Looking to buy stocks from US companies such as GameStop, Facebook or Tesla? Luckily, these days itâ€™s inexpensive and easy to invest in US companies from India, once you know what to do.
As of 2021, there are at least half a dozen online trading platforms in India with access to Wall Streetâ€™s New York Stock Exchange and NASDAQ, however, there are some big differences when it comes to costs and features. Read on to find out more.
Buy US shares in 4 steps
- Compare brokers with access to US stocks
- Open your account by providing your details â€” Aadhar, PAN card, address and more
- Fund your account by transferring money from your bank account
- Search and select the shares you want to invest in and start trading
Not all brokers or trading platforms provide access to global stock exchanges, so if you want to buy and sell US shares, youâ€™ll need to find one that offers the service for a cost-effective brokerage fee.
Why invest in US stocks?
There are many reasons for Indian investors to own stocks listed in the US. In the last decade, Wall Streetâ€™s S&P500 index has delivered returns of around 210%, while Indiaâ€™s equivalent the Nifty 50 returned around 164% for the same period.
US stock markets also offer a greater diversity of companies than is available in India. The New York Stock Exchange and the NASDAQ are the two largest stock exchanges in the world in terms of market capitalisation. Many of the worldâ€™s biggest global growth companies, such as Facebook, Amazon, Apple, Netflix and Google (FAANG) are listed in the US.
Profit aside, holding a diversified stock portfolio is also safer. This means investing in companies from a range of sectors as well as countries. So, if Indiaâ€™s economy were to slow, stocks listed in another country such as the US can act as a buffer.
What are the costs of buying US shares?
A couple of decades ago, investing in global companies was fairly costly. Today, many online trading platforms allow Indian investors to buy and sell shares in India, the US and other international markets for just about US$2 a trade in brokerage fees. There are many that have scrapped the brokerage fee altogether.
However, not all trading apps in India offer US stocks. Some only offer Indian shares or they may charge additional high fees for the service. Before signing up for a new account or broker, itâ€™s important to check which countries are on the books and what the associated fees are.
Each platform works in a different way, however, the same general rules apply as with buying Indian shares â€“ with a few additional considerations. For example, youâ€™ll be charged a brokerage fee and a foreign exchange (FX) fee when you trade shares. Brokerage fees are sometimes higher on international accounts and there may be additional costs such as an inactivity fee.
Alternatively, you can invest in a portfolio of US stocks via exchange-traded funds (ETFs).
Which trading platforms offer US shares?
There are a growing number of Indian online share trading platforms that offer access to international stock exchanges. Some platforms offer international accounts that are separate from their Indian trading accounts, while others are fully integrated on one platform.
Here are some platforms that allow US share trading in India:
Zero brokerage trading accounts
Several share trading platforms in India now offer zero brokerage fees when you trade US stocks. This commission fee is what youâ€™re usually charged by your broker every time you place a trade and can range anywhere from US$0 to US$50 per transaction.
Thanks to the growing competition, some brokers have removed this fee altogether, instead of charging a small foreign exchange fee to convert INR to USD. Hereâ€™s a list of zero brokerage trading platforms for US stocks as of 2021:
Itâ€™s important to note that although you donâ€™t pay commissions to trade using these platforms, it doesnâ€™t mean theyâ€™re free. Youâ€™ll still need to pay a currency conversion fee to exchange INR to USD, which is typically charged as a percentage of your deposit. You may also have to pay ongoing account fees, account opening fees and a â€œcustodyâ€ fee, which is sometimes waived if you meet a minimum number of trades per year.
Indian apps must use a US-based custodian to hold US shares. An annual custody fee is typically charged as a percentage of your holdings.
How do I compare trading platforms?
Make sure that you take the following features and questions into consideration when comparing the benefits of US share trading sites:
- How much is brokerage? Compare the fee each company charges every time you place a trade on US stocks. Be aware that this will be different from broker fees for India-listed stocks.
- Whatâ€™s the exchange rate? Exchange rates vary from platform to platform and this will partly be used to offset low broker fees. Check what these are first.
- Will you need to pay a monthly fee? Some platforms require you to pay a monthly fee in order to keep your account running or to access certain features.
- How is market data displayed? Check how up-to-date the market data offered by each platform is â€” being able to make trades based on current information is critical.
- How many international markets can you access? Some platforms offer access to a few key international markets while others let you buy and sell shares on a much larger number of exchanges.
- How easy is the platform to use? Is it fast, simple and convenient to execute a trade and monitor market performance?
- What trading options are available? Is the platform just online or can you also place trades over the phone? Are flexible options like limit orders available to let you take advantage of market fluctuations?
- Are education and research resources available? Trading shares is complex, so does the platform offer the necessary tools to increase your investment knowledge?
- Is customer support available if you need it? How can it be accessed and when?
What are the pros and cons of investing in US shares?
- Access different investment opportunities. Trading via US stock exchanges allows you the freedom to take advantage of investment opportunities that are not available in India.
- Increasingly more affordable. As a growing number of online share trading platforms compete for market share, brokerage fees are becoming more affordable.
- Diversify your portfolio. If all your investments depend on the performance of one national economy â€“ i.e. Indiaâ€™s â€“ is your portfolio really as diverse as you think? Buying international shares protects you against having all your eggs in one basket.
- Brokerage fees. Youâ€™ll need to contend with potentially higher brokerage fees whenever you place a trade on an international share market.
- Exchange rates. The INR-USD rate fluctuates frequently which might negatively impact your investment.
- Additional fees. International trading accounts are sometimes subject to fees that India-only platforms are not, such as inactivity fees and exchange fees.
What are some of the risks?
One of the key risks to be aware of when trading US shares is that you may not have the same level of knowledge and expertise as you have when trading Indian shares. Investing in an area, industry or country which you know little about is always risky, so it always pays to make sure you know what youâ€™re getting yourself into.
Another factor worth considering is the tax implications of international trading. You donâ€™t want to make any mistakes when declaring your income and find yourself on the wrong side of the Income Tax Department (ITD), so familiarise yourself with the tax treatment of your investments as soon as possible.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
Kylie Purcell is the investments editor at Finder. She has a background in business and finance news with previous roles at SBS, Your Money, TVNZ, Switzer Group and The Adviser magazine. Kylie has a Masters in International Journalism and a Graduate Diploma in Economics. When shes not writing about the markets you can find her bingeing on coffee.
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