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How to Buy US Stocks from India

At Vested, we believe that the economy is global and connected. As such, it is important that your investment portfolio be global as well. One way to increase your portfolio diversification is by investing in US shares.

We created this guide especially for you, the Indian investor, to help you better understand how to invest in the U.S stock market from India. After reading this, you will understand:

1. How to invest in U.S stocks (and why we believe Vested is the best choice)
2. Good things to know when investing in the U.S stock market
3. Why it may be a good idea to invest and diversify in the U.S stock market
4. Popular terms used when discussing the U.S stock market

Can Indians Invest In The U.S Stock Market?

Yes &#; investors from India can invest in the US stock market. If they are interested in diversifying beyond Indian stocks and financial instruments, beyond the Sensex or the Nifty 50, Indian investors can do so by investing in the S&P , Dow Jones, Nasdaq or other US listed companies.

Investing in US stocks or ETFs by Indian investors is permissible under the RBI&#;s Liberalized Remittance Scheme (LRS), by using purpose code S (fun fact: you can also open US bank accounts under this purpose code). Read more about the LRS and US investing here.

Why should Indians invest in the US share market?

1. Superior returns compared to India

The US stock market consistently outperforms the Indian market over the last 10 years. In Figure 1, we compare returns of the DOW Jones Index in the US to the BSE Sensex. During this time period, the DOW returned %, while the SENSEX returned % (note: we picked the DOW index rather than the S&P index because the DOW is more similar in number of constituents to the Sensex both have 30 companies).

Figure 1: Returns comparison between the Dow Jones index vs. the Sensex.

In addition to equity returns, the savvy investor should also think about the effect of currency fluctuations between INR and USD. In the past 10 years, the Rupee has depreciated 44% compared to the USD. This has a significant negative impact towards returns of Indian stocks widening the performance gap. Click here to learn more about why investing in the U.S stock market has offered superior returns.

Figure 2: INR to USD exchange rate from the last decade &#; INR has depreciated by more than 44% in the past decade.

You can read more about this topic here.

2. Exposure to other international stock markets

Investing in the US can be an easy way to invest in other international markets. For example, you can easily invest in the Chinese economy through investing in the US market. The fast growing Chinese economy &#; driven by a growing middle class and rapid technology adoption &#; has led to the creation of some of the world’s leading technology companies. However, instead of going public in China, more and more of these Chinese technology companies are choosing to list in the US. Furthermore, there are ADRs (American Depository Shares) of Chinese companies that enables USD based buying and selling, where the underlying shares are held by multinational Banks or Brokers.

Figure 3: IPOs of Chinese companies in the US.

For Indian investors, another benefit of investing through the US stock market is that the ecosystem is very well regulated, with strict controls on financial reporting, transparency, and standardized governance practices, making it easier for the investors to evaluate the different opportunities. Click here to learn more about how investors gain exposure to Chinese growth.

3. You can Invest in MNCs directly rather than the local Indian subsidiary

Many investors living in India invest in international MNCs because they assume there is a higher level of governance, technological proficiency and transparency in MNCs. However, investing in Indian subsidiaries is often a more expensive proposition. We studied 16 MNCs that are traded in reputable US exchanges and that have Indian subsidiaries that are also publicly traded in India.

On average, investors from India are paying ~3X higher multiples (P/E trailing twelve months) when investing in the stock for the Indian subsidiaries vs. investing directly in the parent company in the US (buying the US shares of the parent companies). And despite paying significantly higher multiples, the average returns can be similar. The average returns of the US parent companies was ~14% (blue line in Figure 4), while the average returns of the Indian subsidiaries was ~17% (orange line in Figure 4).

Figure 4: Average 1 year return of US parent companies (blue) vs. Indian subsidiaries (orange). The grey lines represent the returns of the individual entities over the past year.

Click here to learn more about investing in MNCs through Indian subsidiaries. Please note that past historical data does not guarantee future performance.

Given these reasons, savvy investors from India may want to consider investing in the US. Your next question might be &#; how can one invest in the US from India?

How Can I Invest In The U.S. Stock Market from India?

What are the different ways I can invest in the US stock market?

You can invest directly by opening a US brokerage account

Vested offers a unique platform that caters specifically to investors from India, with no minimum balance and commission-free investing. Furthermore, unlike most brokerage account opening processes in India, Vested’s process is completely paperless and can be completed in minutes. You will need your PAN number, an image of your PAN card, and proof of address. To open an account with us, sign up www.oldyorkcellars.com brokerage approach typically involves overall lower costs for the investor, but requires you to wire funds to the US. As an Indian resident, you are allowed to do this per the Liberalized Remittance Scheme (LRS), where you are allowed to invest up to US $, per year per person. Click here to learn more about the LRS.

Invest in US focused International Mutual Funds in India

Unlike the brokerage method, there is no investment limit for residents of India, as investments are made within India using Rupees. However, this approach can be more costly. You must keep in mind that the expense ratio (fees charged to manage the fund) for these funds tend to be higher since the fee is for both the general management of the fund plus an additional expense charged by underlying international schemes they invest in. For example, the Franklin Templeton feeder fund in India invests in the Franklin Templeton US Opportunity fund. The Feeder fund charges % expense fee, which is on top of the % fee charged by the underlying US Opportunity fund (see the fine print at the bottom of fund prospective here).

How are Indians taxed for their investments in the US stock market?

When you invest in the US stock market from India, there are two types of taxation events:

Taxes on investment gains

You will be taxed in India for this gain. Taxes will not be withheld in the US. The amount of taxes you have to pay in India depends on how long you hold the investment. The threshold for long-term capital gain is 24 months, with the rate of 20% with indexation benefit. If you sell a stock in less than 24 months, capital gains are considered short-term and are taxed according to your income tax slab.

Taxes on dividends

Unlike investment gains, dividends will be taxed in the US at a flat rate of 25%. Fortunately, the US and India have a Double Taxation Avoidance Agreement (DTAA), which allows taxpayers to offset income tax already paid in the US. The 25% tax you already paid in the US is made available as Foreign Tax Credit and can be used to offset your income tax payable in India. Want to learn more about how taxes work when buying U.S stocks from India? Click here to learn more.

How do I fund my account?

Since investments in US equities must be made in USD, you must wire (remit) USD to your brokerage in the US before you can start investing. At Vested, we have simplified this process for you.

What are the brokerage charges?

Different entities charge different rates and have different structures. For example, brokers might charge a fixed fee per trade or charge a percentage of total trade or total asset. In contrast, Vested offers zero commission, unlimited investing (unlimited buy/sell trades). Since the investing process requires international transfers from Rupee to USD, in addition to any potential brokerage fees, there might be other fees that investors incur in order to invest in the US. These fees could be international wire fees or FX conversion fees that the investor’s bank charges, which may vary depending on the bank that the investor uses.

How much can Indians invest in the US stock market?

In accordance with the LRS, an individual can remit a maximum of US $, USD per year for investments. To learn more about the LRS, read more here.

What other features does Vested offer?

The Vested platform offers the easiest and most robust US investing capabilities, enaling you to easily buy US stocks. Our platform includes:

• Real time share market price stream on both our web and app platforms (Android and iOS).
• One of the easiest to use and the most cost effective transfer INR to USD transfer method in Vested Direct.
• The easiest method to track and report your Indian taxes when you invest in US equities.
• Curated model portfolios and collections, enabling you to easily diversify and follow different investment themes (such as software-as-a-service, businesses with deep moats, digital cash, and others).
• With Vested, you can buy and sell fractional shares. This means you can invest as little as $1.

Popular US Investment Glossary

Ok &#; now that you have read the overview on how to buy us stocks from India, here are several glossaries that you need to know.

Investment Indices: Instead of investing in individual stocks, when investing in the US, investors can easily invest in a broad diversified basket of stocks through indices (or stock indexes). Several popular US indices are:

• S&P tracks the performance of the largest US companies by market capitalization. In the year , the S&P surged more than 28%, which is the highest increase since
• Dow Jones Industrial Average: tracks the performance of 30 large US companies trading on the New York Stock Exchange (NYSE) and the NASDAQ. In , the Dow Jones gained 22% for the year.
• Nasdaq Composite Index: tracks over 2, securities listed on the NASDAQ. In , the Nasdaq Composite Index broke through the 9, level for the first time ever.
• Fractional shares: the ability to buy less than one shares. This means, you can buy high priced stocks such as Apple, Tesla, Amazon for as little as $1.

Figure 5: Annual return of the three major indices in

Sectors: The US is the world&#;s largest economy and is home to the world’s largest stock market. Its economy can be classified into 11 major investment sectors, which encompasses communication services, energy, real estate and utilities. In , all 11 sectors posted positive returns.

Figure 6: S&P sector performance

The US has made investing in the stock market outside the US. extremely complex. Banks abroad are denying US Citizens investment services for fear of a penalty due to FATCA. Buying individual stocks might be possible whereas buying funds outside the US poses a big problem. The US also imposes a non creditable taxation on some investment products abroad.

The US furthmore requires that you report all financial interest you have in the US or abroad (FBAR). The US regulations on reporting these investments are complex. Therefore, we advise you to have this screened by a tax advisor specialised in filing for US citizens abroad. Americans Overseas can provide you with names of professionals if desired.

Why Americans should never own Shares in a Non-US Mutual fund (PFIC)

A PFIC ( Passive Foreign Investment Company) is simply a “pooled investment” registered outside of the United States encompassing mutual funds, exchange-traded funds (EFTs), closed-end funds, hedge funds, insurance products and non-U.S. pension plans. Having so called PFICs results in punitive tax. FATCA makes it nearly impossible for the IRS to not tax them. Do you have PFICs? Or are you unsure? Be well informed, contact Americans Overseas for an affordable financial service adapted to your wishes, investment and knowledge. Avoid this punitive tax.

IRA’s

For people with an American nationality, it can be good to find out what options there are to save for retirement income. For example, there are IRAs (individual retirement account) and Roth IRAs, these savings options can be very interesting from a tax perspective.

Contact us for more information

Two of the chief reasons why people invest in international investments and investments with international exposure are:

• Diversification. International investing may help U.S. investors to spread their investment risk among foreign companies and markets in addition to U.S. companies and markets.
• Growth. International investing takes advantage of how to invest in us stock market from abroad potential for growth in some foreign economies, particularly in emerging markets.

But there are special risks of international investing, including:

• Access to different information. Many companies outside the U.S. do not provide investors with the same type of information as U.S. public companies, and the information may not be available in English.
• Costs of international investments.  International investing can be more expensive than investing in U.S. companies.
• Working with a broker or investment adviser.  If investors are working with a broker or investment adviser, they should make sure the investment how to invest in us stock market from abroad is registered with the SEC making money consigning clothes (for some investment advisers) with the appropriate state regulatory entity.  It is generally against the law for a broker, foreign or domestic, to contact a U.S. investor and solicit an investment unless the broker is registered with the SEC. If U.S. investors directly contact and work with a foreign broker not registered with the SEC, they may not have the same protections as they would if the broker were registered with the SEC and subject to the laws of the United States.Investment advisers advising U.S. persons on money makes people greedy in securities must register in the U.S. or must be eligible for an exemption to registration.
• Changes in currency exchange rates and currency controls. When the exchange rate between the U.S. dollar and the currency of an international investment changes, it can increase or reduce your investment return.  In addition, some countries may impose foreign currency controls that restrict or delay investors or the company invested in from moving currency out of a country.
• Changes in market value. All securities markets, including those outside the U.S., can experience dramatic changes in value.
• Political, best cryptocurrency to invest in 2022 august, and social events. It is difficult for investors to understand all the political, economic, how to invest in us stock market from abroad, and social factors that influence markets, especially those abroad.
• Different levels of liquidity. Markets outside the U.S. may have lower trading volumes and fewer listed companies than U.S. markets. They may only be open a few hours a day. Some countries restrict the amount or type of stocks that foreign investors may purchase.
• Legal Remedies. If U.S. investors have a problem with their investment, they may not be able to seek certain legal remedies in U.S. courts as private plaintiffs. Even if they sue successfully in a U.S. court, they may not be able to collect on a U.S. judgment against a non-U.S. company. They may have to rely on legal remedies that are available in the company’s home country, if any.
• Different market operations.  Foreign markets may operate differently from the major U.S. trading markets.

How can I invest internationally?

• American Depositary Receipts. The stocks of most non-U.S. companies that trade in the U.S. markets are traded as American Depositary Receipts (ADRs). Each ADR represents one or more shares of foreign stock or a fraction of a share. If investors own an ADR they have the right to obtain the stock it represents, but U.S. investors usually find it more convenient to own the ADR. The price of an ADR corresponds to the price of the stock in its home market, adjusted for the ratio of ADRs to the company’s shares. Investors can purchase ADRs that trade in the United States through a U.S. broker.
• U.S.-Registered Mutual Funds. One way to get international exposure is through U.S.-registered mutual funds. Mutual funds may provide more diversification than most investors could achieve on their own and they are subject to U.S. regulations protecting investors. There are different kinds of funds that invest internationally:
  • Global funds invest primarily in foreign companies, but may also invest in U.S. companies;
  • International funds generally limit their investments to companies outside the U.S;
  • Regional or country funds invest principally in companies located in a particular geographical region, such as Asia or Europe, or in best money making runescape 2022 f2p single country; and,
  • International index funds seek to track the results of a particular foreign market or international market index.
• U.S.-Registered Exchange Traded Funds (ETFs).  U.S.-registered ETFs can offer similar benefits as U.S.-registered mutual funds.  In addition, ETFs are listed on stock exchanges and, like stocks (and in contrast to mutual funds), trade through the trading day with fluctuating market prices.
• U.S.-traded foreign stocks.  Although most foreign stocks trade in the U.S. markets as ADRs, some foreign companies list their stock directly here as well as in their local market.  Investors can purchase U.S.-listed foreign stocks that trade in the United States through a U.S. broker.
• Trading on Foreign Markets.  A U.S. broker may be able to process an order for shares of a company that only trades on a foreign securities market.  These foreign companies are not likely to file reports with the SEC, so you will need to rely on other sources of information to make an investment decision.

Additional information

International Investing
SEC Office of International Affairs
Investor Bulletin: International Investing
Investor Bulletin: Foreign Currency Exchange (Forex) Trading For Individual Investors
Investor Bulletin:  American Depositary Receipts
Mutual Funds and ETFs – a Guide for Investors
FINRA’s BrokerCheck
Investment Adviser Public Disclosure (IAPD) website

In this article we are going to list the 10 best online brokers for non-US residents, how to invest in us stock market from abroad. Click to skip ahead and jump to the 5 best online brokers for non-US residents.

Are you a US visa holder or a Non-US resident looking to invest into the US stock market? Finding a broker may seem complicated, but there are actually a few brokers out there that are by far the best brokers for Non-US residents which allow people from many countries to register. If you want to find out who are the best online brokers for non-us residents keep on reading so that you can be a part of the world of Non-US residents online trading soon enough!

Whether you are a foreigner living in the United States or a citizen of another country in the world, the U.S. stock market is the go-to destination for all investing opportunities. Two of the most lucrative stock markets in the US include the NYSE and NASDAQ. Both markets offer US traders and investors a chance of buying and selling stock for publicly traded companies. Amongst many of the companies listed on the US Stock Exchange there are many you have probably heard of already. For example, Alibaba Group Holding Limited (NYSE: BABA), GameStop Corp Holding Company (NYSE:GME), Coca Cola Company (NYSE:KO), Pinterest Inc (NYSE:PINS), Twitter Inc (NYSE:TWTR) etc. Thanks to the success and high-profile trading engaged in US markets, non-US citizens have been wondering if they can trade in these markets too. The answer is yes. Currently, there are no regulations that stop online traders from trading in US markets.

Image: Depositphotos

To participate in online trading, you will need to open an account with an online broker. The right choice for an online broker is essential if you want your trading to be profitable. So, what are online brokers and what can they do for you? An online broker is one which facilitates buying and selling of securities/assets over the Internet. The transactions are mostly done through the broker owned trading platforms. Online brokers began to gain popularity in the mid and late s, facilitated by the development of high-performance computers and faster Internet connections.

Why online trading? Well, trading is one of the most lucrative professions that anyone can engage in. It is convenient for many, as you can place orders, check quotes, and make changes from anywhere. It also facilitates faster execution of traders, helping to take advantage of the volatility in a better manner. By taking advantage of market discrepancies, it allows traders and investors an opportunity of how to invest in us stock market from abroad their strategies. Above all else, online trading is more cost-effective compared to trading through a traditional broker and the market offers some of the most desirable goals people could want like financial gain and more time to pursue hobbies.

The US has made investing in the stock market outside the US. extremely complex. Banks abroad are denying US Citizens investment services for fear of a penalty due to FATCA, how to invest in us stock market from abroad. Buying individual stocks might be possible whereas buying funds outside the US poses a big problem. The US also imposes a non creditable taxation on some investment products abroad.

The US furthmore requires that you report all financial interest you have in the US or abroad (FBAR). The US regulations on reporting these investments are complex. Therefore, we advise you to have this screened by a tax advisor specialised in filing for US citizens abroad. Americans Overseas can provide you with names of professionals if desired.

Why Americans should never own Shares in a Non-US Mutual fund (PFIC)

A PFIC ( Passive Foreign Investment Company) is simply a “pooled investment” registered outside of the United States encompassing mutual funds, exchange-traded funds (EFTs), closed-end funds, hedge funds, insurance products and non-U.S. pension plans. Having so called PFICs results in punitive tax. FATCA makes it nearly impossible for the IRS to not tax them. Do you have PFICs? Or are you unsure? Be well informed, contact Americans Overseas for an affordable financial service adapted to your wishes, how to invest in us stock market from abroad, investment and knowledge. Avoid this punitive tax.

IRA’s

For people with an American nationality, it can be good to find out what options there are to save for retirement income. For example, there are IRAs (individual retirement account) and Roth IRAs, these savings options can be very interesting from a tax perspective.

Contact us for more information