Last Updated on March 12, 2024 by ethinos
It is no wonder that the United States stock market is the largest in the world as it houses some of the most prominent international companies like Facebook, Apple, Google, Microsoft, and the like. Very few investors would be averse to investing in the US stock market. For those Indian investors who see the appeal of international market exposure and geographical portfolio diversification, the US stock market offers a variety of companies to invest in and potentially grow your wealth. There is a world of stocks beyond Indian markets, and with liberal norms of international investment being introduced, Indian investors can have a field day investing in US markets.
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Diverse Platforms – Invest in the United States Stock Market
A variety of platforms allow you to invest in the US markets from India. In India, there are no US brokers that you can invest with directly unless they have an Indian presence. So how do you invest? With liberalised regulations for Indians to invest in overseas markets, you can easily invest in US stocks from India. You can invest in the US stock market in one of two ways:
- You can make a direct investment in US stocks
- You can invest in US stocks via the route of ETFs (exchange-traded funds) or mutual funds
Depending on the investment value you are permitted, you can invest in a range of ways suited to you, with some investments spread over different instruments.
Direct Investment from India
You can invest in US stocks from India directly. Here, you can invest directly in the US stock market. The first step to do this is to open an overseas trading account with an Indian broker that has ties with an overseas broker, or with an overseas broker that has a presence in India. Whatever path you choose, in terms of brokers, you must always consider charges before you make your choice. Typically, you can make your investments through the online apps of these brokerages, and here are the two kinds of brokers you can invest with:
Open a Foreign Trading Account with an Indian Broker
Several Indian brokers have collaborations with overseas brokers in the US. The domestic brokers work like intermediaries between you, the Indian investor, and the US brokers to execute your trades. It is possible to open a trading account with a broker such as this and you will be required to submit certain documents to open an account. You may invest in the United States stock market in this manner, but specific limitations may be in place.
Depending on the broker chosen, you may be restricted from investing in particular investment channels or the amount of trades that can be executed. Furthermore, according to the broker chosen, the cost of your investing activity may be high as you must consider currency conversion rates and brokerage fees. You must be aware of all the costs involved before you sign up with a broker.
Open a Foreign Trading Account with an Overseas Broker
You can trade in US stocks via a foreign broker that has an Indian presence. Brokerages like Charles Schwab, Interactive Brokers, and Ameritrade are examples of overseas brokerages with a presence on Indian soil. It is advisable to do some diligent research before you choose a brokerage to invest in US stocks. It is also important to understand the charges you may have to incur.
Indirect Investment in India
Indirect investments in the United States stock market can be made from India by investing in mutual funds and ETFs or exchange-traded funds. Here are the options in detail:
ETFs:
- ETFs or exchange-traded funds give you exposure to US stocks through Indian brokers with affiliations to US brokers, with US brokers that have a presence in India, or with Indian ETFs present on global indices.
Mutual Funds:
- To invest in mutual funds of US stocks, you do not have to necessarily have a foreign trading account or have a minimum deposit. You can invest in US stocks in mutual funds from India just as you invest in Indian mutual funds.
Additional Read: Understanding Market Sentiment in US Stocks
Regulations on Investment in US Stocks
Under the LRS or the Liberalised Remittance Scheme, as released by the Reserve Bank of India (RBI), an Indian resident is allowed to invest an amount of up to USD 250000, annually, in the US stock market or any other foreign investments.
Geographical Diversification
When you invest in the United States stock market, you invest beyond Indian shores and gain exposure to markets and industries overseas. This lends a distinctive quality to your portfolio – diversification. Portfolio diversification spread across geographies gives you prospects of returns while mitigating your risk. Apart from this, historical data considers the US markets less volatile compared to Indian markets, and you may have an edge in your investment due to this. Furthermore, American industries are at the heart of innovation in different sectors so you have the advantage of investing in the growth of a company.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only.
