Brad Wilkerson
The US stock market is the largest and most liquid in the world, with over 15,000 listed companies and a total market capitalization of around $30 trillion. By comparison, the Indian stock market is much smaller, with just over 5,000 listed companies and a total market capitalization of around $2 trillion. This means that investors in India have access to a much wider range of How to Invest in US stocks from India.
Potentially higher returns.
Another benefit of investing in US stocks from India is that you may be able to achieve higher returns than you would if you invested solely in the Indian stock market. This is because the US stock market has historically outperformed other global markets, including the Indian stock market. For example, over the last 10 years, the S&P 500 index (a benchmark for the US stock market) has returned an average of 13% per year, while the BSE Sensex (a benchmark for the Indian stock market) has returned an average of just 9% per year.
Diversification of your portfolio.
Investing in US stocks from India can also help to diversify your investment portfolio. This is because there is often little correlation between how well the US stock market performs and how well the Indian stock market performs. For example, in 2008, while the S&P 500 index fell by 37%, the BSE Sensex actually rose by 9%. This lack of correlation means that investing in both markets can help to reduce your overall risk and improve your chances of achieving long-term success as an investor Vested.
The risks of investing in US stocks from India.
When you invest in US stocks from India, you are exposed to currency risk. This means that the value of your investment will be affected by changes in the exchange rate between the Indian rupee and the US dollar. If the value of the dollar falls against the rupee, then your investment will be worth less in rupee terms. Conversely, if the value of the dollar rises against the rupee, then your investment will be worth more in rupee terms.
There are a few ways to hedge against currency risk, including using currency-hedged mutual funds or ETFs or investing in companies that generate most of their revenue in dollars (such as many big tech companies). However, hedging is not foolproof and can also come with costs (such as lower returns if the hedged asset underperforms the unhedged asset).
Regulatory risk.
Another risk to consider when investing in US stocks from India is regulatory risk. This refers to the possibility that changes in regulations could adversely affect your investment. For example, if the Indian government imposes restrictions on foreign investment, this could limit your ability to buy and sell US stocks. Similarly, if new regulations are introduced in the US that makes it harder for Indian investors to buy and sell US stocks, this could also have an impact on your investment.
Tax considerations.
Finally, there are some tax considerations to be aware of when investing in US stocks from India. Currently, long-term capital gains on equity investments made through a brokerage account are taxed at 10%, while short-term capital gains are taxed at 15%. However, it’s important to note that these rates may change in future years depending on changes to tax laws. Additionally, dividends received from US stocks are subject to withholding tax at a rate of 15%.
Conclusion
If you’re looking to diversify your portfolio and potentially earn higher returns, investing in US stocks from India is a great option. However, there are some risks to be aware of, such as currency risk and regulatory risks. Make sure you do your research and consult with a financial advisor before making any decisions.
