Every now and then we see new milestones in terms of sales hit by the top companies of this planet. While some Indian companies also make it to that list, but that would constitute just the 10% of it. So what about 90% of the publicly trading companies that are doing exceptionally well. Yes, I am talking about the likes of FAANG (Facebook, Apple, Amazon, Netflix and Google). So, it makes sense for one to think how to invest in US stocks from India?
Although, it is easier said than done, but multiple brokers offer the option of investing in US stock markets. The accessibility is NOT the only thing stopping you from investing though. A bigger barrier for me would be the share prices of these companies. As an example, share price of Amazon would be INR 2.3L as on 12.12.2020. Likewise, a Tesla share would cost you almost 45k apiece. When you probably need an SIP to save for purchasing one share of such companies, there has to be some other way.
Should you Invest in Foreign Markets? Some Important Points to Consider:
Before the various alternatives available, let us first evaluate if we really need to leave behind 2000+ listed Indian Companies and go for US Stock markets. While US markets seem to be lucrative from a distance, let’s not forget that the grass on the other side of the river, always appears greener. I strongly believe there is ample of opportunity in Indian market as well. If you haven’t tapped it yet, I would recommend diving deeper here first.
Additionally, if you have done your math and found some great undervalued US companies to invest in, you need to factor in the currency fluctuations as well. Unlike India, now you are investing in a market that runs on Dollars. So if INR appreciates, you earn over and above your returns and vice- versa. So, next time you are looking for an answer to “How to invest in US stocks from India?” It’ll probably make more sense to answer “should you invest in US stocks”, first!
How to Invest in US Stock Markets from India?
One of the ways I already mentioned in the introductory paragraph. You may opt to invest directly in the stocks. I use IndMoney for investing in mutual funds and they have an option of opening a trading account which will enable this. But, as highlighted earlier, I don’t use this option as shares are too expensive for the companies I am bullish on. However, you can go ahead with this option. It definitely won’t be a regular demat account where you add funds and transact immediately. There is some nitty gritty involved which can be understood using their FAQs page.
So, if not directly through equity stocks, how do I invest in US stocks from India? There is more than one channel through which this can be done. Let’s explore all of them:
These are exchange traded funds where an Indian investor invests in an Indian Index ETF. This Indian ETF in turn invests in an abroad Index e.g. Nasdaq in case of US. So indirectly, you can get an exposure to US stock markets. Example of such ETF would be Motilal Oswal Nasdaq 100 ETF.
2. Feeder Fund
Consider this as a mechanism where a fund would gather money from multiple funds placed in different countries, called feeder funds. All the money from these feeder funds would go to one fund and this fund finally would invest in MFs, Stocks, ETFs in the US market. Example: Franklin India Feeder Franklin US Opportunities Direct Fund
3. Funds of Funds (FoF)
As the name suggests, these are mutual funds (Indian) which would invest in an international mutual fund (US) which in turn would invest in US Stocks. So indirectly you can get exposure to US stocks. Eg. of such fund is DSP Global Allocation Fund, Nippon India US Equity Opportunities Fund.
4. Actively managed funds:
These are Indian Mutual Funds that directly invest in US stocks. Just like any other Indian Mutual Fund would do for Indian Stocks. Example: Nippon India US Equity Opportunity
They say never place all your eggs in one basket. So, investing in different countries while you have a chance is a good route of diversification. Moreover, in all likelihood, we are the direct users of the products made by FAANG. That matters because if I were to invest 50k in tech theme overall, I would go for Facebook and Google rather than TCS and Infosys because the products made by former are much more relevant to me in daily life. I don’t undermine the achievements of likes of Infosys but this bias would always play a role in my mind unconsciously.