How to Buy & Invest in US Stocks from India

The stock market is one of the most exciting ways to make money but often unpredictable too. Investing in stocks is not as easy as it looks. Some complexities are involved, specifically, if you want to invest in US stocks from India. The beginner investor can often feel intimidated by the phrases and terminology used, not to mention the ever-changing rules of investing. However, an avid investor might not feel the same way. 

This article is for all Indian investors who want to invest their money in US stocks and witness them growing at a tremendous rate in the coming years. 

The US stock market is worth trillions of dollars collectively and is a global leader in financials worldwide. Yet, with US stocks being so popular, they can be risky as well. Uninformed decisions can lead to disastrous outcomes, which can tank your portfolio overnight.

With this guide, you will get clarity on US stocks and their various types. We will help you with insights about how to invest in the US stock market from India and let you know the best apps to invest in US stocks from India. So, let’s dive in!

What are US stocks and their types?

What is meant by US Stocks? US stocks are those stocks that are bought and sold in the US exchanges, including NYSE (New York Stock Exchange) and NASDAQ (National Association of Security Dealers Automated Quotations), just like the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) in India. 

The three major US stock indexes are the Dow Jones Industrial Average, the S & P 500, and the NASDAQ Composite, just like what we have here in India with the SENSEX & NIFTY. Both the media and investors follow all these 3 broad indexes. However, more than 5000 indexes, besides these 3, make up the US stock market. 

Dow Jones is a company that tracks shares of 30 blue-chip US companies. S & P 500 has 500 major US companies listed on NASDAQ. 

US stocks fall into four different market capitalization categories. All these stocks are valued based on their market cap, the total value invested in a company’s shares. Market cap changes as the stock price vary, so there are thresholds for each category. Following are some of the major types of US stocks:

· Mega Cap- Mega cap stocks are the largest companies in market value. They are usually larger than $200 billion in value.

· Large Cap- Large-cap stocks are worth over $10 billion and are stocks of established, profitable companies. Liquidity is also typically high for large-cap companies. Investing in large-cap is an ideal option for investors looking to earn dividends and yield stable & decent returns.

· Mid Cap- Midcap companies are categorized between small and large caps. They provide a higher level of risk but can also offer a robust growth potential – so they’re suited for investors with different financial objectives.

· Small Cap- Small-cap stocks are those valued in the $300 million to $2 billion range. Investing in these stocks after checking the company’s fundamentals before a bull run on the market can allow you to see a solid financial return over the long term. Small caps are the better option for investors who want to stay on the cutting edge and make sure they regularly understand good quality stocks.

How to invest in US stock Market from India?

Want to know how to invest in US stocks from India? One way to invest in stocks is by purchasing a fractional share. It allows investors to buy less than one full share and still become an investor in that company. Investing in US stocks is now possible for you in two different ways.

1. Direct Investment

Certain apps allow investors to buy US stocks and ETFs from India. All you need to do is open a trading account with a domestic broker who is collaborated with international brokers in the US. If you’re afraid of the foreign exchange rate and; legal implications, you can always open an account with a US-based broker.

Undoubtedly, instant diversification empowers you to pave the path for growing your money. It is because you are investing in a basket of assets that allows instant diversification. It helps to lower the risks. Therefore, you do not need to buy stocks individually to diversify your portfolio. 

Multiple apps will help you to track shares of different companies listed in the stock market. You will find stocks classified based on the market cap size under each category, be it Pharma, Tech, FMCG, Automobile etc.

You can open up a trading account with a domestic broker who is collaborated with international brokers in the US. If you’re afraid of the foreign exchange rate and; legal implications, you can always open an account with a US-based broker.

2. Indirect Investment

You can also indirectly invest in the US market by buying mutual funds from India. These vary depending on what you want to focus on, but there are many options to consider. Whether you want to invest in a particular company or diversity your investment by putting your money in a mutual fund scheme? The choice is yours! But, as far as Indirect investment is considered, you can choose from numerous US mutual funds. 

You can also buy ETFs to help you diversify your investments without risking too much of your money in a single company. You can select ETFs according to their market cap (large, mid, or small). It will vary based on your risk profile and is factored into the expected return. 

Investing your money in US stocks by investing in ETFs is another way of Indirect Investement. Some of the downsides of these investments are their higher expense ratios, tax inefficiency, and poor trade execution.

ETFs can also provide exposure to different parts of the market. There are many ways to do it. You can buy US ETFs from international brokers or the Indian version of foreign indices.

What are the prerequisites for opening a US stock account from India?

Opening a US stock account from India requires no cost. It is free!! To open an account for investing your money in US stocks from India, will need you to follow the essentials listed below:

· You must be an Indian citizen and attain 18 years.

· You must have valid ID proof.

· You must fill your profile with the proper name and address details.

· Provide your bank account details that need to be verified.

· Finally, other details as required by the broker partner.

Note: You will need your identity proof (such as PAN or Aadhaar) and address proof (Aadhaar or Voter ID, etc.). The process is paperless and can be completed with just a few clicks.

Perks of investing in US stocks from India

For many investors, this answer may seem surprising, but there are a few benefits to investing in US stocks:

· Diversify your Portfolio- Investing in US stocks can help you have exposure to new opportunities and offer protection against risk by diversifying your money.

· Gain from the appreciation of the dollar- If you had invested a USD into the INR in 2011, by 2020, it would have given you an additional 36% in USD terms. That is on top of any potential gains from the US stock market.

· Better returns from Indian markets- Historically, the US stock markets have shown less volatility and given higher returns than Indian markets.

· Opportunity to Invest in Reputed Companies- The US is one of the most innovative countries in the world, having pioneered breakthroughs in various industries, including technology, pharmaceuticals, and industry. You could be a shareholder of companies like – Tesla, Apple, Microsoft, Google(Alphabet) and Facebook(Meta) sitting comfortably in India.

Best Broker to Invest in US stocks from India

Learning about the world’s different stock markets and regulations cannot be easy. Luckily, many brokerage firms make it easy for us to invest internationally by partnering with foreign brokers. It’s now possible to open an account just by walking into one of many brokerage firms in India. These apps can give you a way to invest in NASDAQ, NYSE, and other foreign exchanges. Some of the best brokers that lets us invest in US stocks from India include:

1. INDMoney

Managing all your funds under one roof becomes seamless with INDmoney. This super money app is an ideal platform that lets all investors pour their money in US stocks (SIP) and mutual funds. Besides managing your investments, this all-in-one money app allows you to simultaneously track all your loans, expenses, and taxes. The app was launched in 2019 and gained the trust of more than 60 lakhs Indian investors. Yes, using this app is 100% safe and secure. 

To use this reliable app, one needs to have a credit score of 650 and verify your KYC documents, including your PAN, Aadhar, Live Picture, and other personal details to verify your address and identity. 

2. Vested

With the Vested app, Investing in the US stock market has become easy than ever! It is an SEC-registered investment platform that allows you to invest in US stocks and ETFs. This app is SEBI registered and is completely reliable. The best part about Vested is that it facilitates stock purchasing for investors by letting them buy fractional shares listed on the US stock market. 

The platform does not charge any opening fee, which means you can start your trading and investing journey in the US market today!

Taxes on Investment in US stocks

Are you using INDmoney app? Yes? A good news for you. Buying and selling U.S. Stocks is completely free with the INDMoney app. The only charge that you need to pay is when you are converting the stocks’ price into Indian currency. Moreover, the applicable withdrawal fee, in that case, is 5 USD. 

Coming over to the taxes on US stocks investment. There are two types of taxes in the US market- the first is Tax on Dividends, and the second is Capital Gains Tax which includes long-term or short-term capital gain tax. 

In the US, dividends over US stock investments are taxed at a flat rate of 25%. 

However, If you are buying a stock and selling the same within a 2 years time frame, that classifies as a short-term capital gain tax. In contrast, if you sell the same stock after more than 2 years, that is categorized under the long-term capital gain tax. Reaping long term gains will be added under your taxable income, and you will be taxed as per your income tax slab. 

5% TDS is levied on the aggregate remittances valued more than Rs. 7 lakh, which is called Tax Deducted at Source. To sum up, when you open a brokerage account, you are required to incur fees such as an account set-up fee, transfer fees, and foreign currency conversion fees.

How To Fund Your US stock Account Through INDmoney? 

In recent years, certain apps have gained immense popularity regarding investment in US stocks from India. However, one of the best apps to invest in US stocks from India is INDmoney, which can easily guide you about investing in US stocks from India and other foreign markets. 

This app will help you save time and money on forex conversion fees. Ensure that you are on the latest version of your INDmoney app. Here are the steps needed to perform if you want to invest money in the US Stock market from India through INDmoney app:

· Install the INDMoney app and go to the dashboard.

· Click on the “Add money” option.

· If you are looking for a low-cost account and don’t have one already, you can create a basic 2-in-1 US stocks account.

· Once you input the amount (INR) you want to fund your US stocks account with, the INDMoney app will show you the applicable Tax and the USDs in return.

· Finally, enter your OTP number, confirm, and log in to complete the transfer.

· When money goes through your US stocks, you are guaranteed it will be in transit for 1-3 business days.

How much can you invest in US stocks from India?

If you want to invest in US stocks from India, you are limited to a specific amount under the Liberalized Remittance Scheme by RBI. The set-limit is $2,50,000 for 1 financial year. However, the very next year, you can invest the same value again.

Investing in US Stocks from India: FAQS

1. What is the minimum investment amount to invest in US stocks from India?

You can buy partial stocks and invest as little as 75 paise in some of the most popular stocks worldwide. So, you can invest in any company, be it Apple, Netflix, or Tesla.

2. What are the charges for a 2-1 US stock account?

An investor need not pay an account opening fee, maintenance, transfer, or trading charges if they want to invest in US stocks from India. 

3. How to get an SBM Bank account number?

You can receive your 2-in-1 account details, including your US trading account and Saving Bank account numbers, via email.

4. Can you invest in IPOs in the US market?

Yes, you can buy stocks in American IPOs via Indian investment apps that help you invest in foreign stocks. You can start investing directly from the app, and once you have opened an account, you are all set to buy stocks from any IPO available on the stock exchange. As per the RBI regulations, you can invest $2,50,000 abroad annually without special permission.

5. What is the T+3 settlement cycle?

The T+3 settlement cycle means the settlement date of security transactions occurring on a transaction date plus three days. It implies your order will be settled (stock trade) three business days after the day when the order is executed. 

I use and Recommend INDMoney for buying and selling US Stocks from India.