Investments in the Indian stock market have grown amid the pandemic, with active investor accounts growing by a record 10.4 million last year. Many millennials and younger investors took to investing in stocks as the prevalence of stock trading apps, and online portals made it easy. Due to the pandemic-induced financial crisis, many also realized the importance of investing and how it can help them grow their savings and earn a passive income to help them realize their financial goals. However, the Indian stock market does not allow investors to invest in some of the biggest companies in the world, such as Apple and Google. These companies often provide high returns on investments. However, now there are several ways in which Indians can invest in the US stocks market.
Advantages of US Stocks Investments
- Allows You to Diversify Your Portfolio
Each global economy has its ups and downs. However, they usually don’t register gains or losses at the same time. The US stocks market may experience strong growth when the Indian market is crashing. Thus, investing in more than one economy could help diversify risks and increase the probability of getting good returns on your investments.
- Allows Global Investment
Companies from across the world are listed on the US stock exchange. So, simply by investing in the US stocks market, you can access companies from China, the UK, and so on.
- Permits Investments in Different Sectors
The US stocks investments provide you with the opportunity to invest in upcoming companies across various sectors. It is one of the world’s most diversified stock markets, with Technology and Financial stocks making up only 34% of the total market cap. This can help you further diversify your portfolio and reduce investment risks.
- Invest in the World’s Best-Performing Stocks
US stocks investments will enable you to own stocks of some of the best-performing companies globally, such as Facebook, Apple, Google, Tesla, and Netflix. The stocks of these companies have long been the favorite of global investors and usually provide high returns on investments. The stocks of these companies can often be out of the reach of small investors. However, the US stock market permits owning Fractional Shares. This means if the value of one share of a company is too high for you, you can buy a portion of it. This enables small investors to build an impressive portfolio of US stocks over time.
- US Dollar Investment
The US dollar is one of the world’s strongest currencies. Thus, investing in dollars is a promising way to build future wealth and fulfill financial goals.
- Buying US IPO stocks
The US stock market is currently experiencing an IPO boom. Over 279 companies have already gone public this year, while 100 more are set to IPO by the year’s end. This surge in IPOs is expected to continue until 2022, as more money is invested in upcoming startups. Investing in an IPO is often profitable as it enables investors to buy a company’s stock at a much lower price. Most companies’ stocks surge after they go public, thus providing almost instant profits to investors. Investing in the IPOs of high-profile companies like Airbnb and DoorDash has been successful for several investors.
How to Invest in the US Stocks Market?
The RBI’s Liberalized Remittance Scheme allows Indian investors to invest up to $25,0000 (around 1.9 crore rupees) annually in the US stocks market or US ETFs without any special permission. There are several different ways that you can begin US stocks investment. You can do so by opening a brokerage account or an overseas trading account with a domestic broker. Many domestic brokerage firms have tie-ups with US brokers and can act as your intermediaries. Similarly, you can open an overseas trading account with a foreign brokerage firm in India. You can also choose to indirectly invest in the US stocks market through exchange-traded funds or mutual funds that invest in the shares of US-listed companies. There are several US stocks apps and online trading portals available in India as well. These US stocks apps are easy to use and also allow you to invest small amounts.
How are US Stocks Investments Taxed
It should be noted that a flat 25% tax is applicable on your US stocks investments, which will be deducted directly by the country. However, due to the Double Tax Avoidance Agreement (DTAA) between India and the US, investors can offset the tax already paid in the US.
With a GDP of $20.81 trillion in 2020, the US is currently the World’s second strongest economy, behind only China. The US stocks market is also one of the largest and most liquid stock markets in the world. Investing in US stocks can, thus, prove to be very beneficial and provide higher returns than investments made in Indian equities. Due to several online trading platforms, investing in US companies and stocks, in general, has also become much simpler. The concept of fractional ownership of stocks and the prevalence of US stocks app have also made such investments affordable and accessible to all. Therefore, intelligent investments in the US stock market can help you compound your wealth passively. However, such investments often carry high risks as well, especially for first-time investors.