Ultimate Guide on How to Invest in US stocks from India

So you’ve started investing and now understand how stocks and mutual funds work. It’s time to diversify your portfolio by investing in global stocks. Some of the world’s best tech companies are located in the west and are consistently growing yearly. Apple and Google are two examples of these types of companies. As an investor, it’s probably your dream to own shares in these types of businesses.

Investing across geographies can have many benefits, but taking things one step at a time is important. This article will explore some of the top reasons to invest internationally, how you can do it and some of the best platforms to use.

So without any further ado, check out this exclusive workshop by LearnApp on ‘International Investing’ and learn how to invest in US stocks from India. Or rather any country across the globe.

7000+ Companies are Listed in India! Is International Investing Still a Smart Choice?

Emerging markets have been one of the most lucrative investment opportunities in recent times. It helps better portfolio allocation among markets. Globally approximately $27 trillion is invested in stocks, bonds and mutual funds in markets outside the investor’s home country. This section lets us understand the benefits of investing in international markets.

1. The Most Obvious – Diversification

Investing in the international markets helps you diversify your investment portfolio since you get the opportunity to invest:

. Across different sectors (like renewables, semiconductor, technology)

. Companies with different market capitalization and lastly

. Companies based in different geographies

2. High Penetration of Investments in the US

A report by MSCI mentions that the nationwide market share of invested capital for India stands at a mere 1.8% of the total invested fund of the world. In contrast, a major chunk of market share is dominated by North America, accounting for more than 60%.

3. Depreciating Value of INR Over the Dollar

Historically, we have seen that the value of the Rupee depreciates over the years compared to the Dollar. It is because the US is the largest importer of goods and services globally.

In 2000, the average USD-INR exchange rate was around INR 43.5. Cut to 2022; the average exchange rate was hovering around Rs. 77.2, translating that an investor would have gained more than 77% only through currency gains. Let us understand how you, as an investor, can benefit from the depreciating Rupee.

For simplicity’s sake, let’s assume $1 = Rs. 100. Suppose you had invested Rs. 10,000 in shares of Meta. So now, you own Meta shares worth $100 After staying invested for a while, due to macroeconomic factors, the value of $1 is now worth Rs. 120.

You see, the value of one Dollar has increased from Rs. 100 to Rs. 120. But on the flip side, the Rupee depreciated. When you exit your position from Meta and get paid back in INR, you’ll benefit straightaway from the Rupee-Dollar conversion, for which you’ll get paid Rs 120 per Dollar invested.

Now that you’ve understood the benefits of investing in international markets let us also understand how you can invest globally from India.

How to Invest in US Stocks from India?

In this section, we’ll go through the different asset classes available for diversifying your global stock/ mutual fund portfolio.

Directly buying stocks of foreign companies is a way to diversify your portfolio, but it requires extensive research and regular tracking. So for someone who wants to diversify their investments passively, these indirect methods are probably the best option.

Fund of Fund (FoF)

Just like Nolan’s inception had a scene with a dream within a dream, a Fund of Fund or FoF is something similar. FoF is essentially a mutual fund of a bunch of other mutual funds. The objective of such an instrument is to achieve a broad diversification leading to minimal risks. Invest in these if you want good diversification and minimal risk.

Exchange Traded Fund (ETF)

When multiple stocks and a mutual fund come together to form one single instrument, it can be called an exchange-traded fund or ETF. It has the characteristics of a mutual fund (a basket of multiple stocks/ securities) and that of stock (because it can be traded over an exchange). ETF funds are listed on all the major stock exchanges around the world. Invest in these if you want high liquidity and a low expense ratio.

Global Fund

Global funds are investment vehicles that allow investors to pool their money together to invest in various securities, including stocks, bonds, and other assets, across the globe. These funds allow investors to diversify their portfolios and gain exposure to various markets and investment opportunities.

Index Fund

An index fund is a type of mutual fund that mimics the performance of a particular index like the Nifty 50, or S&P500. You ask how the fund tracks the performance of the index. Simple. It invests in the stocks within that index in similar proportions. Thereby becoming a copy of the index which tracks economic growth. So if you generally believe in the country, you can use this and ride the wave of the country’s growth.

Feeder Fund

A Feeder fund is a type of investment fund that invests in another investment fund. They are popular among investors who want to invest in hedge funds or private equity funds but do not want to go through the hassle of investing directly in them.

Now that you know about the various asset classes available to invest in, it’s time for you to begin your international investing journey. But which broker do you go with? Well, in our opinion, here are the top 3 brokers in India.

List of Best Brokers to Invest in US Stocks from India

Vested: With Vested, you can easily buy US stocks and ETFs from India. It allows you to diversify your portfolio with zero brokerage and fractional shares. Also, they have something called vests that are pre-made baskets of stocks on themes like Electric Vehicles or Technology, making choosing stocks very simple.

IndMoney:IndMoney is another good platform that helps you invest in thousands of US stocks and ETFs, charging you with zero commission on trading. The UI is simple and helps you track all your investments across India and US.

Stockal: Stockal helps you digitally open, own and operate overseas investing accounts. They also have investment funds managed by the top hedge funds to let you invest across different horizons and risk appetites. The only downside is they charge a very high brokerage.

We hope you found the Internation Investing blog interesting and helpful! We know that the financial markets can be difficult to understand, and we are trying to improve that. So next time you are looking to get some more insight on the markets, head over to watch LearnApp workshops, where we will be analyzing the market & presenting in a storytelling format (with the help of interesting case studies)

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