How to Invest In US Stocks From India
Hi, I am Viram from Vested and today we are going to talk about investing in US stocks from India! Why you should do it, what options do you have and how does it work is what we are going to be covering today.
Why should Indians invest in the US share market?
So, let’s dive straight in! First up, why should you invest in international markets? We’ll give you five main reasons why you should be thinking about it.
Reason 1: Geographical diversification
The first, and most important reason to invest internationally is geographical diversification.
As political and economic factors affect Indian markets, it is important to ensure that a percentage of your portfolio is diversified internationally. This helps you offset geographic risks.
Reason 2: Eliminate single currency risk
Another reason why you should invest internationally is to eliminate single currency risk. In the past 10 years, the Rupee has depreciated more than 45% compared to the US dollar. So, you may have invested in leading fast growing companies in India, but if the rupee depreciates, so does the value of your portfolio despite your detailed analysis and hard work. You can avoid this by investing in US markets, and in fact make gains from rupee depreciation!
Reason 3: Global exposure
The third reason is that your portfolio can get global exposure via the US markets.
When you invest in the US you are not just exposed to the United States but also through the world, as many leading international companies have global operations while being listed on the US exchanges. For example, you can easily invest in the Chinese economy through investing in the US. The fast growing Chinese economy â€“ driven by a growing middle class and rapid technology adoption has led to the creation of some of the world’s leading technology companies. You can also invest in ADRs of companies from other countries like Toyota and Sony from Japan or TSMC from Taiwan.
Reason 4: Low correlation between Indian and international markets
The fourth reason is that there is low correlation between the Indian and US markets.
US indices such as the NASDAQ and S&P 500 have as little as 32% correlation with the Indian indices. This means that the movement in both markets has shown only 32% similarity over the last 10 years.
Reason 5: Technology and emerging themes
Lastly, through the US markets you can invest in the future, that is technology and emerging themes!
Technology as an industry has outperformed the S&P 500 over the last 10 years. Giving almost double the returns of the market. Through the US markets you can invest either in large technology companies the likes of Google and Apple or upcoming companies such as Coinbase and Airbnb. You can also invest in technology ETFs such as Vanguard’s Information Technology Index Fund.
What you can also do is invest in emerging themes. These are themes that are going to drive technological progress in the decades to come. Companies that are working on cutting edge themes like Artificial Intelligence, Cannabis, Mobility and more are listed on the US markets.
How Can I Invest In The U.S. Stock Market from India?
What are the different ways I can invest in the US stock market?
Next, let’s discuss what are the different options you have to invest in US stocks from India?
There are a bunch of ways through which you could start your international investing journey.
First, what you can do is, you can purchase mutual funds that invest in international stocks. These are known as Fund of Funds. A fund of funds is a pooled investment fund that invests in other types of funds that might be listed internationally.
Some advantages of investing in Funds of Funds are:
You can start investing via your existing mutual fund advisor or platform, no need to open a new brokerage account or even transfer funds into dollars to start investing.
What fund of funds provide is access to experienced fFund-of-Fund managers who can conduct due diligence and choose to invest in those funds that are managed by experienced managers who have longer and stronger track records of success.
What you also get with Fund-of-Funds is an additional layer of due diligence and protection as the managers of the underlying funds have already conducted research on the initial underlying investments.
Some disadvantages are:
In addition to charging their own fees, Fund-of-Funds actually tend to pass through fees from the underlying funds as well. Which means, it might be more expensive.
There is also lack of transparency due to limited visibility into the underlying investments of selected funds. It may be more difficult to monitor or keep track of the overall holdings of fund-of-funds.
The second option that you can explore is that you can invest in Exchange Traded Funds (ETFs). ETFs are different from mutual funds as they are listed and traded just like stocks and tend to have lower expense ratios. There are India-listed ETFs that are rupee denominated and there are also international ETFs that you can invest in directly. We discussed the pros and cons of each in a separate video which is linked in the description below.
Lastly, you can directly invest in international stocks listed on international exchanges using dedicated platforms such as Vested. The benefits of direct investing are that it gives you complete control over your portfolio as well as gives you a lot more investment options.
How to get started with Vested:
In the next section we’ll talk about how you can get started with investing via a platform like Vested. Because, I might have my biases. But still I would want to highlight some features Vested offers, that makes it easy to get started with US investing:
First, we offer fractional share investing. This means you can buy Tesla or Apple shares worth just one dollar!
Second, we allow a no minimum balance account to ensure you can invest and get returns on every last dollar you add to your account.
Next, Vested allows you to withdraw any amount any time. You decide what to do with your money, and when.
Vested also offers both direct investments in stocks and ETFs and as well as investments through curated portfolios. You have all the options you need along with a pre-curated portfolio that experienced investors build for you.
Currently, there are six of these pre-curated portfolios available on Vested ranging from a high-risk, high return Software as a Service focused portfolio, to a collection of All Weather stocks for the more conservative investor.
To get started all you need to provide is your PAN card details and a proof of address and you’re set with the KYC! Once done, add funds to your account using Vested Direct and you can begin investing almost in a day. Check out the Vested Direct walkthrough video linked in the description.
If you have any questions or thoughts, drop them in the comments and we will answer those immediately.