Indian investors who wish to grow their wealth often seek ways to invest in US stocks from India. Given the fact that it is home to two of the world’s biggest stock exchanges, their interest is justified.
The US stock market is one of the most liquid stock markets, and companies such as Apple, Tesla, Meta, Alphabet, etc., are traded.
Two of the main governing stock exchanges in the US are the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ).
We created this guide especially for you, the Indian investor, to help you better understand how to trade in us stock market from India After reading this, you will understand:
- How to buy US Stocks from India
- How to invest in U.S stocks (and why we believe Vested is the best choice)
- Good things to know when investing in the U.S stock market
- Why it may be a good idea to invest and diversify in the U.S stock market
- Popular terms used when discussing the U.S stock market
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. Domestic brokers who offer this facility have tie-ups with US stockbrokers.
2. Investing through instrument
Investing through funds like international mutual funds and exchange-traded funds allows you to invest in the US stock market from India without getting directly exposed to the volatility of the US market. If you want an alternative, then you can also go for domestic funds that invest in the US stock market.
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:
- Visit https://app.vestedfinance.com.
- You will now get the option to sign up using your email, Google account, Facebook or Apple account.
- Choose an option at your convenience.
- Once you successfully register, you will be asked to complete your KYC process.
- Upload your ID proof and address proof, and fill in other information as asked.
- Once your documents are verified, you will get your approval in as little as 10 minutes.
- 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. 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.
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. Where INR was valued at ?47 against USD in 2011, it has depreciated to ?82 now. Thus, simply owing to this depreciation in currency conversion, US stock markets can generate much superior returns 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.
4. Can invest in MNCs directly rather than the local Indian subsidiary
Many multinational companies that operate in India have their Indian subsidiaries registered in the country, while their headquarters are still situated in their home 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 documents are required for investing in US stocks from India?
There are no specific documents required for US investing except for opening your account. If you open an account with a global stockbroker or even Indian stock brokers that facilitate investing in US stocks from India, you would need some documents for KYC. Apart from KYC, there are no other documents required for US investing.
You need a government ID to validate your identification and address proof. Hence, when you open your account, you will have to submit your PAN card details and Aadhaar card details to open your account successfully.
Once your KYC is approved, you can start investing in US stocks from India.
What are the charges and taxes involved 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, brokers might charge a fixed fee per trade or charge a percentage of total trade or total asset. 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
You will be taxed in India for this gain. Taxes will not be withheld in the US. The amount of taxes you have to pay in India depends on how long you hold the investment. 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 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. Your investment goals 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, and how they may impact your investments. Keep track of the economic indicators, political developments, and corporate news that can affect the stock market.
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, enaling 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 transfer INR to USD transfer method in 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.
Frequently Asked Questions:
1. Can Indians Invest in the US Stock Market?
Yes – investors from India can invest in the US stock market. If they are interested in diversifying beyond Indian stocks and financial instruments, beyond the Sensex or the Nifty 50, Indian investors can do so by investing in the S&P 500, Dow Jones, Nasdaq or other US listed companies.
Investing in US stocks or ETFs by Indian investors is permissible under the RBI’s Liberalized Remittance Scheme (LRS), by using purpose code S0001 (fun fact: you can also open US bank accounts under this purpose code). Read more about the LRS and US investing.
2. Can Indian trade in the US market?
No. Remittance for trading in the US stock market or any foreign market is prohibited as per the Liberalized Remittance Scheme (LRS) guidelines.
3. Is it Legal to Invest in US Stocks from India?
Yes, It is absolutely legal for Indian investors to invest in US Stocks. Even if you are not an Indian investor, you can still invest in US stocks from India under the Liberalized Remittance Scheme (LRS) guidelines.
4. What documents are required for Investing in US Stocks from India?
Documents required for investing in US markets include proof of identity and proof of address. The whole process is paperless and can be completed in minutes. Note: All bills and statements must be within the last 3 months and must have your name on it.
5. What are the benefits of Investing in US Stocks from India?
Investing in US stocks from India can provide exposure to a wider range of industries and companies, diversify a portfolio, and potentially offer long-term growth potential.
6. Can Indians Invest in Nasdaq from India?
No, one cannot directly invest in NASDAQ from India. You can invest in the NASDAQ exchange, but investors cannot invest in NASDAQ directly. You can invest in index funds or other ETFs that have a similar portfolio as the stocks in NASDAQ.
7. What are the trading hours of the US stock market for Indians?
As per the Indian timings, the US stock market opens at 7 pm for Indian investors and closes at 1:30 am. It should be noted that the standard US stock market timing is 9:30 am to 4 pm.
8. What are the popular stock indices in the US Stock Market?
Some of the most popular stock indices of the US stock market include the NASDAQ Composite, Dow Jones Industrial Average, S&P 500, and NASDAQ 100, among many others.
9. What are the pros and cons of US stock market Investment?
One of the biggest advantages of investing in the US stock market is that it allows you fractional investing. Hence, if you have just the minimum investment amount (as low as $1), you can buy a fraction of shares which you could not afford otherwise. A major con, on the other hand, is the risk related to exchange rate of currency. Due to fluctuations in FE rates, your final profit and loss can change.
10. How much can Indians invest in the US stock market?
As per RBI’s Liberalized Remittance Scheme, Indian investors can invest up to $2,50,000 in US stocks annually.