Investing in US stocks from India: Steps, tips, and benefits
Did you know that, as of 2024, the United States (US) holds the title of the world's largest economy, with a GDP of around $29.17 trillion? For Indian investors, this economic powerhouse offers countless opportunities to diversify beyond local boundaries and benefit from the strengths of the world's leading economy.
Let's explore the steps to get started, important tips for smart investing, and the key benefits of entering the US market from India.
Steps to invest in US stocks from India
You can easily invest in US stocks as an Indian investor through a trading and investing app. Look for a trading app that offers US stock trading options, prioritises user security, and has transparent fee structures. Also, see if it offers tools for real-time streaming of market prices, insights into stock performance and financial news, custom alerts on stock movements, and easy payment options to conduct trades hassle-free.?
After downloading the app, follow these steps:?
This is how a stock market app allows for hassle-free and cost-effective investing in US stocks.
Tips for investing in US stocks
To make the most of your US stock investments, keep these tips in mind:
Fund limit: Under the Liberalised Remittance Scheme (LRS) by the Reserve Bank of India (RBI), Indian residents are allowed to freely remit up to $250,000 per financial year. Remittances above this threshold need prior approval from the RBI.?
Start small and scale slowly: Begin with small investments to understand the dynamics of the US market. You can increase your exposure as you gain confidence.?
Focus on research: Make sure to analyse the financial health, competitive positioning, and future growth prospects of US companies before investing.
Diversify: Avoid concentrating too much in one sector or stock. It's wise to allocate your capital across industries for balanced risk and returns.
Leverage ETFs: For beginners, investing in US stocks via Exchange-Traded Funds (ETFs) could be beneficial, as they offer exposure to a basket of stocks and reduce the risk of stock picking.
Stay updated on taxation: Dividends from US stocks are subject to a 25% tax in the US. However, due to the Double Taxation Avoidance Agreement (DTAA) between India and the US, you can claim credit for taxes paid abroad to avoid double taxation. Moreover, capital gains from US stocks are taxable in India, with rates depending on the holding period.?
Benefits of investing in US stocks
Access to leading companies: The US stock market hosts global giants like Microsoft, Amazon, Apple, Tesla, Meta, and Alphabet. You get exposure to industries like technology, healthcare, artificial intelligence, pharma research, and energy, which may not be as developed in the Indian market.?
Global market influence: The US is home to two of the world's largest stock exchanges: the New York Stock Exchange (NYSE) and the NASDAQ. This also means that US stock indexes significantly influence global markets.
Currency hedge: Investments in US stocks are made in US dollars. Hence, if the Indian rupee depreciates against the dollar, your investments' value increases when converted back.?
Geographical diversification: Investing in US stocks helps you lower exposure to India-specific risks like policy unpredictability, inflationary pressures, rupee depreciation, or disruptions caused by economic or political shifts. ?
Key takeaways
Investing in US stocks from India is a useful strategy to diversify your portfolio and capitalise on global growth opportunities. Since US markets are not perfectly correlated with Indian markets, this approach offers the potential for faster wealth growth while reducing overall investment risk.
To make the most of this opportunity, ensure you understand the investment methods, stay informed about regulatory and tax implications, monitor currency fluctuations, and, most importantly, choose a reliable investing app to manage your US stock market investments efficiently.
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