Sat. Dec 4th, 2021

How can I invest in the US stock market?

The stand-up comedian posed a question, “What is common between the US stocks and my ex?” A witty reply came after a strategic pause, “Everyone seems to be interested in them.”

Seriously? Is that true—I mean for US stocks?

Yes, it is absolutely true, especially amongst the young adults who wish to explore beyond the traditional boundaries of investment.

Better performance of the US indices like S&P 500 and Dow Jones compared to the BSE Sensex and Nifty have attracted investors to consider investing in the US stocks. Besides, many successful companies across the globe (Facebook, Netflix, Amazon, Google, Alibaba, Baidu) are registered on US exchanges.

Overseas investment is permitted by the Reserve Bank of India (RBI) under the popular LRS or the Liberalised Remittance Scheme. Indian investors can invest in US stocks up to USD 250,000 each financial year.

So, now the question arises—how can you invest in US stocks? Broadly, there are 2 ways of investing in US stocks—directly by opening an overseas trading account or indirectly through Exchange Traded Funds (ETFs), Mutual Funds (MFs), or investment apps.

An overseas trading account may be opened with a domestic brokerage house. Many Indian brokerages provide this facility where you can open an overseas trading account with them, and they execute the orders on US platforms on your behalf. Alternatively, you can also open an overseas trading account with a foreign broking house with an Indian presence.  

If you are a beginner in the world of US stocks, you must consider investing in US stocks through MF. This is one of the simplest methods where expert fund managers manage the funds. Similarly, there are ETFs with exposure to US stocks. For example, you can invest in US ETFs through an Indian or foreign broker or invest in Indian ETFs which have exposure to US stocks. Investment in US stocks can also be made through certain new-age apps.

Investment in US stocks can help you diversify your portfolio. Like any other investment, you must understand the charges and risks involved in investing in US stocks.

Next time when the comedian quotes his line, you won’t be surprised.

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