Can you invest in US stock market from India? What are the ways through which you can invest in US stocks?
Yes, you can invest in US stocks; it is possible through direct investment, mutual funds, or exchange-traded funds (ETFs).
A place or a platform where the selling and buying of stocks take place is called a stock exchange. Sellers and buyers trade stocks (sell and buy) in a stock exchange.
If you want to invest your money in the US stock market, you can directly invest in US stocks or through mutual funds or exchange-traded funds (ETF).
This article will look at how one can invest in the US stock market from India.
How Can I Invest in US Stocks from India?
An Indian resident may allow by the RBI (Reserve Bank of India) on an application to invest in foreign securities.
The New York Stock Exchange (NYSE) and Nasdaq are the two major stock exchanges in the US. These exchanges have some of the best stocks, such as Apple, Tesla, Netflix, Google, Microsoft Corporation, Facebook, Amazon, General Motors, etc.
The two ways through which you can invest in US stock market from India are:
- Direct investment
- Mutual funds or exchange-traded funds (ETFs)
Invest Directly in US Stock Market
In the direct investment method in the US stock market, you can open an overseas account with the help of a domestic broker who has a tie-up with the US stockbrokers.
In such a case, the domestic broker will act as an intermediary in executing your trade.
You can also open an overseas account with the help of a foreign broker who has a presence in India. Some of the foreign brokers in India are Interactive Brokers, Trade Station, TD Ameritrade, etc.
Keep in mind that based on the breakage firm, the trades may face restrictions in the number of trades made or in specific investment vehicles. Also, there are charges that you have to pay for trading.
The price of some shares is very high, in case you want to buy that shares, and when you convert the price into Indian rupees, it may become impossible for you to buy that share.
You can buy a fraction of a share from the US stock market to solve this problem. A fraction is a part of the total share that can be traded like a whole share.
Invest in US Stock Market Through the Indirect Method
You can also invest in US stock market from India through mutual funds or ETFs.
Another way to invest in the US stock market from India is through mutual funds. A mutual fund is an investment plan managed by professional management. The management collects money from several investors and invests this money into bonds, stocks, and securities.
An investor buys shares in a mutual fund, which means he holds shares in a particular mutual fund scheme. You can purchase or sell shares in a mutual fund scheme at the net present value of the fund.
There are two types of mutual funds that are investing in foreign investments. One type is called a fund of funds, which are local mutual funds, and the other is called local mutual funds.
Fund of funds invest in overseas mutual funds, and local mutual funds invest in the overseas stock market.
Apart from the general Indian fund management fees, there is also a management fee for the fund of funds, so the fund of funds has higher expenses.
ETFs stands for exchange-traded funds. These funds enable an investor to invest in multiple stocks or buy many bonds. Usually, ETFs track a specific sector, such as healthcare or energy.
They are similar to mutual funds in that they are essentially multiple stocks collection traded into a single fund, but unlike a mutual fund, ETFs trade in the same way that stocks are traded.
An investor can access the US stock market by investing in ETFs. Direct or indirect channels are there to invest in ETFs. You can buy Indian ETFs of international indices or invest in US ETFs directly with the help of a local or international broker.
It is worth mentioning that there are some regulations for overseas investments through mutual funds. These regulations are laid out by the Reserve Bank of India (RBI).
According to these guidelines, mutual funds registered with the Securities and Exchange Board of India (SEBI) can invest up to 7 billion dollars in the international market. For ETFs, this limit is 1 billion dollars.
The investment limit to invest in the international market by mutual funds and ETFs almost reached 7 billion dollars in January 2022, so fresh investments in the global market are paused.
What is the Maximum Amount You Can Invest in US Stocks?
According to the LRS (Liberalized Revenue Scheme) of RBI (Reserve Bank of India), an Indian resident can invest up to $2,50,000 per year without special permission.
The US stock market has several successful companies to choose from, and in terms of security, it is one of the most stable and safe markets for long-term investments.
It is possible to invest in US stock market from India through direct or indirect investments. You can invest in US stocks with the help of a domestic or foreign broker by opening an overseas account.
Indirect investments involve mutual (fund of funds or local funds) or ETFs. These funds make investments in international mutual funds and the stock market.
Indians interested in investing in the US can help them to diversify their portfolios globally.