BUSINESS

How To Invest In US Stocks From India?

Invest In US Stocks

Introduction

US stock markets top the list when it comes to investors choosing to invest in the international markets mostly because the country homes quite a few technological and wealth-creating giants with adequate investment opportunities. Furthermore, a minimal correlation between Indian and US equity markets is another intriguing proposition.

The US Stocks are traded on NASDAQ and New York Stock Exchange (NYSE) similar to the Indian stocks being traded on the National stock exchange (NSE) and Bombay stock exchange (BSE). NASDAQ Composite, Dow Jones and S&P 500 are Indices measuring the performance of the stock market for US stocks.

Why invest in US Stocks from India

Investing in the US stock markets from India is now quite simple and feasible. But before understanding how to trade in US stocks let us try to understand why to invest in US stocks? 

    1. US markets are less volatile: Historical data manifests US stock markets to be comparatively less volatile than the Indian stock market. 
    2. Adequate opportunities: US markets dispense small-scale companies or even start-ups with an opportunity to dominate the world which the Indian entrepreneurial ecosystem currently lacks.
  • Diversification: Nowadays diversification is just limited to India or specific industries, it has a more deeper meaning to it. To reduce risk, investors allocate a substantial portion of their portfolio to global markets, which is expected to rise shortly. 
  • Better Returns: With the Indian currency depreciating by around 52% over the past decade, the American index has been able to fetch higher returns. Data shows the Dow Jones Industrial Average has returned 196%, as compared to 161% returned by the S&P BSE Sensex during the same time frame.
  • Investment opportunities in high potential stocks: The United States is at a cutting edge technological, pharmaceutical, and industrial innovation. Investors across the globe can profit from the gains earned by these high-potential, creative enterprises by investing in US stocks. 

Stratagem – Trade in US stocks from India

Investments in the US stock markets from India can be done in 3 following ways:

  1. An Overseas account with an Indian brokerage firm: For Indian investors, this is the most convenient alternative as many Indian brokers work as intermediaries between their American counterparts and can execute trades as a result of tie-ups. This is a feature that not all but only a few brokers offer. There are a few restrictions that one has to keep in mind relating to the number of trades per day, minimum capital requirements and investment options available to the investors.
  2. Trading account with American brokerage companies: Another option is to register with a foreign broker which has its presence in India like TD Ameritrade, Charles Schwab, Interactive Brokers, etc to name a few. Brokers, headquartered in their home counties are more likely to provide services that are in line with their home markets. However, one must remember that this may hamper one’s investment costs such as brokerage fees or taxes.
  3. Investing in Indian mutual funds and ETFs with foreign equities: Buying mutual funds and exchange-traded funds (ETFs)  from Indian businesses that invest in worldwide equities. Some Indian brokers also offer mutual funds that are sector-specific or based on market capitalization that invest only in US companies. Such investments are distinctly beneficial to investors who do not have sufficient knowledge of American markets or business concepts to invest in US companies from India.

Conclusion

Diversification is something that every smart investor recognizes and understands. Investing in the US Stock markets not only provides the required diversity but also enables larger returns to the Indian investors from the markets while benefiting from the rupee’s depreciation and by investing in global giants like Facebook, Amazon, and Alphabet, that the US markets offer. Investing in US stocks from India has its pros and cons therefore, one should be thoughtful before doing so.

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