A Quick Guide on the most proficient method to invest in Foreign Stocks from India. Such that Apple, Google, Facebook, Amazon, Microsoft, Samsung, Tesla, Twitter. These are some Popular companies on the planet. We as a whole have grown up utilizing the products/services offered by these companies. Besides, these companies are worldwide pioneers in their fields, as well as trendsetters, who are likely to benefit in the future. But along with utilizing their products, can we additionally possess a few shares of these organizations?
As you know, these are not Indian companies, and they are not listed on the Indian stock exchanges. If you have got a Demat and trading account in India, you can trade and invest only in companies listed on Indian stock exchanges like BSE, NSE, etc. But those companies will be listed in their respective country’s stock exchange like the US stock exchange.
Do not need to worry, if you truly want to purchase these stocks, you’ll get it. In this article, we will discuss the simple four ways through which you can trade as well as invest in foreign stocks.
Why should you invest in foreign stocks from India?
Before we start this article, let us first talk about for what reason would it be a good idea for you to invest in foreign stocks? Is it true that they are better than Indian companies? Here, you need to decide why you need to invest in foreign stocks.
Honestly, I’m not in a situation to address the second question. These are monster multi-billionaire companies that we are discussing here. Google, Apple, Facebook, Amazon, Samsung, Cisco, Tesla, etc are too big companies to remark upon. These companies have bunches of money, profoundly qualified experts, employees in their management. They are innovators and trendsetters in their industry. Anyways, there are even numerous enormous Indian companies that can give competitions to many foreign companies.
Pros of Investing in Foreign Stocks
1. People want to invest in their favorite companies
Apple, Google, Twitter, Facebook, Amazon, Tesla, etc are the dears of this generation. And obviously, many people want to invest in these organizations.
2. Diversification with Global Investments
Investing in foreign stocks helps you to diversify your portfolio. Let’s assume that the Indian equity market starts falling due to some local reason. Nonetheless, investing in foreign stocks can eliminate the danger in your portfolio as the local reason might not significantly affect the worldwide business.
3. To seize bigger opportunities
When you start to invest in foreign stocks, there are no limits any longer. You can chase for better and more profitable opportunities in the global market.
Other than the previously mentioned points, few investors believe that foreign companies have better assets, resources, facilities, government participation, and standards. That is the reason they invest in these foreign companies, compared with Indian companies. All things considered, while choosing to invest in foreign stocks, you should recall that India is one of the fastest developing economies on the planet. But, the majority of the international markets are a little saturated. Therefore, growth-wise, India has better potential to give an enormous return on your investment.
Cons of Investing in Foreign Stocks
1. Be ready for the high charges
While investing in the global market, you’ll be transacting in foreign currencies. For example, if you are investing in the US stock exchange, you need to pay the brokerages in the US dollar. Also, consequently, the stock brokerages might be a little higher compared to the brokerages in the Indian stock exchange. Additionally, the yearly/monthly support charges may also higher compared to India’s account.
2. Profits are subjected to the currency exchange rate
Let’s assume that you are investing in the Us stock market. At the point when you purchased the US stock, the currency conversion rate was $1= Rs 75. However, next year, when you sold the stock, let assume the Indian currency became strong, and the currency conversion rate became $1= Rs 70. In such a case, you have just lost 6.6% because of the adjustment in the conversion rate. That is the reason when you invest in foreign stocks, profits and losses are always subjected to the currency exchange rate.
3. Up to $250,000 can be invested overseas by the Indian residents
According to the RBI guideline in the Liberalized Remittance Scheme (LRS), an Indian resident individual can just invest up to $250,000 abroad every year. With the current exchange rate of $1= Rs 74, this sum ends up being over 1.8 Crores. No worry, If you have a family of 3 or more then you can invest money 3 x $250,000 = $ .75 Million or so on.
How to invest in foreign stocks?
Since you have taken in the essential idea of investing in the global stock exchanges, here are four straightforward approaches to invest in foreign stocks —
1. An account with Indian Brokers having a tie-up with a foreign broker
Some full-service Indian broker like HDFC Securities, ICICI Direct, Kotak Securities, Axis Securities, etc has a tie-up with foreign brokers. They have made it easy to open your abroad trading account with their partner (foreign) brokers. You can invest in foreign stocks utilizing these full-service brokers.
2. Open an account with the foreign brokers
A couple of international brokerage firms like Interactive Brokers, TD Ameritrade, Charles Schwab International Account, etc allows Indian residents to set up an account and trade in US stocks, mutual funds, and so on.
3. Investing in Foreign stocks through new startups Apps
In the last few years, many new startups have been founded in India and abroad that encourages Indians to invest in foreign stocks. For instance, recently open startup Vested Finance, which helps Indians to invest in US stocks. They are a US Securities and Exchange Commission (SEC) enrolled investment advisor. Additionally, you can invest your money in foreign stocks using the Webull application, another mainstream startup that is also dedicated to building the best trading and investing experience for India and Global securities exchanges.
4. Buying Indian MF/ETFs with global equities
Some various mutual funds/ETFs invest in international markets. You can invest in those mutual funds/ETFs to indirectly invest in foreign equities.
This is the easiest way to invest in foreign stocks. An advantage of investing through mutual funds is that you won’t have to open any overseas trading account. Further, you won’t also require to invest a heavy sum. In some foreign exchanges where you may be asked to keep at least a $10,000 deposit, investing in mutual funds /ETFs is modest.
For example, Motilal Oswal recently started their subscription for its Motilal Oswal S&P 500 Index Fund. It is an open-ended scheme replicating the S&P 500 Index, which consists of leading 500 companies listed in the US.