The US stock market is among the top choices for investors investing in foreign stock markets. Its stock market consists of some of the largest companies and a vast global investor community.
In today’s turbulent world, diversification is key to holding a high-yielding investment portfolio. Diversifying across investment products and geographical locations is vital. Diversifying investments across geographical locations assures returns when the domestic market is underperforming.
How to trade US stocks from India?
Indian investors can invest in US stocks from India directly or indirectly through various routes. The direct method consists of investing through brokers and trading apps. The indirect method consists of several innovative online platforms.
Domestic broker
Investment in US stocks can be done directly from India through a domestic broker. Many domestic brokers act as intermediaries and execute trades via their US partner brokers. An investor needs to open an overseas trading account and complete the KYC process to trade through a domestic broker.
Different brokerage houses have different rules on trading in foreign stocks. A limit on the number of trades in a day or restrictions on the type of investment instrument can vary between brokerage firms.
Foreign broker
US stocks can be purchased directly from India through a foreign brokerage company with India operations. Opening a trading account with a foreign broker will require documents and diligence per the norms of the origin nation.
NSE and BSE
BSE- India INX and NSE IFSC are dedicated platforms for trading in US stocks from India. BSE – India INX has partnerships with several stock exchanges across the globe. It allows Indian investors to trade US stocks from India through the direct share buying facilitator route. NSE IFSC currently only includes US stock options and allows investing in the US stock market through the depository receipts (DR) route.
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Fintech apps
The fintech revolution has introduced several startups that enable Indian investors to invest directly in international stock markets. Several online stock brokers have made trading in US stocks accessible and easy through their dynamic apps. The process is similar to investing in the Indian stock market. Investors can open a trading account with these online stockbrokers and start trading. The platforms differ in brokerage rates, other charges, minimum deposit requirements, and offered services.
Mutual funds
Investors can buy US stocks by investing in domestic mutual funds investing in US equity funds. (a structure often termed as funds of funds). An overseas trading account is not necessary with this route. Moreover, the minimum ticket size is also low. Hence, this is the best option for beginners looking to invest in the US market. An annual expense fee is charged from investors. This expense could be higher for funds investing in international funds.
Exchange-traded-funds
Another great way to trade in US stocks is through ETFs. ETFs, invest in a composition of stocks in the same proportion as their underlying index. Hence, instead of creating a separate portfolio, ETFs allow an investor to invest in a basket of stocks in an index or sector. From tech to FMCG and from small to big cap, investors get diversified exposure to various themes, sixes, and sectors.
Investing in US stocks from India is a wise investment decision as an investor can profit from diversification, exchange rate, and the global growth story. The Government and private players alike are making efforts to subdue geographical barriers and boost India’s footing in the global financial system. Stock exchanges, fintech companies, and leading stockbrokers have recognized the interest of Indian investors in US companies and have rolled out innovation platforms for ease of access and trading.