Invest In Us Etfs: A Guide For Indians

Investing in US ETFs from India can be done in several ways, including directly through a platform like INDmoney, or indirectly through mutual funds or international brokers. The US stock market is home to some of the world's most popular stocks, like Facebook, Google, and Apple, and investing in US ETFs from India can be a lucrative opportunity for investors looking to diversify their portfolios. However, it is important to note that there are regulatory and logistical hurdles to investing in the US stock market from India, and investors should be mindful of the fees and charges associated with each investment approach.

Opening an overseas trading account with a domestic or foreign broker

To invest in US stocks from India, you can open an overseas trading account with a domestic or foreign broker. Here's a detailed guide on what you need to know about opening an overseas trading account:

Opening an Overseas Trading Account with a Domestic Broker:

Many domestic brokers in India have tie-ups with stockbrokers in the US. They act as intermediaries and execute trades on your behalf. When choosing a domestic broker, look for those with ties to US stockbrokers, as they can facilitate your trades. Some examples of Indian brokers with ties to US stockbrokers include ICICI Direct, HDFC Securities, Kotak Securities, and Axis Securities.

Before opening an account, be mindful of the charges and restrictions. Domestic brokers may impose restrictions on certain investment vehicles or the number of trades you can make. Additionally, consider the costs, including brokerage and currency conversion charges, to ensure you understand the full scope of the investment.

Opening an Overseas Trading Account with a Foreign Broker:

You can also choose to open an overseas trading account directly with a foreign broker that has a presence in India. Some examples of foreign brokerages with a presence in India include Charles Schwab, Ameritrade, and Interactive Brokers. When selecting a foreign broker, ensure that you understand their fees and charges beforehand.

It is important to research and compare different brokers based on factors such as platform fees, security, the range of options, and customer support to find the one that best suits your investment needs and goals. Additionally, consider the pros and cons of each option, as international investing attracts more charges and has certain tax implications that you should be aware of.

In summary, by opening an overseas trading account with a domestic or foreign broker, you can gain access to US stocks and begin your investment journey. Conduct thorough research, understand the associated costs and restrictions, and make an informed decision that aligns with your financial goals and risk tolerance.

Indirect investment via mutual funds

Indirect investment in US ETFs from India can be done through mutual funds. Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. An investor can buy shares of the mutual fund, and a professional fund manager makes investment decisions on their behalf. Some mutual funds focus specifically on US stocks, providing a diversified exposure to the US market.

US-focused international mutual funds are one of the easiest and most popular methods for Indians to invest in US stocks. However, by investing in US-focused mutual funds, you are indirectly investing in US stocks and not buying stocks of US companies directly, so you do not get any rights to voting and/or dividends of the underlying companies.

When choosing a US-focused mutual fund, compare different funds based on expense ratios, tracking errors, and the fund manager's expertise to find the best fit. Additionally, be mindful of the various charges and fees associated with investing in mutual funds, such as high expense ratios, sales charges, management fees, and potential tax inefficiencies.

Before investing, it is important to understand the regulatory and tax implications of investing in US-focused mutual funds as an Indian resident. Ensure that you consult with a tax professional to navigate the complexities of international taxation and reporting requirements.

• Stockal: Stockal is a popular stock trading platform that provides access to US stocks and investing options for investors in India. It allows users to invest in the stocks and ETFs of more than 5,500 global companies, either directly or indirectly through ETFs.
• Kuvera: Kuvera is a Bangalore-based stock trading brokerage platform that allows you to invest in US stocks directly and through US ETFs. It provides access to many listed US stocks and charges a fee of 0.2% commission per trade (up to $20).
• INDmoney: With INDmoney, you can invest in the US market indirectly through mutual funds. They offer a range of funds covering different industries and asset classes. However, keep in mind that there may be disadvantages to this type of investment, including high expense ratios, sales charges, management abuses, tax inefficiency, and poor trade execution.

Online investment apps

There are several online investment apps that allow users in India to invest in US ETFs. Here are some of the top apps:

INDmoney

INDmoney is an app that allows users to directly buy stocks of US-based companies. However, it charges a high platform and withdrawal fee, and does not offer direct access to US stocks, acting as a mediator. With INDmoney, users can:

• Buy US stocks and ETFs directly
• Take advantage of fractional trading to start investing in US stocks for as little as $1
• Invest in ETFs to diversify risk while earning from US stock market gains
• Invest in the US market indirectly through mutual funds

Stock Tokens

Stock tokens refer to tokenized stocks that have been tokenized on a blockchain. Stock tokens offer several benefits, including easy and global access to top stocks, low fees, liquidity, the ability to buy fractional shares, and increased privacy. Users can buy tokenized stocks from a stock token platform like Reflection. When users purchase stock tokens of a listed US company, the platform will buy the equivalent value of shares from the US stock market, which are then stored in a brokerage account. The value of the stock token reflects the live market price of the underlying stock.

International Trading Accounts

Users can open an international trading account with a global brokerage firm like Interactive Brokers or TD Ameritrade. This account will allow them to buy and trade US stocks directly from India, providing access to the US markets and the ability to buy and sell stocks of listed US companies on top US exchanges, including the New York Stock Exchange (NYSE) and NASDAQ.

Kuvera

Kuvera is a Bangalore-based stock trading brokerage platform that allows users to invest in US stocks directly and through US ETFs. It provides access to many listed US stocks, such as NVIDIA, Meta, Apple, and Tesla, as well as ETFs like the S&P 500. The platform charges a fee of 0.2% commission per trade (up to $20) for investments in US stocks. Features include:

• Investments up to $500,000 per user fully insured
• Invest as little as $10
• 1000+ stocks and ETFs
• Easy and fast withdrawals
• Tax report at year-end
• High security and privacy

Stockal

Stockal is a stock trading platform that provides access to US stocks and investing options for investors in India. The platform allows users to invest in the stocks and ETFs of more than 5,500 global companies. Users in India can invest in a large number of US companies and stocks through the platform directly or indirectly (via ETFs). Features include:

• No minimum investment limit
• Dollar-based investing, with the ability to buy fractional shares
• Fully compliant and legalized
• 5,500+ stocks and ETFs of global companies
• High security and privacy
• Dedicated international bank account for every user

Upstox PRO Trading App

Upstox PRO is a popular discount broker app that offers trading and investment opportunities in stocks, currency, commodities, and mutual funds. The platform features advanced tools, making it ideal for advanced and seasoned investors. Features include:

• Comprehensive market access, including equities, derivatives, currency futures, and options, and commodity futures and options
• Diverse investment options, including gold, IPOs, and mutual funds
• Commission-free mutual funds
• Advanced trading features, including market watch, live stock quotes, and advanced charts
• Trade from charts using the "TFC" feature
• Up to 5X leverage on intraday trading
• Sophisticated charting tools with over 100 technical indicators
• Reasonable brokerage charges
• Easy navigation between screens and trades
• No fees for account maintenance and account opening

5paisa

5paisa is a prominent trading app in India, offering a range of products, including stocks, mutual funds, commodities, and currency trading. Additionally, 5paisa provides free access to news, research, advisory services, and blogs. Features include:

• Clean and intuitive user interface
• Easy access to watchlists and order books
• Personalized research and advisory based on specific financial goals
• Real-time market data, including live stock quotes and price updates
• Advanced tools for comprehensive options for charts and multi-asset watchlists
• Basket orders, allowing users to place multiple orders with a single click
• Investment in US stocks
• Custom watchlists and alerts, with the ability to create multiple watchlists and set unlimited price alerts
• Extra benefits like no charge for call and trades, and cashback options
• Free demat account opening
• No commission on mutual fund investments
• One-click order placement
• Multilingual support
• Provides research and recommendations

MO Investor App

The MO Investor app, created by Motilal Oswal Securities, offers advanced tools, instant price alerts, and a user-friendly interface. It provides a comprehensive range of services, enabling investors to trade in equity, derivatives, commodities, currencies, mutual funds, IPOs, bonds, US equities, and portfolio management services. The app also provides educational resources, including beginner, advanced, and intermediate courses, along with blogs and infographics. Features include:

• AI-powered portfolio rebalancing to optimize returns
• Value-added services, including SIP via WhatsApp, automated advisory, live bot genie, and call-and-trade service
• Funding services, including loans against securities, margin funding, and stock lending features
• Comprehensive research reports with detailed information on positions, margins, and in-depth analysis
• Diverse mutual fund schemes across 40 asset management companies
• User-friendly and quick processes
• Accessible overview of charts, portfolio, and upcoming market events
• Simple and easy-to-understand charting tools
• No charges for account opening, advisory, and research services
• Higher brokerage transactional charges
• Poor customer service, according to user complaints

Edelweiss Mobile Trading App

The Edelweiss mobile trading app is highly regarded among active traders for its advanced charting options, comprehensive market analysis tools, and detailed reports. It offers real-time market commentary, access to various research tools, a dedicated relationship manager, and a free portfolio organizer service. Users also benefit from WhatsApp alerts for timely updates. Edelweiss offers <

International trading accounts

When choosing a brokerage firm, it is important to compare them based on platform fees, security, the range of options, and customer support to find the one that best suits your needs. For example, Vested, an SEC-approved investment platform, offers a one-time platform fee and low transaction charges, SIPC and FDIC insurance for account protection, and advanced research and investment tools.

Before opening an international trading account, be sure to research the costs and terms involved. Direct investment costs can be high due to brokerage and exchange rate charges, so it is important to understand all the expenses before opening an account.

Additionally, there may be restrictions on the types of investments you can make or the number of trades you can conduct, depending on the brokerage firm.

Depositary Receipts

One of the most common types of DRs is the American Depositary Receipt (ADR). ADRs are issued by US banks for foreign stocks traded on a US exchange, including the American Stock Exchange (AMEX), NYSE, or Nasdaq. The receipt is listed in US dollars when an investor purchases an ADR.

ADRs are a great way to buy shares in a foreign company while earning capital gains and possibly being paid dividends. Both capital gains and dividends are paid in US dollars, so investors don't have to transact in foreign currencies.

There are two types of ADRs:

• Sponsored ADRs: Issued by a US bank or financial institution on behalf of an overseas company. The overseas company covers the expense of issuing the ADR and retains control over it after it is issued.
• Unsponsored ADRs: Issued by a US bank or financial institution without the involvement of an overseas company. There can be numerous ADRs of a single overseas company trading on the US market, which may vary in price, terms, and dividend amount.

There are also three levels of ADRs:

• Level 1: Used by overseas companies to mark their presence in the US market but not to raise capital from US investors.
• Level 2: Similar to Level 1, but with more obligations to the SEC and tighter regulation by centralised institutions. Level 2 ADRs get higher trading volume and visibility in the US market.
• Level 3: Considered the most valuable, as they can be used by overseas companies to list their ADRs through a public offering on a US exchange and raise capital from US investors.

Another type of DR is the Global Depositary Receipt (GDR), commonly listed on European stock exchanges such as the London Stock Exchange. GDRs are usually denominated in US dollars but can also be in euros. A GDR allows a US-based company to list its stock on the London Stock Exchange.

DRs can be attractive to investors because they allow diversification of portfolios and provide access to shares in foreign companies. They are also more convenient and less expensive than purchasing stocks directly in foreign markets. However, DRs may have low liquidity, significant administrative fees, and economic risks associated with the performance of the foreign company and its host country.

Frequently asked questions