How to invest in U.S. stocks from India? Why should Indians invest in them?
May 10 2022 - Team Stockal
Invest in U.S stocks from India
A majority of Indian stock market investors expose their funds only to the domestic economy. The Indian economy has its own pros and cons and provides returns depending on the level of risk. In the same way, every financial market around the world has its own inherent qualities. As far as growth is concerned, some economies grow at a faster pace in comparison to others. But as an investor, you must focus not only on diversifying across industries but also on different geographies. This helps optimize the returns and reduce the risk of over-exposure to only one economy.
Upon evaluating various financial markets, the biggest names in the corporate world are listed on the U.S. stock exchanges. The blue-chip companies from the U.S., such as Microsoft, Apple, and Amazon, have given returns worth more than 1,50,000% since their listing. It is rare to see such significant returns in the domestic markets. So how does one reap the benefits of such returns? While the answer to this is fairly simple — by investing in the U.S. stock market from India — yes you heard us right ! Now Indians can easily invest in the U.S. Stock Market.
Here’s how you can take the first step towards becoming a global investor. But before that, let’s take a look at why you should start with investing in U.S. stocks?
Why should Indians invest in U.S. Stocks?
Of all the global financial markets, the U.S. stock markets are considered home to the largest companies offering huge returns to investors. Over the past few decades, the stocks of the U.S. companies have outperformed in terms of return on investments compared to other financial or housing markets. However, apart from the high returns, investment in U.S. stocks is also accompanied by some more interesting advantages.
- Dollar Appreciation: Superior returns with dollar appreciation generate higher ROI for India based investors. This is because, when you invest in terms of the U.S. Dollars, the value of your investment goes up as the dollar value increases. The value of U.S. Dollar in 1997 was Rs. 38 whereas in 2022, it has doubled to Rs. 76. If someone invested in U.S. stocks 25 years ago, even if the stock price didn’t move at all, the investment would have been doubled due to dollar appreciation.
- Bigger Companies, Higher Returns: While the basics of investing remain the same across financial markets, you can earn higher returns by investing in the U.S. stocks compared to the Indian stocks because the U.S. companies have a wider reach than most of the Indian companies.The rate at which U.S. companies grow is exponentially high and this is accompanied by the fact that they have, as evident from historical data, earned great returns for investors investing in the past.
- Unique Investment Opportunities: Being a part of a developed economy, U.S. companies have more accessibility to research and development as compared to other economies. Many unique businesses have successfully thrived in the U.S. markets for decades now. Innovative ideas are constantly being brewed in the fields of AI, Genetics, Electric Mobility, Energy, etc. To help the investors directly invest in a thematic portfolios of their interest, there are different stacks available on Stockal such as Omniscience AIoT, Cosmos Thematic High Impact, Electric Mobility Portfolio, US Energy Portfolio, etc.
- World’s Biggest Economy: Unarguably, the U.S. is the world’s biggest economy valuing $23 trillion. It is also home to two of the world’s biggest stock exchanges – Nasdaq and the New York Stock Exchange (NYSE). In addition to all leading American companies, the U.S. stock exchanges also have top global businesses from Japan and China, such as Honda, Sony, Alibaba, and Tencent listed on them as well.
You can make the most out of these benefits by investing through Stockal that offers a smart, secure, and simple way of taking your portfolio global. Now that you are aware of so many compelling reasons to invest in the U.S. stock market, let us also look at how exactly you can start investing in U.S. stocks from India.
What are the requirements to start investing in U.S. Stocks?
There are two ways to start investing in U.S. stocks. One is by investing in mutual funds in India that participate in U.S. stocks and the other is by directly buying U.S. stocks or ETFs. In India, some mutual funds like DSP Global Allocation, Nippon India U.S. Equity Opportunities Fund, DSP U.S. Flexible Equity Fund, etc offer exposure to the U.S. stock markets. Usually, these international funds levy an extra charge in addition to the expense fee. You can buy the units of these mutual funds like any other mutual fund.
On the other hand, you can directly invest in the U.S. stock markets by buying shares or ETFs with the help of Stockal, one of the leading platforms to invest in U.S. stocks from India. You can simply create an account within a couple of minutes and start making your desired global investment. Apart from the stocks of 5,500+ global companies, you can also invest in the stacks exclusively designed by Stockal. Stacks are pre-configured baskets of stocks, managed by industry experts focusing in a particular sector. Also, with Stockal, you get the benefit of fractional investing that lets you buy only a small fraction of a share with no minimum threshold. You can start by investing as low as $1 in U.S. stocks.
Moreover, the costs involved is another decisive factor in investing. Buying the Indian mutual funds with international exposure surely offers you more diversification. However, the expense ratio of these funds is generally higher. This is because of the inclusion of domestic as well as foreign companies in the portfolio. Comparatively, investing directly in the U.S. stocks or ETFs through Stockal offers you a low cost option.
With a Stockal trading account, you can buy or sell your investment in the U.S. stocks or ETFs anytime as per your convenience. With real-time price updates, you can easily place the buying and selling orders through the app. For the successful execution of these orders, you must make sure that the orders are placed when the U.S. stock markets are open. Therefore, knowing the timing of U.S. stock exchanges is very crucial. So let’s go ahead and see when you can invest in the U.S. markets from India.
When to invest? – U.S. Stock Market Timings
There are two primary stock exchanges in the United States — Nasdaq and NYSE. Both these stock exchanges are located in New York. The opening and closing times of Nasdaq and NYSE are 9:30 AM to 4 PM Eastern Standard Time. These timings are very similar to the Indian stock markets. However, if you wish to trade or invest in U.S. stocks, then the equivalent timings as per Indian Standard Time are important for you. The table below displays the U.S. stock market time in India.
Note: Daylight Saving Time is a practice of setting the time one hour ahead in the U.S. region. This is observed starting from March to November. For the rest of the month, normal eastern time is followed.
Which U.S. Stocks to buy in India?
In India, the stocks of the listed companies are divided into three categories – large-cap, mid-cap, and small-cap. Likewise, in the United States, the stocks are divided into four categories viz.
- Mega Cap
- Large Cap
- Mid Cap and
- Small Cap
If you are starting to geographically diversify your portfolio for the first time, then you must prefer investing in mega-cap companies. Mega cap companies are companies with a market capitalization of more than $200 billion. Normally, these businesses are fundamentally strong and often become the preferred choice for investors looking for low-risk investment options.
All FAANG stocks, that is Facebook (Meta), Apple, Amazon, Netflix, and Google (Alphabet) fall into the category of mega-cap companies. Even Microsoft, Tesla, NVIDIA, Berkshire Hathaway, P&G, etc. are some of the giants that fall into this category. You can check the PEG ratio of the company before investing. PEG ratio stands for price/earnings to growth ratio which should be 1 or less than 1. If the PEG ratio is 1, the stock price is fairly valued. However, the PEG ratio higher than 1 indicates overvalued stock whereas that below 1 indicates an undervalued stock price.
Apart from that, you must also check the financial results declared by the company and ensure that its revenue and income are growing on a Quarter-on-Quarter and Year-on-Year basis. Moreover, before you invest, you must thoroughly research the companies and calculate the risks beforehand.
How to Trade in the U.S. Market from India?
In this section, we will discuss the detailed method on how you can start trading or investing in U.S. stocks. To begin with, you must know that, as a retail Indian investor, you can invest in U.S. companies either by directly purchasing their shares, or by investing in them through the U.S. ETFs, or by buying the units of Indian mutual funds with foreign exposure. Either way, by investing in the U.S. stock market, you can enjoy some benefits like dollar appreciation, superior returns, and geographical diversification of your portfolio.
Wondering how you can go about it? Well, a simple way to invest in 5,500+ global companies with no account minimums is to begin the journey with Stockal. It also offers you the feature of fractional investing where you can simply become an investor by buying a fraction of a share. More than 220,000 happy clients make the most out of world class research and the low cost investing platform offered by Stockal.
To start trading or investing, you can simply use your email address and sign up with Stockal. Once done, you will have to complete the Know Your Customer (KYC) verification and Liberalized Remittance Scheme (LRS) documentation process. This is a mandatory step that cannot be skipped. In the next step, your account gets verified, and then you become eligible to add funds to your fully functional Stockal account. You can then choose a suitable plan that meets your investment goals. At this step, you can choose any plan based on whether you’re planning to trade in U.S. stocks for short-term profits or invest for long-term gains.
When the account is active and you’ve successfully added the funds, you can simply search for the desired stock you plan to invest in. Once you are on the stock page, you will find all the details related to the stock such as – financial reports, fundamental data, recent developments, and expert analysis reports to assist your investment decision.
Trading or Investing in U.S. Stocks from India
It is indisputable that whether we buy for the long term or short, our motive is to make profits. Some people buy U.S. stocks low and sell high on the same day or within a few days to make short-term profits. On the other hand, many buy and hold U.S. stocks for a longer time horizon. While in the short term, trading can be more attractive, it involves high risk as well. However, when you evaluate both in terms of total returns on investment, investing for the long term gives the chance to rise along with the company and make exponential profits.
For novice investors, it is recommended to accumulate the stocks of fundamentally strong companies in small quantities and hold them for the long term. As and when the price corrects, you can buy them and hold them unless you have a strong reason to sell. This is because the stocks of fundamentally strong U.S. companies have given high returns over a couple of decades.
To sum it up
Investing in the U.S. stock market from India is a good way to optimize your investment portfolio for greater returns. It helps in risk management as well by adding geographical diversity to your investments. Historically, good U.S. companies have rewarded investors who held their stocks for a long period. So if you invest in U.S. stocks with the intention to hold them for a long period, then you might increase the chances of earning higher returns compared with the stock of Indian companies.
If you are ready to take the first step, then you should consider opening an account with Stockal that offers a SMART, SIMPLE, and SECURE investment platform. Stockal is the best app to buy U.S. stocks from India and also offers SIPC Protection of up to $5,00,000 on your investments. Choose a wise companion to assist you in the journey to invest in U.S. stock markets.
To learn more, you can visit Stockal’s website here.