Investments in US stocks – An overview of the different ways of investing

Dr Suresh Surana

Indian investors have been keen to invest in foreign securities, especially US stocks, given their popularity in global markets. One of the main reasons why Indian investors are drawn to US markets is to diversify their investment portfolio and ensure a value investment in a relatively stable economy.

Investment methods

In today’s dynamic and tech-savvy business environment, an investor has several alternatives for making foreign investments, such as investing directly in U.S. stocks through an overseas trading account or investing indirectly through mutual funds. investments and ETFs or via next-generation trading platforms.

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Here is an overview of each of these investment methods:

Direct investments

One of the most widely used ways to invest in US-listed companies is to open a trading account overseas. Such an account can be directly opened with a foreign broker (such as Charles Schwab International Account, Interactive Brokers, TD Ameritrade, etc.) or with an Indian broker (such as Axis Securities, ICICI Direct, HDFC Securities, etc.) that is in partnership with a foreign broker. It should be noted that investors may have to maintain a minimum balance as a deposit when opening an account with foreign brokers. However, a few of these brokers may place restrictions on the number of trades an investor can make.

Indirect investment

An investor has the option of channeling his investments indirectly into the US stock market through mutual funds where he can choose to invest in an Indian fund (e.g. Parag Parikh Flexi Cap Mutual Fund) which invests in stocks foreign or an international US fund directly invest in US markets. These options help an investor who lacks the technical knowledge and resources to invest directly in US stock markets.

Also read: Why the US is the perfect market to diversify away from Indian risk

New Era Trading Platforms

Startups such as Angel Broking, Zerodha, Upstox, Vested Finance, GROWW, Indmoney, Webull, etc. have put trading at an investor’s fingertips by launching their mobile apps. This next-generation trading platform has enabled investors to invest in US stocks (some allow access to Indian ETFs holding only foreign stocks) with fewer procedural formalities and some platforms even offer investor the flexibility to invest in fractional shares. However, an investor should carefully read the terms and conditions established by these platforms.

International Financial Services Center (IFSC) at GIFT City: Currently, NSE IFSC and India INX are the only international IFSC exchanges at Gujarat International Finance Tec-City (GIFT City). These exchanges currently allow Indian investors to invest in foreign stocks.

However, it is always advised that the alternatives mentioned above should only be selected by an investor after careful analysis of several other factors such as ease of portfolio handling/management, foreign regulatory aspects, cost involved in the operation of these accounts and transaction costs, etc.

(The author is founder – RSM India)