In this piece, we'll help you understand how to buy US Equities and get your hands on some exceptional American stocks right here from India!
In this piece, we'll tell you how you can buy US Equities and get your hands on some American stocks right here from India! But hold up… First, let's see why people invest in the US Stock Market in the first place.
One basic reason to invest in the US is to protect your wealth from eroding against the rising value of the US Dollar. Every time the rupee falls against the dollar you’ll know you have some wealth that’s growing.
Investing in US Stocks makes even more sense if you plan to live in America or have children studying abroad. You also get to participate in one of the world’s most mature economies and earn interest in dollars.
Whether it is Facebook, Google, McDonald’s, KFC or NIKE, you’ve loved these US Companies and know them in and out. You’ve used their products and can trust them. Investing in a company you understand always helps you make wiser decisions.
USA’s Gross Domestic Product is almost 10 times that of India. That means you are participating in a much larger market with US-listed companies accounting for almost 35% – 40% of the world’s market capitalization.
The Dow Jones Index and the NASDAQ have outperformed our humble NIFTY and SENSEX. So much so that many times the US market rose when ours fell.
Profits earned on selling US stocks are known as capital gains. Generally, capital gains are taxed according to the holding period. You’d be happy to know that US stocks sold for a profit are not liable for any tax in the US.
That’s because India and the US have a double taxation avoidance agreement. This means that you’ll only have to pay a tax on the capital gains according to India’s tax rules.
However, dividend income is taxed in both countries. That said, let’s look at the tax implications of investing in US stocks from India.
Just like we have the SENSEX and NIFTY that are traded on the NSE & BSE in India, the US Market has its own indices & stock markets.
The DJIA is one of the oldest and most popular indices in the US. It comprises the top 30 prominent companies that are generally leaders in their industries.
This is also one of the most commonly followed indices in the US. The S&P500 is a list of 500 large companies that are publicly traded on US stock exchanges.
The companies that collectively make up the S&P 500 and DJIA are then traded on NYSE. It is the largest stock exchange in the world with a market capitalization of US$26.2 trillion (2021). It has more than 2,400 companies listed globally. This includes small companies and the blue-chip stock companies.
NASDAQ is the 2nd largest stock exchange in the world, with a market capitalization of $19.4 trillion (2021). It is home to over 3500 companies that have collectively made up the S&P 500 and DJIA.
You can invest in US stocks from India in one of two ways. One is direct, through a brokerage app like Cube that allows you to invest in the US market from India. Two is indirectly through mutual funds.
You need a broker to help you trade US stocks from India. You will have to create a trading account with a brokerage house and get your KYC done by giving your PAN, Bank Account, Voter ID, Bank Statement, etc.
After this, you’ll need to transfer funds into your account to trade US stocks. Bear in mind you’ll be able to invest in US stocks from India through the RBI’s Liberalised Remittance Scheme (LRS).
There are formalities that you’ll have to follow to ensure that you’ve complied with the RBI’s LRS norms. The LRS allows you to invest up to $250,000 per financial year in the US markets from India.
The brokerages can be domestic or have partnered up with US brokers. or a foreign brokerage that has a direct presence in India.
International funds offer an alternative way of adding US stocks to your portfolio. They negate the need to go through the LRS formalities and are available on apps like Cube.
In a nutshell, you can invest in international funds just like you would in any other mutual fund. There are tradeoffs. For example, the potential returns that you can earn will be in line with the risk profile of the fund.
ETFs are very similar to Mutual Funds. They are a pool of securities that include stocks, bonds, etc. ETFs can be another way to invest in the US stock market. You can buy ETFs that are available in India that invest in the US stock market.
This becomes an indirect investment. You can invest in these ETFs without opening a new US brokerage account.
You should also go through our story on Step-by-step procedure to invest in the US from India to understand the overall scenario better
There are of course some risks that you must keep in mind. It’s not easy keeping track of a foreign market without an app like Cube Wealth, that frees you from that stress. You will also need to consider the higher risk as your losses and gains will both be in dollars.
Liquidity is also lesser than Indian investments. Higher charges and brokerage can also be a concern if you’re not a Cube user. You’ll also have to keep a close eye on global factors and economic conditions that can affect the performance of US stocks.
In order to be able to ensure such risks don’t effect you much, you can also take some pointers from our episode of the Cube Wealth show on How to Build Positive Investing Habits.
Yes, you can invest in NASDAQ from India. However, you can do so only through a brokerage firm and using a trading account.
The NYSE – New York Stock Exchange and the NASDAQ – National Association of Securities Dealers Automated Quotations are the two major US stock exchanges.
The risks are higher when investing in US stocks because you are investing in a market you can’t always keep track of. The lower liquidity and the fact that your losses will also be in USD further adds to that.
Whether you should invest in US stocks for short term depends on a lot of factors like your goal, risk appetite and investment amount. Please consult a Cube Wealth Advisor before making any investments.
Yes, Indian investors can buy US stocks listed on the NYSE using a reliable and intuitive app like Cube Wealth. Cube allows you to invest in US stocks on your own or with world-class advice from RIA, Rick Holbrook, who currently manages ~$130 million in assets for HNIs.
Indians can invest up to $250,000 (₹1,85,68,750) in the US stock market per financial year based on the current LRS rules of the RBI.
“Earn as much as you can, save as much as you can, invest as much as you can, give as much as you can.” John Wesley
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!