through mutual funds and ETFs
1) Direct Investment
Opening an Overseas trading account with a domestic or foreign broker is the method followed to invest in US stocks directly.
— Overseas Trading Account with a Domestic Broker:
A lot of domestic brokers are tied with the stockbrokers of the US. Play to be an intermediary and execute a successful trading operation. You can easily open an Overseas trading account with such a broker by submitting a set of documents.
Keep in mind that this facility has some restrictions. Depending on the brokerage firm, you might have some restrictions on certain investment vehicles or the number of shares you can buy, and much more.
The cost of investing can be high sometimes given the growth rate, currency conversion charges, and more. So, make sure you know all those costs before you open the account.
— Open A Trading Account with a Foreign Broker:
Open an Overseas trading account with the foreign broker who is present in India. But make sure you understand the fees and charges again before you could open the account.
2) Indirect Investments
— Through mutual funds
A mutual fund is one of the easiest ways to invest in stocks listed on exchanges of the USA. You do not need to open an Overseas trading account, maintain a minimum deposit, and more.
There are a lot of mutual funds that investors can utilize from the US Stock market. If you want to see yourself away from the hassle of choosing the right stocks for investing, you can invest in a mutual fund but make sure you pay close attention to the expense ratio of the mutual fund scheme before you buy it.
— Exchange-Traded Fund
In order to gain exposure in the US market, you can also invest in ETFs. There are direct and indirect routes available. You can purchase a US ETF directly through a domestic, International broker or through International indices.
With websites and applications in the market, you are given direct access to the international market. You can easily find stocks, shares, and funds from markets abroad.
The evolution of mobile has left applications of different types providing different services launched by companies for Indian investors to invest in the US market, so make sure to use these benefits at your convenience.
Pros you need to look into before Investing in US Market
Do you know why people invest in the US market? Well, here is the answer to that:
1) Defense Against the Rising Dollar
The basic reason to invest in the US is to protect your wealth from eroding against the rising value of the US dollar. Every time the Rupee Falls against the dollar, an investor would know that they have some wealth that is growing irrespective of this depreciation.
2) Creating a Nest Egg
Investing in US Stock makes more sense if you plan to live in America or have children who study abroad or want to study abroad. You also get to participate in the world’s most mature economies and interest in dollars.
3) Geographically Diversifying the Portfolio
USA’s Gross Domestic Product is ten times that of India, which means you are participating in a much larger market with US-based companies accounting for 35% to 40% of the world market capitalization. It is also one of the biggest stock markets in the world, holding the stocks of the biggest and most popular companies.
4) Performance in History
The NASDAQ and Dow Jones Index half outperformed Nifty and Sensex. So much so that many times the US market rose when the Indian market fell. They have outperformed the Indian market, making it secure for an investor that they would most probably do so in the future too.
There are risks, of course, that you might keep in mind while investing in the US market. The higher your risk, the higher your gains. If your concern is your risk, just remember you might lose in dollars, but you also make profits in dollars.
Most importantly, you will be playing in a market that holds one of the biggest hands in the world markets. You can ensure risks don’t take place with expertise and pointers from your experience by educating yourself or through the Indian Stock Market.
That’s all for this post. We hope you have like and learned something new from our article on how to invest in US stocks from India. Let us know your views in the comment section below. Happy Investing and Trading!