All You Need to Know About Investing in US Stocks
A retail investor has never had better times than in today’s age. As they have a wide bouquet of investment products to choose from. Be it debt, equity, mutual funds, Exchange Traded Funds or ETFs, Gold and Silver in both physical and digital form, and several other asset classes. Another addition to this platter is US stocks. Yes, you read it right. In this digital age, you can easily invest in US stocks sitting in the comfort of your homes in India.
Interestingly, investments by Indians in US stock markets have doubled from $250 million in 2020 to $500 million in 2021, as suggested by data from global investing platform Stockal. This is not surprising given that US markets had one of its strongest runs in 2021 with S&P 500 index gaining over 27%.
US stock markets form about half of global equity value, providing ample potential for investors to participate in the growth of the world’s largest equity market.
Investors can invest in US markets in three ways:
1) Buying shares of US based companies
2) Investing in ETFs based on US markets
3) Investing in domestic mutual fund schemes that invest in US-based equities
Data from Prime database suggests that investments made by domestic mutual funds in companies listed overseas have grown over 200% to ₹33,078 crore in November 2021 as compared to December 2020.
Let us understand all about investing in US markets.
Factors driving investments in US markets
Leading indices of US, namely – S&P 500, Dow 30 and Nasdaq 100 feature some of the prominent companies spanning both traditional businesses as well as new-age companies. These indices cater to the different needs of investors – whether it is to build broad-based, low volatility investments in the world’s largest equity market; riding the growth wave of technology companies or banking on the companies focused on US economy.
Investing in US markets also provides several advantages including diversification of one’s investment portfolio, hedging against a weakening rupee (versus the US Dollar) which amplify returns provided by US stocks, planning for future spending in dollars, among others.
Strong run of the US market relative to Indian markets is another reason why Indian investors are being lured to invest into the former.
Over the past decade, the BSE Sensex has given returns of 136%, while the S&P 500 has grown by 190% (Source: Bloomberg data)
Investors can choose from a wide array of investment themes.
One can save in US Dollar to spend them in the future for multiple purposes.
How can you invest in US stocks through 5paisa?
Investing in US markets via 5paisa provides you with several benefits. We have joined hands with Vested – a US Securities and Exchange Commission Registered Investment Adviser to provide you with the best experience while investing in US stocks. Their online platform makes investing in US stocks/ETFs from India easy and convenient. Vested provides portfolios built carefully to meet the risk appetite as well as financial goals of different set of investors.
5paisa is witnessing strong momentum in US investing with close to 2.7 lakh customers showing interest. Investments of $500,000 have already been made by customers to take exposure in global stocks. Given the benefits of investing in US markets, this metric is growing at a rapid pace.
Process of investing in US stocks through 5paisa
1) Open a Demat and Trading account with 5paisa
2) Link your Vested Account with 5paisa
3) Provide basic details
4) Create your risk profile
5) Upload documents
6) Choose the plan
7) Agree and accept
8) Start Investing
Carefully consider the risks associated with investing in US markets
There is no doubt that investing in US markets opens up a world full of opportunities, but investors must carefully weigh-in the risks associated with the same. Basic rules of equity investment such as studying more about the US-based companies/ETFs in detail before investing must be followed. Likewise, investors are advised to have a reasonable knowledge about market risk and currency risk before plunging into these investments. Taking the advice of your trusted broker might help alleviate several concerns.
Start with smaller investments
Asset allocation is a function of the risk appetite and financial goals of an investor and hence varies for every investor. However, it is prudent to start investing in US markets with smaller investments. Initially, 4-5% of one’s total investments can be parked in US markets. These can be scaled up gradually, after an investor gains reasonable understanding and confidence in these investments.
As technology continues to disrupt traditional ways of investing and present us with a world full of possibilities, investing in US markets is surely a step in the right direction. With the right balance of prudence, discipline and informed decision making, one can unlock maximum potential of their investments.
Happy investing to you.