How to Invest in the US Stocks from India

When it comes to investing in the financial markets, the primary goal set by the majority of investors is wealth creation! However, it is easier said than done. To achieve the wealth creation objective, one needs to ensure that they are invested in the right kind of stocks that are aligned with their investment strategy and goals. Although one may find stocks closely aligning to their investment objectives in the Indian stock market, there can certainly be a better match!

This is where investing in US stocks can benefit Indian investors. As the US stock market is home to two of the world’s biggest stock exchanges (NYSE & NASDAQ), it allows investors exposure to both the Indian and US markets, which are highly liquid and feature top global companies, including major tech players such as Apple, Tesla, Meta, and Alphabet. 

How to Buy US Stocks from India

There are two primary methods to buy US stocks from India. i.e. direct investing and investing through instruments. As the word suggests, the direct method means you can directly invest in the US stock market and add those shares to your portfolio. 

The indirect method, on the other hand, means you can invest in the shares through different funds that invest in US stocks without having to add the shares to your portfolio directly. 

Let’s take a closer look at these two methods. 

1. Direct investing

This method can be further bifurcated into two options. The first option is to make US stock investment from India by opening an overseas trading account with an Indian broker. Your other option is to open an overseas trading account with a foreign broker. 

2. Investing through instrument 

Investing through funds like international mutual funds, exchange-traded funds, or ETFs focused on US markets allow Indian investors to enter the US stock market from India without getting directly exposed to the volatility of the US market. These US stocks funds offer a convenient way to gain exposure to US-listed companies without the complexity of direct stock investments.

While understanding the available ways is important, it is also important to understand the trading hours to invest in the US stocks from India.

• Regular Trading Hours

Regular trading hours for trading in the US-listed stocks is 9:30 AM to 4:00 PM ET. US stock market timings in India would be 7:00 PM to 1:30 AM IST. 

• Extended Trading Hours

In addition to the regular market hours, US stock market extended hours trading can prove to be extremely beneficial, especially for the Indian investors, as it allows them to trade in US listed stocks beyond the standard US market timings. 

1. Pre-market Trading: As the name suggests, Pre-Market trading allows investors to invest in the US market before the US market open time. The pre-market timings are between 4:00 AM and 9:30 AM ET (1:30PM to 7:00 PM IST). Pre-market trading can be extremely beneficial for the traders who’d like to respond to any breaking news before the market officially opens for trading. However, this comes with some drawbacks such as low liquidity due to lack of orders compared to regular market hours, and high volatility.
2. After-Market Trading: After market trading allows the investors to trade in the US market after the US market closing time. The after market hours are between 4:00PM to 8:00PM ET (1:30 AM to 5:30 AM IST). This allows the investors to react to news or developments and take trading decisions in the US stocks after trading hours. 

During the extended trading hours, typically only limit orders are allowed to trade; however, this can change based on the brokers.

Extended hours trading offers more opportunities to trade, which can be a pro for the Indian investors due to the time difference between India and the US. 

The investors should be aware of risks associated with trading in the extended hours such as low liquidity and high volatility.

How do you invest in the US stock market from India? 

If you have been looking for platforms that allow you to invest in the US stock market from India, then Vested is here to meet your needs. As an SEC-registered investment advisor, we offer Indian investors a medium to invest in the US stock market. Here are the few simple steps you need to follow to invest in US stocks via Vested: 

1. Visit https://app.vestedfinance.com.
2. Choose the most suitable option to sign up using your email, Google account, Facebook or Apple account.
3. Upon successful registration, you will be asked to complete your KYC process.
4. Upload your ID proof and address proof, and fill in other information as asked.
5. Once your documents are verified, you will get your approval in as little as 10 minutes.
6. Once approved, your account will be ready for you to start buying US stocks from India.

Benefits of investing in US stocks from India 

The benefits of investing in US stocks range from diversification to better returns and a lot more. It is because of these benefits that inventors are inclined towards investing in the US stock market. These insights can also serve as helpful tips for US stock investing and may support better portfolio diversification. Let’s take a closer look at some of them. 

1. Diversify your portfolio

Investing in US stocks allows diversification in your portfolio. You can invest in shares from across different countries in the world. Some of the world’s most profitable companies are listed on the US stock market, and you can get a portion of their stakes with such investments and build a US stock portfolio that aligns with your investment objectives.

2. Superior returns compared to India

If you take a look at the change in depreciation of Indian currency against the US dollar, you will realize that it has been more than 36% in the past 12 years. The Indian Rupee was valued at ₹47 against the USD in 2011, and it has since depreciated to around ₹82. Thus, simply owing to this depreciation in currency conversion in conjunction with the growth of US stocks, the US market may offer better long-term return potential than the Indian stock market.

3. Exposure to other international stocks

The US stock market is the only market that welcomes stocks from different countries on its stock exchanges. It has stocks listed on it from countries across the world, including China, Japan, Germany and more. Thus, you get the benefits of the global market all in one place without having to invest in every country separately. Not just that, this diversification also hedges your investment against different economies and mitigates your risk by including globally recognized US stocks in your portfolio for broader international exposure. 

4. Can invest in MNCs directly rather than the local Indian subsidiary

Many multinational companies operating in India have their Indian subsidiaries registered in the country. Investing in US stocks gives you the opportunity to invest in their holding companies and get exposure to a much bigger market. 

Additionally, these subsidiaries are often not even listed because of the shareholding pattern. Hence, another benefit of investing in US stocks is that it gives you direct access to the returns of the MNC, and you do not need to limit yourself to their Indian counterparts.

What are the charges and taxes involved in investments in the US stock market?

Before you decide to invest in US stocks, it is important for you to find out about all the charges associated with such investment. Incomplete knowledge of these charges can lead to negative returns despite employing your best investment strategies. 

1. Brokerage Charges

Different entities charge different rates and have different structures. For example, It can be a fixed fee per trade or a percentage of the trade value. Since the investing process requires international transfers from Rupee to USD, in addition to any potential brokerage fees, there might be other fees that investors incur in order to invest in the US. These fees could be international wire fees or FX conversion fees that the investor’s bank charges, which may vary depending on the bank that the investor uses.

2. Taxes on Investment Gains

The taxes will not be withheld in the US rather you’re liable to pay the same in India. The amount of taxes you have to pay in India depends on the investment timeframe. The threshold for long-term capital gain is 24 months, with the rate of 20% with indexation benefit. If you sell a stock in less than 24 months, capital gains are considered short-term and are taxed according to your income tax slab.

3. Taxation on Dividend

Unlike investment gains, dividends will be taxed in the US at a flat rate of 25%. Fortunately, the US and India have a Double Taxation Avoidance Agreement (DTAA), which allows taxpayers to offset income tax already paid in the US. The 25% tax you already paid in the US is made available as Foreign Tax Credit and can be used to offset your income tax payable in India. Want to learn more about how taxes work when buying U.S. stocks from India?

4. Bank Charges

The bank charges for investing in the US shall include foreign exchange conversion fees and transfer charges as well. Depending on your bank, you may also have to pay an account set-up charge. 

5. Foreign Exchange (FE) Rate

FE rates are the cost of converting Indian currency to USD. This charge plays a crucial role as the value of INR against USD determines the number of units that will be allotted to you when you buy your shares. The conversion rate also affects your profits. 

Factors to consider before investing in US Stocks from India

Before investing in US stocks from India, there are several factors you should consider:

Investment goals: Determine your investment goals, such as capital appreciation, regular income, or long-term growth. It will help you decide which type of investment (direct or indirect) and which securities (stocks, bonds, mutual funds, or ETFs) to choose.

Risk appetite: Assess your risk appetite and choose investments that align with your risk tolerance. US stocks can be volatile, so consider diversifying your portfolio by investing in other asset classes, such as bonds and ETFs.

Market conditions: Analyze the current market conditions in the US and India. Keep track of the economic indicators, political developments, and corporate news that can affect your portfolio or the stock market at large.

Tax implications: Understand the tax implications of investing in US stocks, both in the US and India. Consult a tax expert to ensure compliance with the tax laws of both countries.

Investment horizon: Determine your investment horizon, i.e. the length of time you plan to hold your investments. US stocks can offer long-term growth potential, but short-term fluctuations can impact returns.

Fees and expenses: Consider the fees and expenses associated with investing, including brokerage commissions, mutual fund expense ratios, and foreign exchange conversion costs. Compare different investment options to find the most cost-effective solution.

What other features does Vested offer?

The Vested platform offers the easiest and most robust US investing capabilities, enabling you to easily buy US stocks. Our platform includes:

• Real time share market price stream on both our web and app platforms (Android and iOS).
• One of the easiest to use and the most cost-effective INR to USD conversion method via Vested Direct.
• The easiest method to track and report your Indian taxes when you invest in US equities.
• Curated model portfolios and collections, enabling you to easily diversify and follow different investment themes (such as software-as-a-service, businesses with deep moats, digital cash, and others).
• With Vested, you can buy and sell fractional shares. This means you can invest as little as $1.

Popular US Investment Glossary

Ok – now that you have read the overview on how to buy US stocks from India, here are several glossaries that you need to know.

Investment Indices: Instead of investing in individual stocks, when investing in the US, investors can easily invest in a broad diversified basket of stocks through indices (or stock indexes). Several popular US indices are:

• S&P 500: tracks the performance of the 500 largest US companies by market capitalization. In the last five years, the S&P 500 surged more than 54%.
• Dow Jones Industrial Average: tracks the performance of 30 large US companies trading on the New York Stock Exchange (NYSE) and the NASDAQ. In the last five years, the Dow Jones gained 38%.
• Nasdaq Composite: tracks over 2,500 securities listed on the NASDAQ. In the last five years, the Nasdaq Composite surged more than 69%.
• Fractional shares: the ability to buy less than one share. This means you can buy high priced stocks such as Apple, Tesla, or Amazon for as little as $1.

Read more about widely followed US stock market indices.