Invest in US Stocks With 5 Easy Steps [Guide]

Millions of Indians in the current pandemic scenario have garnered interest in the stock market which has raised hopes of consistent growth in the appetite for equity trading. Investing in an Indian stock may seem quite lucrative but not every trader is privileged to win a maximum return on the investment made.

Trading in the Indian stock market happens at no distinguished momentum despite the volatility of the market. However, due to this highly unpredictable and rapidly changing market driven by several economic forces, many have resorted to the diversification of their stock investments across different industries and market capitalizations. Looking beyond India’s borders for investment opportunities has been one of the prominent ideas adopted for investment diversification and the US stock market happens to be one of these. 

The US stock market portfolio happens to be home to a few of the world’s most profitable stocks. For example Tesla, Amazon, Alphabet Inc, Apple, General Motors, and others. If we are to compare, the US stock market indices such as NASDAQ and Dow Jones have consistently outperformed the Indian market (Sensex and Nifty) over the previous decade due to their consistency and reliability. An additional benefit for Indian investors in the US stock market is a well-regulated ecosystem that focuses on transparent financial reporting and standardized governance practices.

invest in US Stocks From India

Each and every investor has to adhere to the RBI’s foreign exchange trade policies and thus, an international brokerage house is kept as an intermediate to supervise all the documentation between cross-country stock trading. Several Indian brokerage firms like Motilal Oswal, HDFC securities, and fintech platforms like Stockal, and brokerage applications like INDmoney, Vested Finance, Groww, and 5paisa provide opportunities to the general public to trade in the US Stock Market. In India, trading in the US stock market can be done in two distinct ways.

Also Read: Top 10 Stock Market Growth Strategies For 2021 [Full Guide]

Direct Investment in US Stocks through brokerage platforms:

One can simply open an overseas trading account with a domestic or foreign brokerage platform. The standard global investing platform would normally divide its direct stock trading approach into 5 key steps which are as follows:

  1. Account Opening:

After one has chosen his preferred global stock trading platform from the ones mentioned above, an online account registration is mandatory. It involves a simple and quick process of entering personal details such as Investor’s name, email, a secure password, and mobile number. After the detail verification, the brokerage account is created automatically.

2. Documentation process:

In order to verify one’s identity to the platform, submission of a prerequisite set of documents is necessary. This documentation may include a combination of Identity proof such as Aadhar card, Voter ID, PAN Card, Valid Driver’s license or Passport and an address proof such as a mobile phone or electricity bill, bank passbook or a bank credit or debit card statement. This documentation process is mandatory without which opening of the account would not be legally authorized. The authorization confirmation from their part takes approximately 1-3 hours depending on the platform.

3. Funds Deposit:

Once the documentation process has been accomplished, the trader can add an initial deposit of minimum Rs 100 from his bank account to the trading account. This deposit would be used to trade in the desired stocks.

4. Foreign Exchange formalities

This involves a bit of paperwork formality related to the Liberalized Remittance Scheme (LRS) under which any Indian resident individual has an allowance to remit a maximum amount of USD 2,50,000 in each financial year. This involves purchase of US dollars (USD) using Indian Rupees (INR) at the ongoing currency exchange rate from an authorized bank in India. This converted sum can further be spent abroad to purchase assets such as equity shares through the platform.

5. Foreign Exchange Rates

The foreign exchange rate plays a great hand while transferring the rupee funds from one’s bank account to the brokerage account in US Dollars. The exchange can be facilitated by the bank itself with which one opens a trading account on the platform.

Indirect Investments (Alternate Financial Products)

There exist a few methods to trade internationally through an indirect approach:

  1. Mutual Funds

One of the simplest strategies to invest in stock exchanges outside India is through mutual funds. One does not even require opening of an overseas trading account or maintenance of a minimum deposit. A number of mutual fund schemes invest in US stocks, and this can be the simplest method for a trader to invest in them if he has less or no knowledge about which stocks to play his cards with.

2. Exchange-Traded Funds (ETFs)

This is a type of security that tracks an index, sector, commodity, or any other asset, but which can be traded on a stock exchange just like any other regular stock. They include various investments such as stocks, commodities, bonds, and a mixture of other investments. US ETFs can be purchased and sold directly through a domestic or international broker or an Indian ETF of international indices.

How to invest in US stocks

Points to keep in mind before International Trading:

  • One should carefully analyze the preferred stock market index and the trade options before actually getting involved with the process.
  • In comparison with Indian domestic stock investments, international trades may attract more charges in the form of account fees, brokerage fees and currency conversion charges.
  • There may also be applicability of taxes as per the US and Indian taxation laws.

Conclusion:

Through foreign market investments, one can surely introduce an additional and profitable diversification to the portfolio. However, traders should consider adequate and detailed research and analysis before any kind of stock trade.

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Aryan Vora
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