How to Invest and Buy US Stocks from India

Your ultimate guide to buying, investing and selling US Stocks and ETFs from India.

6 minutes read

For a very long time, it was very difficult to invest in US stocks from India; often expensive, and reserved for the uber-rich. But as more retail investors enter the fold, coupled with low commissions and easy account opening, hundreds of thousands of Indian investors have unprecedented access to US markets. 

The trend of investing in US equities is gaining prominence globally and is not restricted to just India. In the last few years, millions of investors across the world have gained direct access to US stocks.

In this blog, we’ll answer three broad questions.

  1. Can I invest in US stocks?
  2. Should I invest in US stocks?
  3. How do I invest in US stocks from India?

Towards the end, we’ll explain which method is best for YOU, what you should look for in a platform, and how taxation works when investing abroad.

But let’s start with the first question.

Can I invest in US stocks?

Simply put, yes, you can invest in US stocks from India.

In fact, you can invest in a lot more than just US stocks – and you should definitely consider it. 

Beyond stocks, you can invest in assets like ETFs, real estate, and even commodities. And people just like yourself do invest in these assets – in the year 2017, Indians were the 5th largest investor in US real estate.

So how does this happen?

Well, in the old days (circa 2004), you had to ask for the RBI‘s permission every time you needed to send or invest money abroad. 

But today, it’s a much easier process with something called the LRS. 

LRS stands for Liberalized Remittance Scheme and it allows Indian citizens to invest/send up to $250,000 in foreign markets, per person, per year. 

Should you want to invest more than the cap, you can simply apply for an exception with the RBI.

Three important things to note about LRS:

  1. LRS can be exercised by investing in foreign stocks, paying for your child’s education, buying travel packages, transferring money, etc.
  2. Should you invest more than 7 lakh INR (~$10,000) in a financial year, you will be taxed 5%, collected at source.
  3. You can claim this 5% against tax payable while filing ITRs. So, if your Tax Collected at Source (TCS) is higher than your tax payable, you’ll get a refund.

Takeaway – LRS is not just for investing, but several use cases beyond that too. Finding a platform that enables you to utilize LRS to its fullest potential is key for your long-term financial planning.

Should I Invest in US Stocks from India?

Well, that depends on a variety of factors – capital on hand, risk appetite and your future plans amongst others.

But in any case, you should strongly consider it. Here’s five reasons why –

1. Better Returns

Simply put, historically, US markets outperform their Indian equivalents*.

An investment of Rs 100 in the BSE Sensex would fetch you Rs 236.2 ten years later. Very impressive. 

However, a Rs 100 investment in the S&P 500 would fetch you a sum of Rs 444.5, nearly double the returns of the Sensex, in absolute terms.

This disparity in gains can be attributed to the US being home to much larger and more innovative companies, something we’ll get back to later on in the blog. But rest assured, beating the US market’s performance on a risk-adjusted basis is quite difficult.

For more about that and an in-depth look into the historic performance of both markets, you can read our blog, titled the Last Decade Of Investing In US Vs India.

*Historic performance is not an indicator of future performance. Capital is at risk.

2. Lower Risk

Diversification is the name of the game when building a portfolio for steady long-term returns. 

By not keeping all your eggs into a single geographical basket, you not only protect yourself from market volatility but also have the capital to fall back on in case one of your investments does not turn out as planned. 

In 2011, when the S&P BSE Sensex corrected 25%, the S&P 500 was flat. Similarly, in 2018, when the S&P 500 delivered a negative 6% to investors, Sensex saw gains of 6%.

US markets also have stocks and ETFs from other countries and continents (China, Africa, etc), allowing you to further diversify your portfolio should you choose to do so.

3. Currency Devaluation

While macroeconomics may not be an element you can control for your personal finances, it should absolutely be something you consider. 

So sure, the Indian rupee has been in a slump against the US dollar – but what does that mean for you?

Well, let’s take an example. Say you were saving for your child’s education at an Ivy League college and/or you’re looking to buy a house in the US. You’ve chosen to save $100,000 (75 lakhs) in ten years to achieve these goals. 

This is where currency devaluation kicks in.

In ten years since 2011, the US dollar has appreciated 67% against the Indian Rupee. So, while you needed INR 45,000 to buy $1000 in 2011, you now need INR 75,000 to get the same amount. 

Using this logic, $100,000 could cost 75 lakh today, but ten years from now may cost 1.25 crores. 

By investing that $100,000 in US markets from the offset, you’re not only likely to get better returns, but you’re also safe from this valuation slide.

4. Value and Thematic Investments

The world is making a shift towards clean energy, cryptocurrencies, robotics, AI, and software. 

So where do the best companies that tackle these big problems reside and go public? The US of A.

Indian regulations make listing companies a little challenging, so it’s hard to invest in the potential of these ideas before they’ve achieved an enterprise product-market fit. 

Additionally, you probably consume more US products than you do of their Indian variants. Google, Netflix, Amazon, Apple, Facebook, Microsoft – the list is endless. 

Invest in the products you use and in the industries you build in.

5. Time Delta

Compared to its global equivalents, the Indian market is fairly young. 

While the BSE and NSE were recognized in the second half of the 20th century, the NYSE and LSE go as far back as the early 1800s. 

The age of a stock market is important for three reasons. 

One, since global exchanges have been around for longer, there’s a broader variety and higher quality of companies to choose from. 

Two, since global exchanges are more mature, they are also typically less volatile.

Three, given their larger stature, companies from all across the globe list in these exchanges. Spotify (Sweden), Atlassian (UK), Alibaba (China), Coupang (Korea) are just a few of the global companies you can invest in. 

When you are ready, there are three broad ways to invest in US stocks. 

  1. Domestic brokerage firms that have partnered with a foreign broker 
  2. Tech platforms that connect you to a foreign brokerage
  3. International regulated brokerages, like Winvesta

More about this in a bit. But regardless of how you invest, the steps to invest remain largely the same. 

How to Invest in US Stocks from India?

  1. Register: Enter your phone number, name, date of birth, nationality, country of residence, and email.
  2. Complete your KYC: Provide your PAN card, Aadhar Card, and video KYC.
  3. Do a couple more questions: Answer basic questions like your Employment Status, Investment Experience, Funding Source, and fill out your W8 BEN agreement.
  4. Add Funds: You’re nearly there. All that’s left is to fund your account. You can start with as little as $10.
  5. Start Investing: Make your first trade! If you use Winvesta, you get $10 when you fund your account, 10 free trades for your first month and 3 free trades each month after!

What is the best method for me?

Like we mentioned earlier, there are three channels to invest directly in US stocks. 

  1. Domestic brokerage firms that have partnered with a foreign broker
  2. Tech platforms that connect you to a foreign brokerage
  3. International regulated brokerages like Winvesta

Domestic brokers often charge exorbitant fees that cut into your profit margins, making investing a much trickier prospect. Tech platforms are just that – tech platforms that take your money while exposing you to platform risks, with subpar legal recourse if/when things go wrong.

We’ve listed the advantages and disadvantages of these platforms in this handy guide below.

Comparison of platforms enabling US stock investing from India

One Last Bit – Taxation 

The tax treatment for investing in US markets is actually quite simple. There is NO capital gains tax in the US for foreigners, and overall taxes you pay remain similar to what you would pay for Indian investments. Learn more about the tax implications of investing in US markets here. Please note that tax rules will depend upon personal circumstances and are subject to change in the future.

Ready to Start Investing in US Markets?

Get direct access to 4000+ US stocks and ETFs with Winvesta and start diversifying your portfolio globally today.

All content provided by Winvesta India Technologies Ltd. is for informational and educational purposes only and is not meant to represent trade or investment recommendations. Remember capital is at risk. Terms & Conditions apply. 

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