Are you looking to expand your investment portfolio?
You have all the Blue-chip stock like HUL, Wipro but now you wanna play in the major leagues?
You wanna invest in stocks like Apple, Microsoft but you don’t know how to do it?
Don’t worry, the below article will answer all these questions.
If you are looking to diversify your portfolio by adding stocks globally, then investing in the US stock market is a great choice.
How to Invest in US stock market from India?
1. Invest directly in stocks through US Brokerage Account:
- Find the right Broker – To invest in US stocks from india, you will need a US brokerage account. Brokers like HDFC Securities, Motilal Oswal and Kotak Securities offers the facility of a US brokerage account.
- Open an account – The account opening is just a click away once you have identified the right broker. All you need is your mobile number, e-mail, and name. Bingo your brokerage account is created and now you just need some documents to verify it.
- Submit the documents – You will need to submit some documents for Identity verification and address verification.For the ID proof (Any one) Voter ID, Driving License, PAN card can be used. For the address verification, Aadhar card should be sufficient.
- Add money to your account – You will need to convert your Indian currency into US dollars for adding funds to your US brokerage account. Forex conversion charges are also applicable depending on your bank. An Indian resident can only invest up to $2,50,000 per year under the RBI’s remittance scheme.
Now you are all set to add stocks like Apple and Microsoft to your portfolio.
2. Invest indirectly through International Mutual Funds:
Unlike the traditional broker account opening method the investment in International mutual funds doesn’t have any investment limit. Now Coin by Zerodha offers the platform to invest in International mutual funds through your regular Demat account.
If you have a Zerodha Demat account then you are good to go, if not then you can choose a Forex Broker to invest in international mutual funds.
You don’t need a US brokerage account for investing in International mutual funds because transactions will take place in Indian currency.
However, investing in International mutual funds can be a bit costly due to the exit load and expense ratio on mutual fund investments.
Stock Exchanges Of US Stock Market
The US market comprises two major stock exchanges :
- NASDAQ
- New York Stock Exchange
What is NASDAQ?
Nasdaq is an American stock exchange for buying and selling securities electronically that ranks second in market capitalization.
How did Nasdaq become so popular?
Nasdaq was merely a quotation system founded in 1971 by the National Association of Securities Dealers Automated Quotations (NASDAQ). It was the very first electronic stock exchange that became popular due to the lower bid-ask spread between buyers and sellers.
What is NYSE?
NYSE is the largest stock exchange by market capitalization located in new york city. It is the oldest and the world’s largest equities-based exchange.
How was NYSE formed?
Ever heard about the Buttonwood Agreement?
Well, America didn’t have a stock market until the 1700s. A group of merchants used to meet daily under the buttonwood tree to buy and sell stocks and bonds. These merchants signed an agreement that came to be known as the Buttonwood Tree Agreement, which laid the foundation for the New York Stock Exchange.
Popular Indices of US Stock Market
Just like Nifty and Sensex represents the major stock exchanges of India. Similarly, the US stock market has two major indices Dow Jones Industrial Average and S&P 500.
Dow Jones
It includes the prices of the 30 most actively traded stocks on the NYSE and Nasdaq. It basically gives direction to new investors about the overall movement of stock price.
S&P 500
The S&P index comprises of the 500 largest publicly traded companies of the US stock exchange. The S&P index is also known as the Standard and Poor’s 500 Index.
Why you should invest in US stocks from India?
Now we know all about the US market, but why should an Indian invest in the US market.
Well, there are certain criteria’s as to why I favor the US stock market which are listed below:
1.Low Risk and volatility:
The US market is the epitome of new technology and growth companies. In the long run markets of developed countries are proven to be less volatile. The share price of brands like Apple, Alibaba, Microsoft don’t fluctuate a lot and these companies form a major chunk of the US stock market.
2.Currency valuation:
Over the decade the price of the Indian rupee has fallen to roughly 70% against the US dollar. This depreciation of the Indian currency has definitely boosted the returns for investors that invested in the US stocks.
| Year | USD/INR Currency Rate |
| July 2011 | Rs 44.07 per USD Dollar |
| July 2021 | Rs 74.43 per USD Dollar |
The inflation rate of the Indian economy is at a higher pace than the US economy. Hence, diversifying your portfolio into US stocks will benefit you more as the Indian rupee depreciates.
3.Invest in reliable day to day companies:
Investing in NASDAQ gives you the opportunity to invest in the most popular stocks named as “FAANG – Facebook, Apple, Amazon, Netflix, and Google”. The products of these companies are used in our day-to-day lives. I mean who doesn’t love an apple I-phone or watching Netflix. Therefore betting on these stocks in the long run, will definitely benefit your portfolio.
4.Growth Opportunities:
Investing in the US stock market provides better growth opportunities than the Indian stock market. Many Chinese companies are listed on the US stock exchange. Through the US stock exchange, you can easily invest in leading Chinese companies like Alibaba and Tencent, a money multiplier.
Frequently Asked Questions
Q1. How much can I invest in US stocks?
Ans: Under the RBI’s Liberalised remittance scheme an Indian investor can remit up to $2,50,000 per year. The limit is applicable for one member including minors, which means a family of 3 can remit up to 7,50,000 per year under the LRS scheme. However, no such limit is applicable for investing in international mutual funds.
Q2. How much tax will I have to pay on these investments?
Ans: US and India have a Double Tax Avoidance Agreement (DTAA) which prevents the investors from paying tax twice.
There are two types of taxes that are levied on investment in the US stock market:
1.Dividend Tax: For Indian residents, a flat rate of 25% is charged on dividends.Due to the DTAA treaty between the US and India any tax paid in the US can be claimed as Foreign Tax Credit in the domestic filing.
2.Long Term Capital Gain Tax: A 20% LTCG tax will be applicable if you hold the investment for more than 24 months along with indexation benefits.
3.Short Term Capital Gain Tax: For Indian residents, the STCG tax will be applicable according to their income tax slab.
Q3. How can I invest in Nasdaq from Zerodha?
Ans: No, currently Zerodha doesn’t allow trading in foreign stocks. But, if you wish to invest in a stock like Apple, Microsoft, or just want to have market exposure. Then you easily invest in International mutual funds through Zerodha. Zerodha currently provides 10 international mutual funds to invest in.
Q4. Can I Invest in NYSE from India?
Ans: Yes, you can easily invest in NYSE-listed stocks from India with the help of a reliable broker that offers a US brokerage account.
Q5. Is investing in US stock from India Legal?
Ans: Yes, investing in US stock from India is perfectly legal. One can invest in US stocks directly by opening a US brokerage account or indirectly Via mutual funds.
Final Thoughts
Investing in the US market is a good choice if you are looking to diversify your portfolio. Invest can be done directly in stocks of your preference or indirectly via international mutual funds.
The US stock market is the home of the most popular companies like Apple, Microsoft, Google that offer more growth opportunities and less volatility in the long run.
Indian currency is depreciating over the years against the USD dollars. Indian investors can benefit from this by investing in the US market.
Overall, investing in the US stock market is a good way to invest but remember every investment is subjected to market risk. Do your research well before choosing any way to invest.
Happy Investing 🙂
A commerce graduate who is on a mission to educate people about investment and personal finance.