There are multiple foreign companies dominating the global market. These include companies like Apple, Amazon, Google, Microsoft, Tesla, Samsung, Netflix and Facebook. These companies are global leaders and generate high returns for their investors.
In the financial year 2020, Tesla ‘s stock skyrocketed and surged up to 740%, making it one of the hottest stocks listed on the market. It was only Tesla but stocks of all the leading global companies which generated high returns for their investors.
Here is a snapshot of companies which generated significant returns :
|Data processing services
• Facebook climbed 33%.
• Netflix jumped 67%.
However, these companies are not Indian companies and are not listed on Indian stock exchanges. However, these companies are public and listed on the stock exchange of their respective Countries. In this post, we’ll discuss the easiest way to as to how to invest in US stocks from India.
Why should you invest in stocks from the US ?
Retail investors in India are looking to diversify their portfolios and seize greater opportunities to achieve massive returns on foreign equities. We are talking about multi-billion-dollar companies such as Google, Apple, Facebook, Amazon, Samsung, Cisco and Tesla. These businesses have huge capital and are managed by highly qualified professionals.
These are afew reasons why you should consider investing in foreign equities-The US stock market had consistently outperformed the Indian stock market over the last decade.
The Indian Rupee has depreciated 44% compared to the USD in the last decade. This has a significant negative impact on the returns of Indian stocks widening the performance gap.
- The US stock market is less volatile than the Indian stock market. The volatility of the Dow Jones Index was 3.92% whereas the BSE Sensex was considerably more volatile at 5.06% in the last ten years.
- The US has headquarters of the biggest multi-billion dollar Companies.
How To Invest In US Stocks From India ?
1. Open an account with an Indian broker having a tie-up with a foreign broker.
Many Indian brokers like HDFC Securities, ICICI Direct, Kotak Sec, Axis Securities and Reliance money have tie-ups with foreign brokers. In order to trade foreign securities directly, these domestic brokers can assist you in opening a foreign trading account through a (foreign) trading broker.
For Example, ICICI Securities has tied up with Interactive Brokers LLC, a US-based online brokerage firm to offer its customers the ability to invest in the US markets.
The investment cost may be higher given the brokerage and currency conversion fees. Therefore, it is necessary to make sure that an investor is aware of all charges before opening an account.
2. Opening an account with foreign brokers
- There is also an option to open an overseas trading account directly through a foreign brokerage firm.
- Brokerage firms like Interactive Brokers, TD Ameritrade and Charles Schwab International Account allow Indian citizens to create an account and trade in US equities and mutual funds
- Make sure you understand the fees structure before setting up the account.
3. Investing in Foreign stocks through new startups Apps
- There are start-ups launched in India and abroad which help Indians invest in foreign stocks.
- GROWW, Vested Finance and Webull are applications which help Indians invest in American equities.
- Indian dealers have started offering customers a facility to invest in the US and foreign equities market
- For example, Zerodha plans to provide the option to invest in US equities with no minimum investment. However, these features have yet to be launched.
- However, these brokers working on these characteristics are a good sign for Indian retail investors who are enthusiastic about investing in foreign companies.
4. Buying Mutual Funds, ETFs with global equities
- This is one of the easiest ways for a retail investor to make investments in foreign equities.
- There are a number of mutual funds/ETFs There that have launched schemes that invest in international markets.
- An advantage of investing via mutual funds is to open a foreign trading account.
- Investors can start with small amounts of investments to gain experience.
For example, Motilal Oswal recently started its subscription for itsMotilal Oswal S&P 500 Index Fund. It consists of leading 500 companies listed in the US.
A few of the popular mutual funds that trade in global equities are—
- Motila l MOSt Oswal NASDAQ 100 ETF
- Aditya Birla Sun Life International Equity Fund -Plan A
- Reliance US Equity Opp. Fund DP (G)
- HSBC Global Consumer Opportunities Fund
- Kotak US Equity Fund – Direct (G)
Have Investors Weighed the Pros & Cons ?
- Diversification and Global Exposure: Adding US equities to your portfolio will add stability and assist you to be a part of growing global economies.
- Currency exposure: One of the primary benefits of investing in the US markets is the US dollar. As it grows in value, so does the value of investments, even though your portfolio itself has not changed. Considering the Indian rupee which has experienced a steady decline in its value against the US dollar. It is a major disadvantage since all investments made in the Indian markets are in INR, which means that their value decreases over time.
- Bigger opportunities: By investing in US stocks you widen your horizon and seize better opportunities. Google, Twitter, Facebook, Amazon and Tesla are jewels of this generation that are continuing to grow and expand their businesses around the globe. And of course, many people want to invest in these companies.
- Currency Fluctuations – If INR performs well in upcoming days your foreign investment will or USD depreciates your investments will reduce your returns.
- While investing in US stocks, you’ll be transacting in US dollars. You will have to pay the brokerages in the US dollar. Similarly, the annual/monthly maintenance charges may also be higher compared to domestic accounts.
- Indian residents can invest up to $250K abroad. With the current exchange rate of ($1= Rs 70), this amount is more than 1.8 crores. In any case, if you have a family of 4, you can invest 4 x 250,000 $ = 1 million dollars. That ought to be enough money to invest.
- Market Characteristics: An investor unfamiliar with how a country’s market operates can make costly mistakes.
Concluding Remarks For How To Invest In US Stocks From India
In this article, we discussed different ways to invest in US stocks from India; we also covered the advantages and disadvantages of investing in foreign stocks.
Investing in the foreign market will help you diversify your portfolio and seize bigger opportunities. Moreover, in the era of the internet- it’s difficult to invest in the international market. However, before making an investment, it is important to understand the Brokerage charges and currency exchange rate and understand the factors affecting foreign stock markets.
This article is authored by Aryan Bharti. He is an active blogger and writes about topics such as financial planning, investments and wealth management.
If you want to understand the stock market better, read another interesting article – Understand stocks by industry in India.