Can you invest in US stocks from India?
The world's largest stock, bond, and currency markets are all in the United States. The US stock markets provide investment opportunities in some of the world's largest and most well-known companies, including Apple, Amazon, Alphabet (Google), Meta (Facebook), Walmart and Tesla. There was a boom in the US stock market in the wake of the Covid-19 pandemic, with many high-risk but handsomely rewarding investment bets like FAANG (Facebook, Apple, Amazon, Netflix, and Google) stocks or Tesla leading the growth. The New York Stock Exchange (NYSE) and the Nasdaq are the two leading exchanges in the US. But can you invest in the US market sitting here in India?
First, let's understand whether and why you should consider investing in markets abroad.
There could be several reasons for investing in markets outside India. For instance, your portfolio is vulnerable to regional macroeconomic and geopolitical risks if all your investments are concentrated in the Indian stock markets. Any major national or geopolitical event like demonetisation or a war has the potential to devalue your portfolio sharply.
This risk is reduced by a well-diversified portfolio dispersed over several regions. An Indian investor who wants to diversify beyond the Indian stock markets and looking to put their money behind some of the biggest companies globally can look at investing in the US markets.
It is important to mention a word of caution here. While investing outside India can help you hedge against localised risks in the Indian market, you must also be aware of all the risks associated with other markets.
Important Tips To Keep in Mind Before Investing In the US Market
You must remember the following points before choosing to invest in US stocks from India:
● Per the Liberalised Remittance Scheme of the RBI, Indians may send up to $250,000 overseas annually. Investment costs are included here. This must be considered when investing in any US financial instruments, including securities, deposits, and real estate.
● In addition to being the home of US companies, the US stock market also enables investors to invest in multinational corporations. The US stock exchanges also boast major international corporations from China, Germany, Japan, and other countries.
● One of the most crucial factors to take into account when investing in US stocks is foreign exchange risk. Currency fluctuations have a significant impact on a regionally diversified portfolio.
● Before buying any asset, it's necessary to consider the tax implications. Understanding the tax repercussions is crucial when investing abroad. The United States and India have a double tax avoidance agreement (DTAA) that prevents the same income from being taxed twice.
● When making any investment, it's important to be aware of the fees involved. With international investing, there can be a lot of different fees charged by the broker, the government, and even the company itself.
How do you invest in US Stocks from India?
After you have conducted a thorough risk-benefit analysis of investing in the US markets and concluded that you want to proceed, you need to choose a platform for investing. TD Ameritrade, Merrill Edge, eToro, and Schwab are a few options available.
1. TD Ameritrade
There are many different investment services and products offered by TD Ameritrade. It doesn't charge a commission for trading in equities. TD Ameritrade also has a mobile app for trading in stocks and exchange-traded funds (ETF). It also provides educational material and sophisticated options contracts. Also, its clients have the option to create a managed account to aid in the management of their portfolios.
2. Merrill Edge
Merrill Edge provides investment management and news services, making it the perfect choice for novice investors.
For investors who like to engage with other investors on social media, eToro is one such platform. Investors can share their investment strategies with others and follow and copy other investors' strategies on the platform. Additionally, eToro has a mobile app that enables users to access the website from any location.
Using Schwab's mobile trading platform is a good place to start if you're new to stock investing. It provides a range of research resources, such as the Schwab Equity Ratings, which assign companies ratings based on a number of criteria, such as price, dividend yield, and volatility. Additionally, you can use these tools to filter companies by sector, industry, market capitalisation, and topic, helping you focus your search and choose the stocks most likely to live up to your expectations.
If you're considering investing in US stocks from India, remember to research the differences between the two markets before making any decisions. By understanding how to buy US stocks and how the two markets work, you can make informed investment choices and maximise your chances for success in trading in US stocks.
Q. What are the risks involved in investing?
Risk can be classified into many different categories, with some asset classes and financial products being intrinsically considerably riskier than others. But practically all forms of investment involve some level of risk. It's always possible that the value of your investment won't rise over time or even decline. As a result, managing risk is crucial for investors in order to reach their financial objectives.
Q. How do brokerage fees and commissions work?
Customers pay a commission to brokers for each trade. Exchange-traded funds and mutual funds, among other investment options, charge fees to cover fund management costs.
Capital gains are the gains made on the sale of shares and investors have to pay a tax on such gains depending on whether they are short-term capital gains or long-term capital gains. Let us look at these taxes a little in detail.