Indian investors are often unclear about how to invest in US stock markets from home. However, as it has been quite rightly said that you never know what kind of setups the market will offer you; the objective is to find the most favorable risk reward ratio. Additionally, as the economy is global and connected, it is not as difficult as one might think. Those that are interested in diversifying their portfolio beyond Indian stocks, can do so by investing in US companies such as Nasdaq, S&P 500, Dow Jones and many others.
Investments in stock trades such as Apple, Google, Amazon, etc. on the US market can help anyone build a successful financial portfolio. Despite severe lock downs in many markets in recent months, many markets have recovered with a much faster pace as compared to others, and Indian investors have flocked to global stock markets.
Benefits of Investing in the US Stock Market
To be able to join forces with the world’s economy, it is important to consider the advantages and borders it will open up for you. Want to have a look at them? There you go;
- Superior returns in comparison to Indian markets
- Exposure to other lucrative markets
- US markets have shown a less volatile history as compared to Indian markets
- The most famous and prolific corporations in the world have their headquarters in the US, which in turn allows for a wider diversification
- If you consider in dollar terms, the US market has outperformed the Indian market by leaps and bounds in the last 10 years
- Due to America being the epicenter of global innovation, several companies can be invested in during the inception stage itself
How to Invest in US Stocks
International brokerage platforms ascertain that the international investing process be easy, convenient, and most importantly, secure. Ranging from a number of processes such as RBI clearances, bank authorizations, finding the right bank account, etc. these platforms become a one-stop-shop facility to start off. Take a note of the following mentioned key steps to follow before you can start investing in US stock markets from India.
1. Open an Account: After zeroing in on the best brokerage company for buying US stocks, you will first need to register online. This is quick and easy. All you will need to do is enter details such as your name, address, email ID, cell phone number, etc. After creating this account, your brokerage account will be credited automatically.
2. Required Documents: When you are in the middle of processing the account, you will need to submit a few documents that will establish and ascertain your identity. These are easy to obtain as most Indian citizens already have them. The documents needed will include;
- ID proof such as PAN card, Aadhar card, Voter’s ID, etc.
- Proof of address such as utility bills, passport, Aadhar card, Drivers license, etc.
Keep in mind that all documents should be valid and up to date with a picture, wherever necessary.
3. Load Your Money: Adding funds would be your next step, which is an easy transfer. You will be able to add money from your existing account to your brokerage account with easy transfers.
4. Formalities Related to Forex: Before adding funds to your brokerage account in order to start investing in the US stock market, you have to be sure of the RBI rules on foreign exchange. The Liberalized Remittance Scheme (LRS) has been introduced especially for this. Indian residents will need to buy US dollars using Indian currency from a certified dealer (bank) in the country. The current exchange rate shall be levied. The dollars can then be spent or remitted for even acquiring property and assets like equity. The limit offered by the LRS allows remittance of up to $2.5 lakhs (USD 2,50,000) annually. With a small amount of paperwork, you will be able to complete these formalities before making money transfers and commencing trade.
5. Foreign Exchange Rates: When money transfer of rupees from your Indian account to your US brokerage account is underway, the forex rate is of significance. Many brokerage companies have tie-ups with leading nationalized banks which will give low and favorable exchange rates. Banks can also give decent rates and you should do some due diligence before transferring a large amount, so you make the least loss.
Are Investments Taxed?
Let us not forget about the elephant in the room – taxes. No money transfer, exchange, etc. can be done without the due levy of taxes. When investing in the US markets, the following two types of taxation events are applicable;
1. Tax on Dividends – Dividends will be taxed in the US at a 25% flat rate. Both Indiaand the US will have a double taxation avoidance agreement (DTAA) which ensures that taxpayers don’t end up paying taxes to both countries. Whatever tax paid by you in the US will be offset from any tax you need to pay in India for that particular transaction.
2. Tax on Gains – For any investment gains, you will be taxed in India and not in the US. The amount of tax you pay in India depends on the duration of how long you hold the investment. For long term capital gains, the threshold is 24 months with a 20% indexation benefit. In case you sell a possessed stock within the 24 months, the capital gains are then termed as short term gains which will then be taxed to you as applicable in your income tax slab.
So in a nutshell, you can now make the big bucks in the US stock market by taking a few simple steps and right money transfer methods. An important point to note, though, is that since investments in US stocks need to be made in US dollars, you must transfer money from India to your USA brokerage account before you can start investing.
All you need to do is contact a customer care executive on Bookmyforex.com and you will be skillfully assisted by one of our team members. Let us handle your procedures while you kick back and psych yourself over which stocks will bring you the most gain. Happy investing!
About the Author
Gourav Pilania is the Content Manager at BookMyForex. Gourav has a penchant for writing with his work published in some of most prominent publications including Forbes India, International Business Times, The Hindu & many more. Gourav knows a thing or two about the equity markets and he is also a massive Liverpool Football Club supporter.
