Are you considering the benefits of investing in US stocks from India? Global economic integration is progressing. This makes it increasingly popular to diversify your investment portfolio by including international markets like the United States.
This strategy can offer numerous benefits, such as the potential for attractive returns and reduced risk through geographic and economic diversification.
The US stock market, known for its massive scale and the presence of global corporate giants, offers a unique opportunity for portfolio diversification. As of January 1st, 2024, the total market capitalisation of the US stock market was approximately $50.8 trillion, making it one of the largest in the world. In comparison, the market capitalisation of the Indian stock market is around $4.6 trillion.
If youтАЩre looking to expand your investment strategy to include international stocks, understanding the process and benefits of investing in US stocks from India is crucial. Keep reading to find out how you can access one of the worldтАЩs largest markets, and boost your investment returns through diversification.
How to Invest in US Stocks
When it comes to investing in US stocks from India, you have several options at your disposal. These methods can be broadly categorized into direct and indirect investment avenues, each offering distinct advantages depending on your investment goals and risk tolerance.
Direct Investment Options for Buying US Stocks from India
Buying US Stocks through Investing Apps
One of the easiest ways to invest in US stocks from India is by using investment apps that facilitate international stock purchases. These apps allow you to buy US stocks or ETFs directly from your smartphone. Apps like Appreciate enable you to start investing with as little as тВ╣1. This makes it accessible for individuals who wish to invest small amounts and gradually build their portfolios over time.
Here are some distinctive benefits of using the Appreciate App to buy US Stocks:
- Appreciate provides real-time access to the US stock market, which is crucial due to the time difference between India and the US. Investors can react quickly to market changes during US trading hours, directly from their smartphones.
- Apps frequently include educational resources that help new investors understand the complexities of US stock markets. These can range from tutorial videos to articles on investment strategies.
- You can access advanced features such as fraction тАУ which allows you to invest in fractional shares, starting from as low as тВ╣1. Appreciate also offers pro features like advanced analytics and insights.
- Appreciate handles INR to USD conversions seamlessly, often providing more competitive rates than traditional banks. This reduces the hassle of managing multiple currency accounts.
Opening an Overseas Trading Account
Another way to invest in US stocks is by opening an overseas trading account, either with a foreign broker or through a domestic broker that offers international trading services.
You can open an account directly with a US-based broker like Charles Schwab or TD Ameritrade. This option allows you direct access to the US stock markets, enabling you to buy stocks like Apple, Amazon, or Google. To fund your investment, youтАЩll likely use a SWIFT payment from your Indian bank account.
There are typically two main types of costs involved: currency conversion fees and wire transfer fees.
- Currency Conversion Fees: These fees arise because your investment in US stocks needs to be made in USD, so your INR will be converted to USD. The rate of conversion will include a markup over the mid-market exchange rate, which is how banks make a profit on the conversion. Currency conversion fees for such investments can range from 3% to 5% of the transaction amount, depending on the financial institution and the specific services used.
- Wire Transfer Fees: Banks charge a fee for the actual wire transfer. This fee can vary significantly depending on the bank but typically ranges from тВ╣500 to тВ╣2,000 per transaction. Some banks offer reduced fees or promotions for online transfers or for premium account holders. ItтАЩs also important to note that the timing of these transfers and the associated rates can impact the total INR you spend, as exchange rates can fluctuate frequently.
Drawbacks:
- Some US brokers require a substantial minimum deposit, which can be restrictive for average investors. For instance, brokers like Charles Schwab or TD Ameritrade might ask for a minimum deposit of $25,000 to start trading.
- Earnings through US-based brokers are subject to US tax laws as well as Indian tax regulations. This can complicate tax filings, requiring the investor to possibly file tax returns in both countries depending on the circumstance.
Overseas Trading Account with a Domestic Broker
Alternatively, you can open an overseas trading account with an Indian broker that offers international trading
These brokers partner with US-based brokers and offer a platform for investing in US stocks. They provide added conveniences, such as handling currency conversions and ensuring regulatory compliance on your behalf.
Generally, there is no fixed minimum investment amount required for investing in US stocks through these platforms. The brokerage fees might be higher when using these domestic platforms compared to directly using US brokers. This is due to the additional services they provide, such as ease of transaction and regulatory compliance.
On average, US online discount brokers charge around $5 to $15 per trade, but this can vary widely. Some brokers offer zero-commission trades, although they may recoup costs through other fees.
Drawbacks:
- While convenient, domestic brokers might offer limited access to the full range of US stocks. For example, they may only provide access to major indices and not to smaller stocks or certain sectors.
- When converting INR to USD and vice versa, domestic brokers often add a margin to the exchange rate, which can reduce the overall returns from investments.
- The investorтАЩs experience and the range of available features heavily depend on the brokerтАЩs platform capabilities, which might not always align with the investorтАЩs needs.
Indirect Investment Methods for US Stocks
Investing in US Stocks via Mutual Funds
You can invest in US markets by purchasing units of mutual funds that invest in US equities. These funds are managed by professionals who allocate investments across various US stocks.
ItтАЩs a less hands-on approach to investing in US stocks and is ideal for those who prefer not to manage daily trading activities. Here are some examples of mutual funds that Indian investors might consider for investing in US stocks:
- Franklin India Feeder тАУ Franklin US Opportunities Fund: This fund primarily invests in US companies through the Franklin US Opportunities Fund, aiming for growth by investing in US-based companies across a range of sectors and company sizes.
- ICICI Prudential US Bluechip Equity Fund: The fund invests in blue chip companies in the US, which are large, well-established companies known for their reliability and ability to operate profitably in various economic conditions.
- DSP US Flexible Equity Fund: This fund aims to provide exposure to US stocks across various sectors and market caps, adapting its holdings based on current market conditions to maximise returns.
These funds allow Indian investors to participate in major US companiesтАЩ growth without directly trading stocks on US exchanges.
Exchange-Traded Funds (ETFs)
ETFs are similar to mutual funds but are traded on stock exchanges much like individual stocks. Here are some prominent ETFs that focus on US equities:
- SPDR S&P 500 ETF Trust (SPY): This is one of the most well-known ETFs globally, designed to track the S&P 500 Index, which comprises 500 of the largest US companies. As of February 2024, it had assets totalling about $502 billion. This size reflects its popularity among investors looking to gain broad exposure to the US stock markets.
- Vanguard Total Stock Market ETF (VTI): It covers the entire US equity market, including small, mid, and large-cap growth and value stocks.
- Technology Select Sector SPDR Fund (XLK): This fund provides targeted exposure to technology and telecom sectors within the S&P 500.
| Did you know?The US stock market is the largest in the world, representing about 60% of the global stock market as of January 2023. It offers Indian investors the opportunity to invest in major global tech companies such as Alphabet and Meta. |
Costs and Tax Implications of Investing in US Stocks
When investing in US stocks from India, several costs can affect your overall returns. These include:
TCS (Tax Collected at Source) on Remittances: Effective from 1st October 2023, a 20% TCS is applicable on remittances over тВ╣7 lakh under the RBIтАЩs Liberalized Remittance Scheme (LRS). This tax is on the amount exceeding тВ╣7 lakh and can be claimed as a refund when you file your Income Tax Return (ITR).
Capital Gains Tax: Capital gains from US stocks are subject to taxation in India. If you hold the stocks for less than 24 months, the gains are considered short-term and are added to your income, taxed at your applicable income tax slab rate. For stocks held longer than 24 months, long-term capital gains tax applies, typically at 20% with indexation benefits.
Dividend Taxes: Dividends earned from US stocks are taxed at 25% in the US. However, under the Double Taxation Avoidance Agreement (DTAA), you can claim a foreign tax credit in India to avoid double taxation.
Bank Charges and Brokerage Fees: Banks typically charge foreign exchange conversion fees and transfer fees when you remit funds to invest in US stocks. Additionally, brokers charge fees for executing trades, which can vary based on the platform or broker you use.
Currency Conversion Costs: The exchange rate at the time of converting INR to USD can significantly impact your investment costs. Currency conversion fees are often included in the markup on the exchange rate provided by banks or brokers.
Taxation for US Stock Investments
Being aware of the tax implications of investing in US stocks is crucial to ensuring compliance and optimising your net returns. Key tax considerations include:
- Double Taxation Avoidance Agreement (DTAA): The DTAA between India and the US allows you to claim a credit for taxes paid in the US on dividends, thereby preventing double taxation on the same income.
- Long-Term and Short-Term Capital Gains Tax: As mentioned, the duration for which you hold the stocks determines whether you pay short-term or long-term capital gains tax. ItтАЩs important to plan your investments with these tax implications in mind.
- Foreign Tax Credit: If youтАЩve paid taxes on dividends or capital gains in the US, you may be eligible to claim a foreign tax credit in India. This can help reduce your overall tax liability.
Understanding the taxation laws applicable to foreign investments is crucial. HereтАЩs a breakdown of the main taxes applicable to US stock investments for Indian residents:
| Type of Tax | Tax Rate | Description |
| Dividend Tax | 25% | Taxed in the US at this rate; eligible for credit under the Double Tax Avoidance Agreement (DTAA) against Indian taxes. |
| Capital Gains Tax | 0% (applies only to specific income levels and holding periods) | Individuals who stay in the US for less than 183 days in a year are not subject to US capital gains tax; staying longer may trigger tax obligations. |
| Long-term Capital Gain | 20% (in India) | Applicable if US stocks are held for more than two years. Taxed at 20% in India. |
| Short-term Capital Gain | According to the income tax slab (in India) | For stocks held less than two years, added to income and taxed at the respective income tax slab rates in India. |
Why Indians Should Consider Investing in US Stocks?
Investing in US stocks offers a range of benefits that can enhance your overall investment strategy, particularly through diversification and access to global market leaders. Here are some compelling reasons why you should consider adding US stocks to your portfolio:
Diversifying Your Portfolio with US Stocks
One of the primary reasons to invest in US stocks is to diversify your portfolio geographically. By holding investments in both Indian and US markets, you can reduce the risk associated with market volatility in a single region. Different markets and regions often respond differently to global economic events, allowing you to balance potential losses in one market with gains in another.
Accessing Global Market Leaders
The US stock market is home to some of the worldтАЩs largest and most influential companies. Investing in US stocks gives you direct access to these global market leaders, including companies at the forefront of technology, healthcare, and consumer goods. These companies often have a global reach, which can lead to more stable and sustained growth compared to companies operating primarily in a single region.
Investing in Cutting-Edge Innovations
The US is a hub for innovation, with significant advancements in technology, artificial intelligence, biotechnology, and more. By investing in US stocks, you can gain exposure to companies that are pioneering new technologies and driving future growth. This presents an opportunity to be part of the growth stories of companies that could shape the future of global industries.
Potential for Currency Gains and Long-Term Returns
The US dollar has historically appreciated against the Indian rupee, which can enhance your returns when converting your investments back to INR. Additionally, the relative stability and long-term growth prospects of the US economy make it an attractive option for investors looking to build wealth over time.
Key Considerations Before Investing in US Stocks
Before you begin investing in US stocks, there are several important factors to consider. These considerations will help you make informed decisions, align your investments with your financial goals, and navigate the complexities of international investing.
Impact of Currency Exchange Rates on US Stock Returns
When investing in US stocks, your returns can be significantly affected by fluctuations in the exchange rate between the Indian rupee (INR) and the US dollar (USD). A strengthening dollar against the rupee can boost your returns when converting profits back to INR. Conversely, a weakening dollar can reduce your gains. ItтАЩs essential to monitor currency trends and consider the potential impact on your investment returns.
Regulatory Compliance and Legal Considerations
Investing in US stocks from India involves adhering to both Indian and US regulatory frameworks. The Reserve Bank of India (RBI) regulates the amount you can invest abroad under the Liberalized Remittance Scheme (LRS), which currently allows Indian residents to invest up to $250,000 per financial year. Additionally, you must comply with US securities regulations, which may include tax filings or reporting requirements, depending on your investments.
Aligning US Stock Investments with Personal Financial Goals
Your investment decisions should align with your life goals, whether itтАЩs saving for retirement, buying a home, or funding education. US stocks can be part of a broader investment strategy that supports your long-term financial aspirations.
LetтАЩs say you want to save тВ╣65 lakhs for your childтАЩs education in 18 years by investing in US stocks.
- Monthly Contributions: Invest тВ╣15,000 each month.
- Expected Return: Aim for an average annual return of 7% from a diversified US stock portfolio.
Over 18 years, your initial amount and regular investments, growing annually, should help you reach your тВ╣65 lakh goal.
Note: After buying shares, itтАЩs important to track their performance and manage your portfolio effectively. Use our Stock Price Average Calculator to calculate the average price of multiple purchases and get a clearer picture of your overall investment.
How to Invest in US Stocks on Appreciate
Investing in US stocks through the Appreciate trading app allows you access to international markets. HereтАЩs how to get started:
Create Your Appreciate Account
Start by registering on the Appreciate platform. YouтАЩll need to provide some personal details such as your name, email, and phone number, along with KYC documents like your PAN card and proof of address. Once your documents are verified, your account will be ready for transactions.
Transfer Money to Your Account
Link your bank account to transfer funds to your Appreciate account. You can use net banking. Remember to consider the foreign exchange rates and transfer fees, as these will impact the total amount available for investment. Appreciate offers the best forex rates for your convenience.
Select the Stock You Want to Invest In
Choose from a wide range of US stocks available on Appreciate. Use the platformтАЩs tools to research stocks based on their financial health, performance history, and current market trends.
Make sure to select stocks from sectors you are familiar with or those that show growth potential.
Execute Buy Order
Place your buy order through the trading interface. You can opt for a market order to purchase at the current price or a limit order to specify the maximum price youтАЩre willing to pay.
Your order will be executed during US stock market hours, and you will be notified once the transaction is completed.
By following these steps, you can manage your investments through the Appreciate app and diversify your portfolio internationally.
Final Thoughts
Investing in US stocks from India is a powerful way to diversify your portfolio and tap into the growth potential of some of the worldтАЩs largest and most innovative companies. By carefully considering the costs, tax implications, and regulatory requirements, you can make informed decisions that align with your financial goals. With platforms like Appreciate, which is fast becoming one of IndiaтАЩs best trading apps, the process is streamlined, making international investing accessible even for beginners.
Ready to get started? Download the Appreciate app today and take the first step towards global investment opportunities.
If youтАЩre interested in buying the popular US Stocks, you can read the following articles:
Best Semiconductor Stocks in India
Best Green Hydrogen Stocks in India
How to Find Multibagger Stocks
FAQs About Investing in US Stocks from India
How Much Can I Invest in US Stocks from India?
Under the Reserve Bank of India’s Liberalized Remittance Scheme (LRS), Indian residents can invest up to $250,000 per financial year in US stocks. This limit includes all foreign investments, not just stocks.
What Documents Are Required to Invest in US Stocks from India?
To invest in US stocks from India, you typically need your PAN card, proof of address (such as an Aadhaar card or utility bill), and sometimes a recent bank statement or proof of income, depending on the platform or broker.
Can NRIs Invest in US Stocks?
Yes, Non-Resident Indians (NRIs) can invest in US stocks. They have access to similar investment opportunities as resident Indians, often using their NRE or NRO accounts to fund these investments.
Is It Legal to Invest in US Stocks from India?
Yes, it is legal for Indian residents to invest in US stocks. The investments must comply with RBI regulations under the LRS, and investors must adhere to both Indian and US tax laws.
What Are the Trading Hours of the US Stock Market?
The US stock market operates from 9:30 AM to 4:00 PM Eastern Time (ET), which translates to approximately 7:00 PM to 1:30 AM Indian Standard Time (IST). These timings are essential for Indian investors to consider when planning their trades. Learn more about US Stock Market Timings.
What is the Best Platform in India for Investing in US Stocks?
Appreciate Wealth is the best platform for investing in US stocks from India, because it provides real-time data, fractional share investing, and AI-based recommendations.
Can I Invest in Fractional Shares of US Stocks?
Yes, fractional share investing allows you to buy a portion of a high-priced stock, making it more accessible to invest in companies like Apple or Amazon without needing to buy a full share.
What Is the Minimum Investment Amount for US Stocks?
The minimum investment amount can vary depending on the platform or broker you use. Appreciate lets you start investing with as little as тВ╣1 by purchasing fractional shares of US companies.
How Does Currency Fluctuation Affect My US Stock Returns?
Currency fluctuation can impact your returns when converting your investments back to INR. A stronger dollar can enhance your returns, while a weaker dollar can reduce them. Monitoring currency trends can help you optimise your investment timing. Historically, investors have gained an extra 4% per annum from US stocks than Indian stocks.
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