Content :
Introduction:
Investing in the US stock market from India can seem daunting, but with the right tools and resources, it can be rewarding. The US stock market is one of the largest and most advanced markets in the world, providing investors with access to a wide range of companies and financial products.
In this article, we will discuss the advantages of investing in the US stock market, the different ways to invest in US stocks from India, and some tips to help you get started.
Advantages of Investing in the US:
Investing in the US can provide diversification, access to a broad range of companies, the potential for higher returns, a stable political and economic environment, and access to advanced financial products. However, it's important to remember that investing in the stock market involves risks, and past performance is not indicative of future results.
Diversification:
Diversification is one of the key benefits of investing in the US stock market. By investing in stocks or funds that are based in the US, you can spread your risk across different companies and sectors. This can help to reduce the impact of any one company or sector on your overall portfolio.
Access to a broad range of companies:
The US stock market is home to some of the world's largest and most successful companies, such as Apple, Amazon, and Microsoft. Investing in these companies can provide exposure to a wide range of industries, including technology, healthcare, and finance.
Potential for higher returns:
Historically, the US stock market has provided higher returns than other markets. According to a study by Credit Suisse, the US stock market has delivered an average annual return of 9.8% over the past 120 years. While past performance is not indicative of future results, investing in the US stock market can provide the potential for higher returns. US stock market has outperformed the Indian stock market over the last 10 years in dollar terms.
Stable political and economic environment:
The US has a stable political and economic environment, which can provide a sense of security for investors. Additionally, the US government provides protections for investors, such as the Securities Investor Protection Corporation (SIPC), which insures up to $500,000 of securities and cash held in a brokerage account.
Access to advanced financial products:
The US financial market is one of the most advanced in the world, offering a wide range of financial products such as exchange-traded funds (ETFs), options, and futures. These products can provide investors with additional ways to manage risk and maximize returns.
Ways to Invest in US Stocks from India:
Direct Investment:
One way to invest in US stocks from India is to open an account with a US-based brokerage firm. This allows you to invest directly in individual US stocks. Some popular options for US-based brokers include Interactive Brokers, E-Trade, and Charles Schwab. However, opening an account with a US-based broker can be challenging as most US brokerage firms do not accept non-US residents as clients. Additionally, there may be regulatory and tax implications to consider.
Mutual Funds:
Investing in US mutual funds is a popular way to gain exposure to the US stock market. For investors in India looking to bet on markets beyond their own country, international mutual funds sold by Asset Management Companies provide easy investment options including via SIPs (systematic investment plans) across geographies and asset categories.
5 such strong US-focused mutual funds,
ETF and their performance (on 14th April 2023):
*Data presented might not match exactly with different sites.
Exchange-Traded Funds (ETFs):
Exchange-traded funds (ETFs) are similar to mutual funds in that they offer exposure to a diversified portfolio of US stocks. However, ETFs are traded like individual stocks on an exchange, making them more flexible and liquid than mutual funds.
Liberalized Remittance Scheme (LRS):
The Liberalized Remittance Scheme (LRS) allows Indian residents to invest up to $250,000 per financial year in foreign markets, including the US stock market. To invest in the US stock market using LRS, you need to open a trading account with an Indian broker who offers the service, such as ICICI Direct or HDFC Securities. Once you have opened the account, you can transfer funds from your Indian bank account to your trading account and start investing in US stocks.
As per the Budget 2023, you will have to pay a flat TCS (Tax collected at source) of 20%. This means if you wish to send USD 250,000 outside India, you will have to provide USD 300,000, as USD 50,000 will be collected as TCS.
Depository Receipts:
Depository receipts are a popular way for investors to gain exposure to foreign companies listed on US exchanges. There are two types of depository receipts: American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs). ADRs are issued by US banks and represent shares in a foreign company, while GDRs are issued by international banks and represent shares in a foreign company that is listed on a non-US exchange.
Open a demat account in GIFT City:
The Gujarat International Finance Tec-City (GIFT City) is an offshore financial center in India that offers investors a gateway to the international financial market. Investors can open a Demat account with a depositary in GIFT City and invest in US stocks through a depository participant.
Investing in depository receipts can provide exposure to foreign companies without the need to open a foreign brokerage account. However, depository receipts may be subject to currency exchange risk and may have higher expense ratios than US-based investments.
Applications to invest in US markets:
In recent years, there has been a surge in the popularity of online investment platforms in India, with several platforms now offering the ability to invest in US stocks. Here is a brief overview of some of the popular investment platforms in India and their features:
IndMoney:
With the INDmoney app, you can open your account in 3 minutes. INDmoney partners with Drivewealth LLC and Alpaca Securities LLC . Both are members of FINRA (Financial Industry Regulatory Authority) and SIPC (Securities Investor Protection Corporation) and are registered across the US. Any non-US account registered with a member of SIPC is treated as a resident US account. So, you are guaranteed a seamless experience with your INDmoney app.
Vested:
Invest in US Stocks from India - Vested Finance Formerly Vested.co.in
Vested is a platform that specializes in helping Indian investors invest in US stocks. The platform offers a wide range of US stocks, including tech giants like Apple, Amazon, and Facebook. Vested also offers a user-friendly interface, low fees, and allows users to invest in fractional shares. It changes 450 rupees onetime for the basic plan and PREMIUM plan costs 375/Month.
Stockal:
Investing and saving internationally, made smart, simple, and secure | Stockal
Stockal is another platform that specializes in helping Indian investors invest in US stocks. The platform offers a range of investment options, including individual stocks, ETFs, and managed portfolios. Stockal offers a user-friendly interface.
ICICI Direct:
ICICI Direct is another popular full-service brokerage firm in India that allows investors to invest in US stocks and other international markets. The platform offers access to o US stocks and ETFs. ICICI Direct Interactive Brokers LLC is the executing and clearing broker. It allows you to Invest freely without worrying about minimum balance.
HDFC Securities:
US Stock Market: Invest in the US stock market Online from India| HDFC securities
HDFC Securities is another full-service broker that offers access to US stocks and other international markets. HDFC Securities also offers a range of research and analysis tools and investment advisory services to help investors make informed investment decisions.
Groww:
Groww is a popular investment platform in India that allows investors to invest in US stocks and other international markets. The platform offers access to over US stocks and ETFs. Groww also offers a range of other investment products, such as mutual funds, gold, and fixed deposits, as well as research and analysis tools to help investors make informed investment decisions.
5paisa:
5paisa is a popular discount brokerage firm in India that allows investors to invest in US stocks and other international markets. 5paisa offers a range of other investment products, such as mutual funds, as well as research and analysis tools to help investors make informed investment decisions. 5paisa partnered with Vested to provide Zero Commission investing in the US markets for all customers.
When deciding which investment platform to use, it is important to consider factors such as fees, investment options, and user experience. It is also important to do your research and choose a platform that is registered with regulatory authorities such as the Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA).
Tax details
When investing in US stocks from India, investors need to consider the tax implications of their investments. Here are the main taxes that Indian investors should be aware of when investing in US stocks:
Capital Gains Tax:
Indian investors will be subject to capital gains tax on any profits they make from their investments in US stocks.
Long Term capital gains tax – If you held the stock for more than 24 months before selling then you need to 20% task on the capital gain and the surcharges.
Short-term capital gain tax – If you held the stock less than 24 months before selling then you have to pay the tax according to the Indian tax structure.
Dividend Tax:
Indian investors will also be subject to dividend tax on any dividends they receive from their US stocks. The tax rate on dividends is 25%, which is withheld at source by the US company paying the dividend. However, India and the US have a double taxation avoidance agreement (DTAA), which allows Indian investors to claim a tax credit in India for any taxes paid on their US dividends.
STT (Stamp Duty):
TSTT is a tax paid on the purchase or sale of securities. When it comes to mutual funds, only equity-oriented funds attract an STT payment. If you've invested in a debt-oriented fund, then no STT is applicable to it. STT of 0.025% of the sold amount is payable when you sell units of equity mutual funds. STT is not applicable at the time of purchase of equity mutual funds.
It is important for Indian investors to consult with a tax professional or financial advisor to understand the full tax implications of their investments in US stocks. With proper tax planning and compliance, Indian investors can enjoy the benefits of investing in US stocks while minimizing their tax liability.
Tips for Investing in US Stocks from India:
Research before investing: Before investing in any US stocks or funds, it is important to do your research. This includes understanding the company's financials, growth prospects, and competition. Additionally, it is important to understand the risks and potential rewards of investing in US stocks.
Diversify your portfolio: Diversification is key to reducing risk in any investment portfolio. Investing in a mix of US stocks, mutual funds, and ETFs can provide exposure to different companies and sectors, reducing the impact of any one company or sector on your overall portfolio.
Consider the tax implications: Investing in US stocks may have tax implications for Indian residents. It is important to understand the tax laws in both the US and India and how they may impact your investment returns.
Choose the right broker: Choosing the right broker is important when investing in US stocks from India. Look for a broker that offers competitive fees, a user-friendly trading platform, and good customer support. Additionally, check if the broker is registered with regulatory authorities such as the Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA).
Conclusion:
Investing in the US stock market from India can provide investors with access to a wide range of companies and financial products, as well as the potential for higher returns. There are several ways to invest in US stocks from India, including direct investment, mutual funds, ETFs, LRS, and depository receipts.
Before investing in any US stocks or funds, it is important to do your research, diversify your portfolio, consider the tax implications, and choose the right broker. With the right tools and resources, investing in the US stock market can be a lucrative and rewarding endeavor.
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