Important Factors If You Want to Invest in US Stock Markets | Motilal Oswal

You Want to Invest in US Stock Markets

Diversifying your portfolio over geographies can be one of the most prudent investment decisions you can make. The way to go ahead with such a plan is to invest in US stock as it is one of the most popular choices of international investment today. The United States of America is home to some of the greatest capital-creating corporations and the best technology firms in the global arena. 

Furthermore, there exists a low correlation between the US equity markets and the Indian equity markets, making investment in US stocks ideal for Indians. Nonetheless, this is a leap you should take after considering certain factors relating to US stock investment. 

Before You Invest in US Stock

Before you invest in any stock, the main step to take is to open a demat account with a broker in India. Once you do this, you are well-equipped to indulge in your stock investment in India and in the US. Then you can take advantage of the Liberalised Remittance Scheme launched by the Reserve Bank of India, giving Indian residents the leeway to remit amounts to the tune of $250,000 each year. This is a limit that applies to  every individual, and this includes minors as well, meaning that a family consisting of four people are able to remit USD amounting to 1 million each year. 

The quota of remittance includes investments such as US securities, bank deposits, real estate, etc, plus expenses like student education and travel abroad. 

More Considerations

Through any online trading app, especially that of a reputed brokerage, you can invest in US stock just as you make any other investment like a subscription to an upcoming IPO. Its a good idea to invest in US stock, but you must take some time to consider the following factors: 

  • Diversification Over Geographies - If you want stability in your portfolio, geographical diversification can be a game changer in investment. In the long run, the markets of developed economies tend to exhibit a lower degree of volatility than those of emerging countries. When you invest in US stock, you have the chance to play a role in an international story of growth. Furthermore, via ETFs which are listed in the US markets, you are able to receive exposure to broader economies. For instance, the EWG ETF which is listed on the NYSE has invested in some of the biggest companies in Germany. 
  • The Foreign Exchange Impact - Fluctuations in exchange rates are one of the key factors that may affect your investment in the US markets. It is easy to open a demat account, but dealing with price shifts may pose a challenge. You should note that, in recent years, the Indian rupee has declined by 3% to 5% against the USD. Therefore, if you invest in US stocks, you also make an investment in USD and have to bear any related risk. If the dollar appreciates, your investment naturally gets a boost. Additionally, it is important to note that while remitting capital to invest in US stocks, your bank in India may levy an FX “conversion fee”. This is also called a spread, and may range from 0.5% - 2% of remitted amounts, and also depends on your particular bank. 
  • Tax Implications - To invest in US stock is not difficult, but paying taxes deserves some thought. If you wish to make your investment effort worthwhile, you should make sure you are not paying excess tax. The US and India have a “Double Tax Avoidance Agreement” or DTAA. Such an agreement prevents taxation of the identical income twice. Two taxes largely relate to your US stock investment, and these are a dividend tax and a capital gains tax. 

Start Investing

You may open a demat account and start your journey in Indian stock investment. You may have also subscribed to any upcoming IPO. However, it's time you thought of investing in US stock to truly add diversification to your financial portfolio. 

 

Related Articles: Follow these 5 Expert Advices to Get Started with Investing | 4 Investment Mistakes New Stock Market Players Must Avoid at All Cost | 5 Rules Every New Investor Must Know Before Investing |  10 common mistakes made by SIP investors | 4 Smart Must-Follow Investment Tips for Beginners in India

 

 

  • Open your FREE Demat Account in 5 Minutes
+91|
Select State
Select City
By submitting your details, you are authorising us to call you or send promotional communication even though you may be registered under DND
angle-up