While it may appear difficult, how to invest in us stock market from India can be profitable with the correct information and direction. We’ll simplify the procedure and provide you with all the information you need to get started in the world of foreign investment in this tutorial.
Reasons How to Invest in US Stock Market from India
- Opportunity to Invest in Top Companies: You can invest in several well-known US stocks, including Amazon, Apple, Tesla, and others, from India. The US stock market offers a distinct investing opportunity due to its immense size, high trading volume, and variety of investment possibilities.
- Portfolio Diversification: Portfolio diversification aids in hedging against market-related swings. You can increase the scope of your investment portfolio by purchasing US equities from India. By doing this, you can lessen the financial dangers brought on by the ups and downs in the Indian market.
- Potential Currency Gains: The profits you make from investing in the US stock market are increased by currency exchange rates. January 2018 saw the US dollar at ₹63, while January 2023 saw it at ₹83. In five years, that is a 30% appreciation. You can also profit from the simple value of dollar growth by investing in US stocks.
- Higher Returns with Less Volatility: All markets experience ups and downs, but the Indian stock market has seen more significant fluctuations than the US one. Aside from the 2022 Russo-Ukrainian conflict that rocked most international markets, investors find the US market to be a less volatile option due to its relative stability and controllable cyclical fluctuations. This has guaranteed steady returns for investors, especially when combined with the Dollar’s continuous rise.
- Tapping into Innovation: The United States is home to thousands of potential businesses, making it the hub of innovation. Buying US stocks allows you to benefit from all the revolutionary advancements being made, helping you increase your wealth in industries like robots, AI, ML, and biomedicine. You can take advantage of early bird admission incentives and leverage the development potential of emerging innovative ventures.
Things to Consider Before Invest in US Stock Market from India
Investment Cap: Under the RBI’s Liberalized Remittance Scheme or LRS, investments in the US stock market are subject to regulations. A $250,000 annual investment cap per investor is mandated by the LRS. This specified investment cap must be adhered to by your investments.
Investment Goals: Your investment objectives have to be at the core of your investment plan. Stated differently, your strategy must align with your overall life objectives – moving to a new place, helping your kid pay for college, or simply saving money for retirement. After determining your investing objectives, you can select a direct or indirect investment path that best serves your needs.
Ancillary Charges: When investing in US stocks from India, additional costs are associated with it outside taxes on your earnings. There are numerous overheads to take into account, ranging from annual maintenance fees to brokerage fees, FX conversion charges, and transaction expenses. You do not have to pay any additional brokerage or costs unless you are investing in US equities through Fi Money.
Taxation: The Double Tax Avoidance Agreement, or DTAA, protects your gains from stock market investments made in the United States. The same income cannot be taxed more than once, per the agreement. Due to the DTAA, Indians’ dividend income from US stock investments is subject to a 25% tax and may be claimed as a Foreign Tax Credit on domestic tax returns. While there is no tax on capital gains in the United States, holdings held for two years or longer are subject to a 20% long-term capital gains tax in India. Short-term holdings (less than two years) that result in capital gains are taxed according to your income slab and added to your annual income.
How to Invest & Buy in US Stocks Markets from India
- Direct Investment:
- Create a US Trading Account: Work with a domestic broker that provides global platforms to invest in US stocks from India. Investors can trade US equities straight from India thanks to brokerage firms like ICICI Direct, Kotak Securities, and HDFC Securities, which offer easy access to US trading accounts. Through partnerships with these brokers, investors can gain access to an extensive selection of US stocks and effectively oversee their investment portfolios across global markets.
- Fund Your Account: Investing in US equities from India can be achieved by transferring funds to your US trading account via approved methods such as the Liberalized Remittance Scheme (LRS). The Reserve Bank of India (RBI) has a policy called the Liberalized Remittance Scheme (LRS) that makes it easier for Indian citizens to send money overseas than it was before.
- Trade US Stocks: Buying and selling individual stocks or making direct investments in US-listed Exchange Traded Funds (ETFs) like the following are made possible by investing in US stocks:
- SPDR S&P 500 ETF (SPY): exposes investors to 500 large-cap US firms by tracking the S&P 500 index.
- Vanguard Total Stock Market ETF (VTI): provides exposure to the whole US stock market, including large, mid, and small-cap firms, by tracking the US Total Market Index.
- Invesco QQQ Trust (QQQ): exposes investors to 100 of the biggest non-financial companies listed on the Nasdaq stock exchange by tracking the Nasdaq-100 Index.
- iShares Core MSCI Emerging Markets ETF (IEMG): follows the MSCI Emerging Markets Index and provides exposure to a global basket of companies from developing nations.
- iShares Global Aggregate Bond ETF (AGG): gives exposure to investment-grade bonds issued by governments and businesses worldwide by tracking the Bloomberg Barclays Global Aggregate Bond Index.
- Indirect Investment:
- Mutual Funds: You can choose to buy in US equities through mutual funds situated in India if you’re looking into ways to invest in US stocks from India. By offering skilled management and diversification, these funds lower the risks involved with direct stock investments. Some India-based mutual funds that provide exposure to US stocks are ICICI Prudential US Bluechip Equity Fund, Franklin US Opportunities Fund, SBI US Dynamic Equity Fund, and HDFC US Bluechip Fund. You can look into and choose mutual funds that allocate a sizable percentage of their assets to US equities to learn more about investing in US stocks from India.
- Exchange Traded Funds: You can also select India-listed exchange-traded funds (ETFs) that track US stock market indices, such as Nifty US Equity ETF, ICICI Prudential MSCI ACWI IMI ETF, and Nippon India, to obtain additional possibilities for investing in US equities from India. Pastel exposure is provided by the Nifty Next 50 ETF. Investors can buy shares using the trading platform by opening brokerage accounts with companies that grant access to Indian stock exchanges, where these ETFs are listed.
- ADRs/GDRs: Invest in US stocks that are traded on Indian exchanges as American Depositary Receipts (ADRs) or Global Depositary Receipts (GDRs). Through these financial products, investors from India’s domestic market can purchase US stocks. To trade ADRs or GDRs with ease, individuals looking for information on how to invest in US equities from India can open brokerage accounts with companies like ICICI Direct, HDFC Securities, or Kotak Securities. These companies provide access to Indian markets.
Charges and Taxes on Investing in US Stocks
- Transaction Charges: Platform charges related to every transaction.
- Conversion Fees: fees associated with changing US money into rupees and vice versa.
- Indian Capital Gains Tax: applicable to gains made from the sale of American stocks.
- Brokerage Fees: fees for trades and account maintenance that your selected broker charges.
- US Withholding Tax: Dividends from US equities are subject to a 10% tax unless a tax treaty reduces this amount.
How Much Can You Invest?
Under the Reserve Bank of India’s LRS scheme, citizens of India are permitted to invest up to USD 250,000 in US stocks per fiscal year. This amount covers both capital and current account transactions, such as purchases of foreign real estate and payments for investments, education, and healthcare.
Investors who understand how to buy US stocks from India can now access high-growth prospective companies and diversify their portfolios thanks to this higher limit. However, you must first ascertain your financial objectives and your preferred approach (direct or indirect) before investing in the US market.
FAQ of How to invest in us stock market from India
Q1. What is the Direct Plan for the Samco ELSS Tax Saver Fund?
It is required that the Samco ELSS Tax Saver Fund – Direct Plan invest at least eighty percent of its assets in equity securities. Under Section 80C of the Indian income tax legislation, it provides tax exemption. Investments in qualifying securities up to Rs 1.5 lakh in a financial year are tax-free under this section.
Q2. Should I make short-term investments in US stocks?
Stocks are therefore not good short-term investment vehicles. The long-term performance of stocks is superior to that of most other financial tools, with higher returns. Therefore, long-term stock investments in the US would be a wiser course of action.
Leave a Comment