US brands have slowly become a part of our everyday lives in India right from the Windows/Mac OS, the iPhone, and our favourite fast-food chains like McDonald’s, Burger King, Starbucks, and more. But did you know that you can buy a piece of your favourite US brands from India?
Cube is the first app to bring US stock advisory to India. The app helps you buy US stocks in a simple and streamlined manner. But before we delve into buying US Stocks let's talk about all the benefits and risks of investing in US stocks so that you can decide whether or not you want to invest in US Stocks with confidence.
5 Benefits Of Investing In US Stocks
A developed country like the US offers a lot of benefits. Apart from the fact that the US has the biggest GDP in the world, close to $21.44 trillion, there are several other benefits of investing in the US markets.
1. Market Capitalization
The S&P 500 is the biggest stock exchange in the world purely in terms of market capitalization estimated to be US$30.5 trillion. Why is this so? Because it hosts 500 of the best companies in the world such as Apple Inc. (AAPL) Microsoft Corp. (MSFT) Amazon.com Inc. (AMZN) 4. Facebook Inc. (FB) Alphabet Inc., etc.
2. The Dollar Value
The US dollar is one of the strongest currencies in the world that rarely fluctuates in value. Investing in US dollars is a good way to create long term wealth. If you bought 1 Google Share in March 2005 for $90 (₹3,933), the value of the same share would be $1,606 (₹1,18,121) on October 23rd 2020.
The US markets are one of the most diversified markets in the world. The top sectors, Technology and Financials, only make up for 34% of the overall market cap.
4. Truly Global
Companies from all over the world are listed in NASDAQ, S&P 500, etc. So you can access companies from China, Canada, Germany, the UK, etc.
Newer, better and more innovative companies keep emerging on the US soil. You can take part in their growth journey by investing wisely. Cube users stay ahead of the curve by having direct access to US advisory from award-winning RIA, Rick Holbrook.
Fun Fact: The oldest U.S. stock exchange was located in Philadelphia and was opened in 1790.
5 Risks Of Investing In US Stocks
Just like any other investment, investing in US stocks carries its own risks. Let’s take a look at these risk here:
1. Currency Exchange Risks
The rupee amount that you invest is converted into dollars before a stock option is purchased in the US markets. Similarly, when you get dividends or sell the stock, the amount is converted into rupees.
Any negative fluctuation in the currency exchange can impact your investment. If you are investing via an app like Cube Wealth, you can transfer money to your US Brokerage account in one go to avoid this risk.
2. Country Related Risks
It is impossible to predict the economic, social and environmental factors that impact another country. A new policy or trade deal announcement, to name a few, can affect your investment. It is best to be aware of such events or better yet to have a US Advisor looking out for you.
3. Interest Rate Risks
It is no secret that the US economy is debt-heavy. The policies are such that big and small companies can easily procure a loan or take on a new round of funding. Rising interest rates, in such cases, are crippling for the company.
This can have a direct impact on your investment. So, ensure you know about the company you’re investing in.
4. Liquidity Risks
In a stock market as large as the US markets, high trading volumes are a given. But this doesn’t mean that everybody trades in high volumes. One of the worst mistakes you can make as an investor is to assume that there is a buyer out there for the volume of shares you are willing to sell.
A balance, in such cases, is necessary. With an advisory app like Cube Wealth, you can talk to an expert to ensure that you are investing wisely.
5. Regulatory Risks
Several sectors of the US economy are regulated by Government bodies. Regulatory changes can thus directly impact the sector and in turn, your investment. If you’re investing DIY, keep an eye out for news on the companies you’ve invested in.
Cube users, of course, don’t have to worry about these risks since they can invest based on advice from award-winning RIA, Rick Holbrook.
Taxability Of US Stock Investments
Since you’ll be investing in the US and getting your profits & dividends transferred to India, it’s important to know the tax rules and regulations in both countries. Any changes in the tax rules might affect your investments too.
In the US, a flat tax of 25% is applicable on your investments. However, India and the US have a Double Tax Avoidance Agreement (DTAA). This can be used to offset the taxes in India.
In India, LTCG is applicable to stocks held for over 2 years and STCG to stocks held for less than 2 years. Rates charged as per investor’s tax slab.
4 Tips To Measure Investment Risks
Before investing in any foreign market, look at these measures:
Gross Domestic Product (GDP)
Consumer Price Index (CPI)
Broadly speaking, getting a good wealth advisor can help you invest in the right stocks and minimize the overall risk. Speak to a wealth coach today.
Investing in US stocks have several clear benefits such as the rising value of the dollar, access to a variety of stocks from across the globe, better liquidity, higher market cap, etc. but they also carry several risks which are difficult to zero-in on if you’re a new investor.
So we recommend you to speak to a professional wealth coach like the ones at Cube Wealth. They can help you understand if you should invest in US stocks or take the mutual funds or ETFs route. Cube is the first investment app to bring US advisory to India.
Our advisor, award-winning RIA, Rick Holbrook, currently manages assets worth ~$130 million for HNIs. You can invest in US stocks by yourself on the Cube Wealth app for a low amount!
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!