Many global giants like Facebook, General Motors, Apple, etc. trade on the stock market in the US and are among the greatest in the world. Investing in such stocks exposes you to opportunities to grow your wealth outside India’s stock market.
If you want to know how to invest in US stocks from India, there are a wide variety of options, as there are no limits on where you can trade.
How can Indians participate in the American stock market?
You can buy US stocks from India if you are thinking about how to invest in the US stock market.
From India, you can have access to the US stock market in two ways:
1. Stocks bought outright.
2. Invest in a pool of stocks through a mutual or exchange-traded fund.
Let us discuss these two options in detail.
Investments Made Directly
Before choosing the best app to invest in US stocks from India, you must check the fees involved.
- Using a US Broker to Trade Abroad
- Partnerships between Indian brokers and American brokers can be seen in the industry. These third parties help with global trading. With any of these brokers, you can set up an account to trade in foreign markets. You may need to provide proof of identity and address when you open this account.
- Investing can be quite pricey when you check the trading fees and the cost to convert currencies. So, before opening an account, ensure you know well about all the fees to be paid.
- Applying to a Foreign Broker for an Overseas Trading Account
- An overseas broker having offices in India is one more option for setting up a trading account abroad. Charles Schwab, Ameritrade, Interactive Brokers, etc. are a few examples of such brokers. Before you open an account, be sure you fully grasp all of the costs.
To invest successfully in US stocks from India, you should know well about all of your broker options.
Funding Invested Indirectly
It is viable to buy US stocks indirectly without actually buying any shares, just as it is possible with local stocks. We offer you ways to do this:
- Mutual Funds
- Mutual funds are a well-known way to invest in stocks and bonds in the United States.
- Unlike some brokers who offer direct foreign investments, no minimum deposit is required, nor is an overseas trading account required.
- ETFs (exchange-traded funds)
- Investment in exchange-traded funds (ETFs) is one more way to get access to the US stock market. You can get ETF in two ways: directly and indirectly. Directly investing in US ETFs through an Indian or foreign broker is the first option. Investing in an Indian ETF tracking global indices is another option.
- Investing in Cutting-Edge Apps
- Since the rise of start-ups offering mobile apps for a variety of services, several apps have been made to aid Indian investors in trading on the US stock market. Some apps might not allow intraday trading on the US market from India because of some legal restrictions.
Now that we have got to know the steps to invest in the US market from India, let us know the costs and perks of buying US stocks.
How Much do the Various Fees Add Up to for Buying US Stocks?
- Direct Taxation
- Under the RBI’s Liberalized Remittance Scheme, a 5% TCS is to be paid on any fund transfer over Rs 70,00,000. This only applies to the part of the bill that is more than Rs 70 Lakhs.
- Once you file your income tax return, you can get a refund of the TCS.
- Income Tax on Capital Gains and Dividends
- Indian citizens pay a 25% tax rate on dividends earned in the US. A DTAA lets the investor claim a credit for foreign taxes paid in the past to offset future tax bills.
- In the US, such profits are not subject to taxation. But you must pay tax in India on any profits made from selling assets.
- Fees Assessed by Financial Institutions
- There is an extra fee for making a transfer or converting currency at a bank. A one-time fee for creating an account is also possible.
- When you buy or sell shares, the broker will charge you a commission.
- Rate of Foreign Trade
- Prices and assigned units may fluctuate depending on the foreign exchange rate at the time of purchase or withdrawal.
What Attracts Indians to Invest in US Stocks?
- In general, US stock market indices have been less volatile than Indian stock market indices over time.
- The US is home to the headquarters of most multinational firms, giving you access to a wider range of investments.
- The US stock market has performed better than the Indian stock market over the past decade.
- The US is a world leader in innovation, making it an ideal place to launch a new business.
Considerations Before Buying US Stocks
If you have the resources to study the US economy and market, you may be ready to open a trading account in a foreign country.
Investing can save you money compared to day trading on the US stock exchanges. This is because significant fees can reduce traders’ ability to turn a profit. You can still earn good profits after fees if you invest for the long term.
Consider any tax obligations that may arise per US and Indian regulations.
You should invest modestly at first and then expand your stake as your knowledge of the US markets grows.
You can diversify your stocks by US stock trading from India and investing in overseas markets. Now more than ever before, it is easy to do a brief research on firms and assess their stock performance with the wealth of data at our disposal.
However, bear in mind that both perks and risks are going to be associated with investing in stocks on a global scale. That is why it is crucial to consider everything and tailor your investment strategy to your specific needs and risk tolerance.
For more information on investing in US stock markets, contact the financial experts at Piramal Finance. Get yourself acquainted with wide-ranging financial products and services, especially credit cards and personal loans.