It's no secret that you can invest in US stocks from India. Especially since the buzz surrounding foreign investments has gained momentum in India. A quick scroll through social media is all it takes to notice that the desire to invest in US stocks from India has risen exponentially. Yet, this interest isn't limited to veteran investors alone — but applies to regular folks like you and me. After all, I have been reading about the likes of Apple Inc (AAPL), Meta Platforms Inc (FB) of Facebook fame and Tesla Inc (TSLA) for ages now.
During this time, I have learnt of their highs (and lows) – but their gains have caught my attention. While I have contemplated getting in the game for a while now, knowing that it’s possible to invest in US stocks from India, I am excited to take the plunge.
Want to know more about investing in US stocks? Continue reading to learn more about this investment journey of mine.
Investing brings with it a wealth of opportunities. Growing up in India, it is hard not to notice the innovative ways people earn money. Whether it’s real estate, gold jewellery or art – if there’s a way to make money from the asset under consideration - Indians look into it. Foreign investments, and US stocks, in particular, are, therefore, no different.
Today, we use a host of services and products brought to us by many brands, several of which aren’t listed on Indian stock exchanges. These companies provide opportunities for wealth creation, given their global status. Since many of these companies are American (think Microsoft/ MSFT, Amazon/ AMZN and Johnson & Johnson/ JNJ), investing in them is worthwhile. Trading in such US stocks from India can help you boost the overall returns of your investment portfolio.
If you’ve ever had a tryst with investments, you’re likely to be aware that the mantra that’s repeated day in and day out is “diversification”. This holds true regardless of the asset class under consideration.
Given its importance, it should come as no surprise that by investing a fraction of your assets in foreign markets, you can help diversify your portfolio. This will help reduce your portfolio’s dependence on the Indian economy and Indian stock markets.
You might be wondering just how to buy US stocks from India. Well, I’ve got you covered. Mutual fund houses are a great place to start as they provide feeder funds that, in turn, offer routes to international funds.
The value of investing via feeder funds lies in that they are a convenient way of acquiring exposure to foreign investments. This is evident because there’s no cap on the amount you can invest and the taxation policies that apply are clear from the get-go.
The LRS or the Liberalised Remittance Scheme has been brought forth by the Reserve Bank of India, allowing Indians to send up to USD 250,000 within a single financial year. While this method of foreign investment has been fairly popular among high-net-worth individuals for a while now, it has been opened up further by several broking firms. These firms have made it easier for all investors to get a taste of US stocks trading from India by entering agreements with leading foreign brokers.
If you begin investing in US stocks from India, you need to be aware of the stock market timings that apply to American stocks and how they translate to Indian standard time (or IST).
As an investor or trader located in India, you would need to note that NYSE and NASDAQ open at 8 PM and close at 2:30 AM as per IST. However, while daylight saving time is active (i.e., between the second Sunday in March right up to the first Sunday of November), the US stock market opening time in India is 7 PM IST and closing time is 2:30 AM IST.
Five American technology companies that got the global markets abuzz form the acronym FAANG. This acronym is used to collectively refer to Meta (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL).
The products and services these companies offer have a strong grip on societies worldwide and are included among the world’s largest companies. As of October 2021, they collectively had a market capitalization close to USD 9.29 trillion. Provided you choose to dabble in US stocks from India, finding a mutual fund that invests in the same could help you get in on the action.
Before you get excited to invest or trade in US stocks from India, it is vital to be aware of the following considerations.
If you are uncertain about the taxation that applies to dividends and capital gains on short-term and long-term investments, investing in US stocks in India can be tricky. Any dividends drawn from American market companies within a financial year are taxed at 25 per cent.
Long-term gains (i.e., on stocks held for over 24 months) are taxed at 20 per cent in India while having no tax implications in the US. As far as short-term gains are concerned (i.e., on stocks held for under 24 months), taxation occurs under your tax slab as per the Income Tax Department.
Should you choose to opt for profits after your tax has been deducted at source, you must indicate the same when you file your taxes. Over 88 countries have entered into double tax avoidance agreements (DTAA) with India, including Australia and Canada.
Tax withheld in the U.S can be offset by a tax liability in India. In simpler words, suppose you get a dividend of $100 from a company you invested in, a tax rate of 25% is deducted. You then receive $75. Now, in India, you will be taxed on $100 and let's assume the amount to pay is $35. Since your $25 is already deducted, that can be offset against $35 and you will only have to pay $10 as tax. This is because of the DTAA agreement in place, you can claim a credit of $25 on your tax return.
An important area not to be forgotten is that the value of the Indian Rupee impacts your earnings within the US markets to the US dollar. The past few years have witnessed the price of the Indian Rupee fall from 4 per cent to 5 per cent. Meaning investors must bear the risks associated with currency fluctuations.
That said, you can take advantage of the US dollar by investing in US stocks in India. So long as its value appreciates, so make your investments, regardless of whether your portfolio remains unchanged.
It’s worth noting that Indian banks levy a fee for foreign exchange, which can range from 0.5 to 2 per cent depending on the bank and investment advisor you select.
Finally, select the platform provider for your global portfolio with care if you invest or trade US stocks from India. It should offer a secure brokerage account with simple digital processes. The stocks and ETFs available should tap into a wide variety of sectors in the US markets. I’ll admit my investment journey isn’t absolute. The learning has been as wavy as those graphs, but it’s a fruitful ride so far.
Given their superstar status in the tech world, American bigwigs like Microsoft/ MSFT, Amazon/ AMZN, etc., may kick start your wealth creation journey. Investing a fraction of your assets in the US market can help diversify your portfolio. It also implies that your investment journey is not solely dependent on the Indian economy and Indian stock markets.
As of late 2021 (October), five tech giants in the US had a collective market cap of USD 9.29 trillion. These companies are Meta (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL). Collectively known in investment circles as FAANG, investing in these US stocks means that your portfolio will also make good strides and get you a slice of that dollar pie.
Indians can take advantage of the US dollar’s rising stature by investing in US stocks in India. As its value increases, your US stocks investments do well too. Plus, there’s no cap on the amount you can invest, and the taxation policies are crystal clear. So, invest in diversifying your portfolio.