Dr. Suresh Surana
Indian investors have been keen on investing in foreign securities, especially in US stocks, considering their popularity in the global markets. One of the significant reasons for Indian investors to be attracted to US markets is to diversify their investment portfolio and ensure value investing in a relatively stable economy.
Modes of Investment
In today’s dynamic and tech-savvy business environment, an investor has multiple alternatives to make foreign investments such as directly investing into US stocks through an Overseas Trading Account or indirectly investing via Mutual Funds and ETFs or via next generation trading platforms.
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Here is an insight into each of these investing modes:
Direct Investments
One of the most widely used modes of making investments in US listed Companies is by opening an overseas trading account. 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.) which is in partnership with a foreign broker. It must be noted that, investors might have to maintain a minimum balance as deposit while opening an account with foreign brokers. However, a few such brokers may put restrictions on the number of trades that an investor can enter into.
Indirect Investment
An investor has an option to indirectly route his investments in the US stock market via Mutual Funds wherein he can either opt to invest in an Indian fund (eg. Parag Parikh Flexi Cap Mutual Fund) which invests in foreign stocks or an International US fund directly investing in the US markets. These options aid an investor who lacks the technical understanding and resources to directly invest in US stock markets.
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New-age Trading Platforms
Startups such as Angel Broking, Zerodha, Upstox, Vested Finance, GROWW, Indmoney, Webull, etc. have brought trading to the fingertips of an investor by launching their mobile applications. These next-gen trading platform has enabled investors to invest in US stocks ( some allows access to Indian ETFs holding foreign stocks only) with fewer procedural formalities and certain platforms even provide the investor with the flexibility to invest in fractional shares. However, an investor must carefully go through the terms and conditions laid down by these platforms.
International Financial Service Centre (IFSC) at GIFT City: At present, NSE IFSC and India INX are the only international exchanges in IFSC at Gujarat International Finance Tec-City (GIFT City). These stock exchanges currently provide access for Indian investors to invest in foreign stocks.
However, it is always advisable that the above-mentioned alternatives must be selected by an investor only after an in-depth analysis of several other factors such as ease of handling/managing portfolio, foreign regulatory aspects, cost involved in operating such accounts and transaction costs, etc.
(Author is Founder – RSM India)