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Do you want to diversify your portfolio with US stocks as an Indian investor? Investing in US stocks from India has become more accessible to Indian investors, presenting an attractive opportunity to diversify their portfolios with the US economy and the world’s largest stock market.
US stock market is home to some of the world’s most renowned companies such as Facebook, Google, Apple, Tesla, etc. These investments not only allow you to be part of their success stories but also provide an avenue for geographical diversification beyond the Indian stock market.
In India, we have two well-known stock exchanges, NSE and BSE, where you can trade Indian stocks daily.
Similarly, in the United States, you’ll find the New York Stock Exchange (NYSE) and NASDAQ, which are the major US stock exchanges. However, it’s important to note that there are no US stock brokers physically present in India.
As an Indian investor, interested in US stocks, you have a wide variety of options available to you.
One is direct investment through an overseas trading account, that allows you to buy and sell US stocks directly.
Another is indirect investment, through mutual funds, exchange-traded funds (ETFs), or mobile apps that facilitate access to US stock markets. With the use of these platforms Investing in US stocks is easier than ever before, due to advancements in technology and globalization.
In this article, we will provide a complete guide on how to purchase US stocks from India, different ways to invest, charges and taxes involved, and address some common questions about investing in US stocks from India.
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1. Invest in US through Direct Investment
Direct investment in US stocks means buying stocks that are listed on the US stock exchange. For Indian investors, there are two ways to do this:
- Opening an International Trading Account with an Indian Broker
Many domestic brokers in India have partnerships with stockbrokers in the US which allows them to act as intermediaries, facilitating your US stock trades. To get started, you will need to open an overseas trading account with one of these domestic brokers, and this requires submitting certain documents.
However, it is important to note that there may be some limitations, which means there are some types of investments you can’t make, depending on the specific brokerage firm.
It is important to be aware that investing through this route can be relatively expensive due to brokerage fees and currency conversion charges. Hence, it’s important to fully understand the associated charges before opening an account.
For Indian investors, who are looking to invest in US stocks, the first option is to open an overseas trading account, with a domestic broker, such as HDFC Securities, ICICI Direct, Kotak Securities, etc. With an overseas trading account from a domestic broker, you can trade US stocks, just like you do with Indian stocks.
- Opening an account for international trading with a foreign brokerage
Another way to invest in US stocks is by opening an account with a foreign broker, that allows you to trade in the US stock market. Foreign brokers like TD Ameritrade, Charles Schwab, and Interactive Brokers extend the opportunity for Indian investors.
While opening an overseas trading account with a foreign broker, may require more paperwork and verification compared to domestic brokers, although they offer several advantages, like more advanced trading platforms and research tools. Before opening an account, it is important to thoroughly understand the associated fees and charges.
2. Invest in US through Indirect Investment
If direct investing doesn’t align with your investment preferences or risk tolerance, you can explore alternative options like mutual funds, exchange-traded funds (ETFs), and user-friendly new-age mobile apps.
- Mutual Funds
Mutual funds offer a convenient way for investors to invest in the US stock market by pooling money from multiple investors to purchase stocks, bonds, or other securities, when you invest in a mutual fund, you essentially become a shareholder in that fund, and your investments are professionally managed by a fund manager.
Those Indian investors are looking to invest in US equities through mutual funds, for them there are numerous mutual funds available that focus on US stocks and provide a range of options to diversify their portfolios. Also, if you are interested in investing outside the US, so for that also mutual funds are available.
This means you can have more choices when it comes to where you want to invest your money. But make sure, your decision must align with your investment goals, risk tolerance, and time horizon.
One of the advantages of investing in US stocks, through mutual funds is, that you don’t need to open an overseas trading account or maintain a minimum deposit, which can be required by some stockbrokers for direct international investments.
- Exchange-traded funds (ETFs)
Exchange-traded funds, or ETFs, work a lot like mutual funds but with a few differences. They also pool money from several investors to buy stocks and bonds etc, but there’s a key difference, ETFs are traded on stock exchanges, just like regular stocks. You can purchase and sell ETFs at your convenience.
To invest in US stocks through ETFs, you’ll need to open a demat account with a stockbroker that gives you access to US stock exchanges, only after that you can look for ETFs that focus on US stocks. And the fees you pay, when you make transactions are usually lower compared to mutual funds. So, it’s a more cost-effective way to invest in US stocks, Investing through ETFs, like getting the best of both worlds – the benefits of mutual funds and the flexibility of trading stocks.
- Investing in US Stocks through Mobile Apps
These days, many new-age mobile apps are available for Indian investors, who want to invest in US stocks and ETFs. These apps offer an easy and user-friendly way to invest in US stocks and manage your investment portfolio. Some popular options for Indian investors include apps like INDmoney, Webull, Stockal, and Vested.
To get started, you simply download the app of your choice, complete the registration process, and provide your personal and financial information, as part of the KYC (know your customer) process. Once you’ve finished registration, you can add money to your account and start investing in US stocks and ETFs. Some of these Apps may not allow intraday trading in the US market from India due to regulatory rules.
How to Buy US Stocks in NSE India
Earlier, there were only two ways to buy US stocks, through international mutual funds and by opening an account with a US-based broker. But now, there’s a third option.
You can now invest in top US companies’ stocks on the NSE IFSC (International Financial Service Centre) Exchange, located in Gujarat’s GIFT City. This opportunity opened up for Indian retail investors on March 3, 2022.
Eight US stocks are currently available for trade on the NSE IFSC Exchange including Microsoft, Netflix, Apple, Amazon, Walmart, Alphabet (Google), Meta Platforms (Facebook) and Tesla, the number of US stocks will increase to 50, and will be added to the market gradually. Some of the other stocks in the pipeline to be listed on the NSE IFSC platform, include Berkshire Hathaway, Mastercard, JP Morgan Chase, Morgan Stanley, Nike, PayPal, PepsiCo, Pfizer, Intel, and more.
However, your regular Demat account won’t work to trade these stocks, for this, you need to open a Demat account with a broker registered with the IFSC, even you can check with your existing broker, if they are affiliated with NSE IFSC and see if you need to meet any specific requirements, before trading US stocks on this global exchange.
After completing the process to trade, you will need to transfer funds from your Indian bank account to an IFSC-registered broker account, and currency conversion is also required because trading on the NSE IFSC exchange is done in US dollars, not in Indian rupees. Once your money is in the broker’s IFSC account, you are ready to trade your favorite US stocks.
Charges and Taxes When Investing in US Stocks
Since we have already answered how to invest in the US stock market from India, now it’s time to know about the charges and taxes involved. These factors can have an impact on your overall returns.
- Charges: Before trading in the US market, you must know the charges involved, including brokerage fees (the cost of buying and selling stocks), custodian fees (charges for holding your stocks), transaction charges (fees for executing trades), and foreign exchange charges (if you’re converting your money from Indian rupees to US dollars).
- Taxes: Tax rules can get a bit complicated, the amount you will pay in taxes can depend on what type of investment you make, how long you hold your investments, and where you are from.
To minimize these charges and taxes, you can consider investing in tax-efficient options like ETFs (exchange-traded funds), choosing a broker that doesn’t charge a huge fee, and investing with a long-term view can help you navigate taxes more effectively.
Conclusion
Investing in US equities from India may be beneficial, whether you choose a direct or indirect approach, make sure you understand the risks, benefits, and disadvantages before investing.
Happy investing and thank you for reading!
Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.
