How to invest in the US Stock Market from India
The US stock markets are a few of the most versatile and liquid markets in the world. They also offer boundless opportunities to invest in global high-growth companies like Facebook, Google, Apple, Amazon, etc. If you are looking to diversify in foreign stocks, investing in US equities is one of the best options. The US stock markets have outperformed Indian stock markets for a long time, they also offer more opportunity to diversify your investments in foreign stocks. The US is the center of global innovation, its markets offer promising opportunities.
How to invest in US stocks from India?
Investing in foreign stocks has become quite easy with globalization and liberalization of foreign remittances policies of the Reserve Bank of India. The easiest way to invest in foreign stocks is to open an overseas account with an Indian brokerage firm. Many Indian brokerage houses offer the facility to open an account for investing in US equities. However, these accounts have certain restrictions, there is a limit to what you can invest in foreign stocks and some brokers also limit the number of trades you can enter into.
You can also open an account with a foreign broker with a presence in India. A few firms are providing this facility. However, you should carefully examine the charges before you go for this option. They are usually on the higher side. It all depends on how much you want to invest in the US equities and how often you would transact. In either case, you will have to follow the foreign exchange rules and regulations along with RBI guidelines on foreign investments.
The aforementioned options are for people who want to directly invest in foreign stocks. However, there are several indirect ways to invest in foreign markets without the trouble of opening an overseas trading account with an Indian or foreign broker. You could simply invest in mutual funds or Exchange-Traded Funds which invest in foreign stocks. Several India-based mutual funds and ETFs invest either completely in US stocks or have a diversified international portfolio; you can simply purchase their units. For example, Motilal Oswal has a Motilal Oswal S&P 500 Index Fund that invests in 500 listed US companies.
A new and upcoming way of investing in US stocks is via apps. Many phone applications are offering to invest money in US equities or foreign stocks. It is a convenient way to spend. However, it is not advised to invest in foreign stocks with these apps unless you trust them. They are often not registered with the Securities and Exchange Board of India and have little regulatory oversight. There is a high probability of fraud or embezzlement with these apps.
Conclusion
By investing in foreign markets, you can have a diversified portfolio. However, you must take time to analyze the risk involved while investing in US equities. The US market is not the same as the Indian market and you also have to bear the risk from currency fluctuations. It is better to start small and gradually progress towards adding more securities to your portfolio.