The digital era has completely revolutionized the investment industry. Now, all you have to do is to pick your smartphones, tap, and pick a stock of your choice. Digitization has blurred geographical boundaries and stock investments are not limited to domestic stock exchanges anymore. This further has led to increased participation of Indians in the US stock markets. From Dalal Street to Wall Street, Indian investors facilitated by technology, have started making their way into the US stocks market. After all, a prudent investor will know the importance of diversifying their investments geographically by investing in both national and international markets.
Why US stocks market?
The United States stock market is home to some of the largest companies in the world. Leading stocks like Facebook, Google, Amazon, Netflix, Apple, General Motors, and so on, not only allows you to be a part of their growth story but also helps you in portfolio diversification beyond the Indian stock market. (The stock names quoted are exemplary and not recommendatory)
The need to diversify portfolio arises to balance out risk and rewards. But until recently, geographically diversifying your portfolio was difficult. Hence most investors had to stay within Indian markets despite overseas investment being permitted under Liberalized Remittance Scheme. Nonetheless, with increasing number of brokers offering lucrative plans for *international investing, the participation is growing. Facebook, Tesla, and Google were the most sought-after stocks amongst Indian investors.
In 2021, the S&P 500 gave favourable returns, making it one of the best years in the US stock market. Not only has this attracted Indian investors but also benefitted the Indian investors who had invested in the S&P 500 before.
How do I invest in US markets?
There are two ways of investing in the US stock market.
- Direct investment in stocks
- Indirect investment in stocks through Exchange Traded Funds or Mutual Funds
Direct investments in US stocks
It’s easy to directly invest from India in the US stock market. You can open an overseas trading account with a domestic/foreign broker. For investing with a domestic broker, you would have to submit a set of documents like your PAN number, address proof (example: Aadhar card, utility bill etc.). Kindly note, all bills, and statements must be within the last three months and should have your name on them. The entire process is paperless. Before investing, kindly check with your brokerage firm about the charges, restrictions, currency conversion rates etc. that come along with this facility.
Foreign brokers having a presence in India also help with opening of an overseas trading account. Ensure that you are aware of all the fees and charges before you open such an account.
Indirect Investments
Just like domestic investments, you can also take an indirect position in US stocks without directly investing in them. Mutual Funds and Exchange-Traded Funds (ETFs) are the two options to consider with Mutual Funds being the easiest way of investing in US stocks . It provides a geographical diversification to your portfolio. Just ensure that you keep a close watch on the expense ratio of the mutual fund scheme before you buy.
ETF investments also help you in gaining exposure to US stocks. You may either buy US ETFs directly via an international or domestic broker or you can buy an Indian ETF of international indices.
Things to keep in mind
- Please make sure you have done your research thoroughly on the US economy if you’ve bought stocks directly on the US exchanges.
- Equity markets by nature are volatile and dynamic and of course, the risk element always exists. There are some social, political, and economic constraints that are beyond one’s control. Thus, it’s advisable that you trade in the US markets with precaution.
Conclusion
Thankfully, we belong to an era of technology due to which investing in the US stock market is now easier than ever. Keeping the growing interest amongst Indians in US stocks in mind, we have partnered with Vested so that our clients can purchase US stocks with ease. Vested also offers you curated theme-based stocks/ETF baskets to match your risk profile with dynamic re-balancing. Diversification is now just a click away!
International investment is not supervised by any regulatory body in India. Thus, any claim or dispute relating to such investment or enforcement of any agreement/contract /claim will not be under the laws and regulations of the recognized stock exchanges and investor protection under Indian Securities Law. The account opening process will be carried out on the Vested platform and Bajaj Broking will not have any role in it.