How to Invest in US Stock Market from India?
Okay! Let’s believe in the fact that the whole idea of the economy is global and connected. As such, it is kind of important that your investments should be global as well. There are so many ways to increase your investment portfolio & one of them is by investing in US Stock Market from India.
Our Experts have created this quick learning guide for you to learn everything about before investing your money in U.S Stock Market. After reading this article you will learn:
- Why it could be a good idea to diversify your investment in the U.S Stock market from India?
- How to invest in US Stock market from India.
- What are the popular terms when we talk about U.S Stock Market?
There is always a question people ask “Can Indian’s Invest in U.S Stock Market? “
Answer: YES! Indians can invest in U.S Stocks & trade in U.S Stock Market!
Yes- All Indian Investors can invest in the U.S Stock market even while staying in India and even so many people are already doing that. If they are into diversifying their money in international companies & brands beyond Indian and Funds or say other financial instruments, other than nifty 50 & Sensex all Indian investors can invest in Dow Jones, S&P 500, Nasdaq or the other U.S listed Companies or brands.
Investing your money in U.S Stocks or ETFs being an Indian Investor by using the purpose code s0001 (You can Open US Bank Account under this Purpose Code) is permitted by the RBI’s Liberalized Remittance Scheme(LRS).
Why All Indian Investors Should Invest in the U.S Shares?
Answer: Returns are comparatively better than investing in India.
The U.S stock market has consistently grown & performed better in comparison to the Indian Stock Market over the past 10 Years. In Image 1, we compared the return growth between the U.S DOW Jones Index & Indian BSE Sensex. During this period, BSE Sensex Booked a 22% yearly gain, & by the last day of 2021 BSE Sensex ended 459.5 points or 0.8% higher to close at 58,253.82 & DOW industrial was ended at 36,338.30 (important: we picked the DOW index rather than S&P index because DOW is much similar in terms of numbers of units/constituents to the Sensex both have 30 companies).
In addition to the returns on equity, every investor should consider thinking about the effect of fluctuations between both currencies USD & INR. In the past 10 years, the Indian Rupee has undervalued 44% in comparison to the USD. This is a significant negative impact & performance gap on the returns of Indian Stocks.
Exposure to other international Stocks & Other stock markets
It is very easy to invest in the U.S stock market or another international stock market. For example, an investor can easily invest in the Chinese economy by investing in the U.S stock market. The Chinese economy is also a very fast-growing economy- if we take a look at the middle-class growth & rapid technology adoption- had taken us to the creation of some great world-leading technology companies. Instead of getting listed in china, maximum Chinese technology companies choose the USA to list in.
However, there are American Depository Shares(ADS) of Chinese tech companies that enable currency USD-based selling & buying a share, here underlying shares are helped by market big multinational Banks & Brokers.
Being an Indian investor, there is another benefit of investing their money in the U.S Stock Market is that their ecosystem is very regulated, with strict controls on standard govt. practices, transparency & financial reporting making it very easier for the Indian investors to gram many different opportunities.
Invest Directly in an MNC rather than the local Indian subsidiary
There are so many Indian Investors living in India & investing in the international Stock market because they believe there is a greater level of governance or a higher level of govt. authorities involved, there is more transparency in investing in the international MNCs. However, investing in the Indian Stock market is often a more expensive idea. We have studied many MNCs that are traded in the U.S Stock market and have Indian subsidiaries and are also publically traded in India.
On an average note, investors in India are paying- 3 times higher multiples when investing in a stock of Indian subsidiaries vs directly investing in a parent company based in the U.S. And despite paying higher multiples, the average returns could be similar. According to the 2019 records, the returns of the MNCs companies were was-14% (Pink line in image 3), while the Indian subsidiaries were at 17%. (green line in the Image-3).
After reading all these your next question must be-
How can I invest in US stocks market from India?
Things You should remember when investing in U.S stocks from India. What are the different ways to invest in the U.S stock market?
- You can start investing directly by opening a U.S brokerage account. If you are investing for the past few years you must have heard about the INDMoney Platform. which I personally use to diversify my investment portfolio. IND Money offers a very unique platform that caters especially to Indian investors. You can start investing in the US stock market while living in India with no minimum commission and balance. IND Money is unlike most brokerage account opening processes available in India. INDMoney process is very easy & paperless and can be completed in a few minutes. You just need your PAN Card & your proof of address you can open your US brokerage account here easily or click the button below.
The brokerage approach usually involves the lowest cost of 1$ for the investors, but it requires you to wire up your funds to the US. Being an Indian Citizen & resident, you are very well allowed to do this per the LRS (Liberalized Remittance Scheme), where you are allowed to invest any amount per year per person.
- Investing in US-focused International Mutual Funds in India. Same as to brokerage method, there is no limit on investment for the Indian residents, as investments can be made in both currencies like Indian Rupees & US Dollar. You should keep in mind that the expense ratio for these funds tends to be higher since higher because the fee is for both general management of the fund an additional expanse charged by underlying international schemes they invest in. For example, The Franklin Templeton feeder fund invests its money in the Franklin Templeton US Opportunity Fund. then the feeder fund charges a 1.54% expanse fee, which will be on top of the 1.82% fee charged by the US Opportunity Fund.
How do Indians pay taxes for their investments in U.S Stock Market?
If you are investing in US Stock Market, there will be two types of tax-paying events;
- Paying Taxes on investment Gains: You will pay tax in INDIA for these capital gains but not in the US. The amount you will pay in taxes is totally based on how long you are holding your investment. The threshold for these long-term capital gains is 2 years/ 24 months, and in your short-term investments, you will be taxed according to your Income Tax slab.
- Paying Taxes on Dividends: Similar to investment gains, all dividends will be taxed in the US at the flat rate of 25%. The US & India have a DTAA (Double Taxation Avoidance Agreement), which allows investors or taxpayers to offset their income tax which they have already paid in US. that means the 25% tax you have already paid in the US is now available as Foreign Tax Credit & it can also be used to offset your all income tax amount in India.
How do I fund my IND money Account?
Here you are investing in US Stocks or Equities so all the investments must be in USD, you may need to complete your KYC to fund your INDmoney account to start investing in US stocks.
How much Indians can Invest in US Stock Market?
What Other features does INDmoney offer?
The INDmoney Platform offers the safest & easiest way to buy & sell US Stocks. INDmoney Platform includes:
- Share market price stream in real-time on both web & app platforms(iOS & Android).
- IND money is one of the easy use & cost-effective investment platform available out there. It is very easy to transfer INR to USD.
- The easiest way to track all your investing & up-to-date reports is when you invest in US funds & equities.
With IND Money you can invest any amount in US stocks. this means you can invest as little a 1$.
Popular US Investment Glossary
Okay-So now you must have finished your learning on the overview on How to invest in US stock market from India. Kindly know that this article is just a piece of information and not any kind of investment advice.
All the information stated above is not meant to be taken seriously, Readers are advised to research, read more information on their own and invest at their own risk. Some affirmative words in this article suggest various factors. As we all know investments are subject to market risks, and changes happen every day in the global market.
Team Sahi Hai Bro has researched and contributed to this article, Team Sahi Hai Bro is not responsible for readers’ investments and market risks. Every investment involves a little to a huge amount of risk, this piece of information in this article may or may not be suitable for every investor. Know that numbers in the market go up and down every day as per circumstances, there is no assurance of profit and losses.