Table of Contents
1. How to Invest in US Stock Market from India – Introduction
In recent years, Indian investors have increasingly sought opportunities in global markets, with the United States standing out as a particularly attractive option. This shift is driven by a desire for diversification, risk management, and the potential for higher returns.
Global Investment
Investing in global companies across various sectors allows Indian investors to create a more balanced and diversified portfolio.
Diversification is a crucial strategy in investing; it reduces risk by spreading investments across different assets.
For example, if an investor holds stocks in both Indian and US companies, a downturn in one market may be offset by gains in another.
Investment Strategies
Traditionally, many Indian investors focused solely on domestic stocks, building portfolios that reflected the Indian market’s characteristics.
However, this trend is changing. Investors are increasingly constructing portfolios that include both domestic and international stocks.
This approach not only opens up a wider array of investment opportunities but also helps mitigate risks associated with economic fluctuations in any one country.
For instance, during times of economic uncertainty in India, stocks in the US might perform better due to their exposure to different economic conditions. By incorporating international investments, Indian investors can achieve a more resilient portfolio.
A Balanced Portfolio
Consider an investor who holds shares in Indian companies like Infosys and HDFC Bank. To diversify, they might also invest in US-based companies such as Microsoft and Visa.
This mix provides exposure to both the Indian economy and the robust performance of US tech and financial sectors.
If the Indian market experiences a downturn, the performance of US stocks may help cushion the impact on the overall portfolio.
2. How to Invest in US Stock Market from India – The US Market – Major Indices
Dow Jones Industrial Average: Tracks the performance of 30 large-cap US companies.
S&P 500 Index: Comprises 500 leading US companies, providing a broader representation of the market.
Nasdaq Composite Index: Tracks the performance of over 3,300 stocks, primarily technology-focused companies.
3. How to Invest in US Stock Market from India – Two Routes
If you’re wondering, how to invest in US stock market, how to start investing in US stock market or how to invest in US stocks from India, the answer here.
When it comes to investing in the US stock market from India, you have two primary routes:
- Direct investment – Buy Stocks
- Indirect investment – Invest in Mutual Funds or Exchange traded Funds (ETFs)
Each method has its own advantages and considerations, making it essential to choose the one that aligns with your investment goals and risk tolerance.
Direct Investments
Invest in the US stock market directly by opening an Overseas Trading Account with either with domestic or foreign brokerage firm.
It’s essential to carefully consider the fees and charges associated with each platform before selecting the best app for your US stock investments.
By comparing commission rates, currency conversion fees, and any additional costs, you can find a broker that suits your investment style and budget.
Indirect Investments
Mutual Funds
There are more than 7,500 mutual funds in the United States invests in US Stocks and/or Mutual Funds. By investing in mutual funds you can invest in US stocks from India.
Exchange Traded Funds
One can gain exposure to US stocks by investing in ETFs. One can buy US ETFs directly via a domestic or international broker or buy an Indian ETF of international indices.
4. How to Invest in US Stock Market from India – Overseas Trading Account
Investing in US market or any other country as a foreigner one needs to have overseas trading account. Overseas trading account can opened with Domestic broker or with foreign broker by submitting certain required documents.
Overseas Trading Account with a Domestic Broker
Many domestic brokers partner with US stockbrokers to facilitate international trading/investing, acting as intermediaries for executing your trades. You can open an overseas trading account through one of these domestic brokers.
One has to confirm the currency conversion charges and brokerage commission, other charges if any before opening the account.
Overseas Trading Account with a Foreign Broker
One can also open an overseas trading account directly with a foreign broker with a presence in India.
There are brokerages like Ameritrade, Charles Schwab and Interactive Brokers etc. One should ensure and understand fees and charges before opening the account.
Do your own research properly before you pick the best broker to invest in US stock market.
5. How to Invest in US Stock Market from India – Charges and Fees
Brokerage Fees:
Charges or fees paid on the buying and selling of shares.
Currency exchange rate:
The currency exchange rate at the time of buying or withdrawal can impact the costs and the number of units allotted.
Bank Charge:
Most of the banks charge currency exchange conversion fees and transfer fees. There may also be a one-time account setup charge.
Tax Collected at Source:
As per RBI guidelines starting October 1, 2023, any personal remittances above 7 lakh rupees annually will incur a 20% TCS rate on the amount exceeding this threshold.
The remitting entity deducts this Income Tax before transferring the funds overseas.
Dividend Tax:
In the United States, dividends are taxed at a rate of 25% for Indian citizens (which is known as withholding tax). Owing to the Double Tax Avoidance Agreement (DTAA) between US and India the investor can claim credit for taxes paid in US so that he/she doesn’t have to pay tax on the same income twice.
Capital Gains Tax:
There is no capital gains tax on your investments in the United States. But one should liable to pay tax on the capital gains in India.
Reader may also like to read:
Top 10 high return mutual funds in India
https://www.angelone.in/us-stocks-vested
Disclaimer: No content on this website should be treated as investment advice. All the content offered on the website is for informational purposes only. Please contact your adviser before making an investment.