As part of portfolio diversification exercise or to tap into wider opportunities for investments and to be a part of the global economic growth, one can also lap up US and other overseas stocks. And if have been worrying how to do so while you are in India, here we will suggest some of the best apps and trading platforms for the purpose.
But before we go ahead with it, we will point out some of the essentials you need to note when investing in foreign stocks:
1. Invest into foreign stocks with a long term investment horizon of at least 5 years. As returns in the short term can even disappoint.
2. Do not go by the past returns of last one or three years as basing decision solely on this parameter and taking bets in some of the overseas stock can deplete your overall returns by a large quantum.
3. Decide on allocation to such funds say 10% of your overall equity portfolio and stick on it despite the volatility with a long term point in view.
4. SIP or systematic investment plan even in case of international stocks can prove to be better than lumpsum investments.
5. In case when you invest in US stocks, 25% TDS applies in case of dividend income. But as US and India have a DTAA signed, you as an investor are taxed just once.
6. Also there is a cap on the amount you can invest in overseas stock which is up to $250,000 per annum. This is as per the RBI's Liberalised Remittance Scheme (LRS). Here you also need to account for any other foreign remittances you might have made in a particular financial year.
Now getting onto how you can buy into overseas or US stocks more commonly referred as 'FAANG' with Facebook, Apple, Amazon, Netflix and Alphabet stocks as its prime constituent from Indian shores. Here we suggest the best platforms for the purpose.
1. Via Indian Brokerages: Similar to how you buy into stocks of Indian companies, you can open an overseas trading account for investing in foreign stocks through any of the leading Indian brokerage firm that has tie-ups with foreign brokers. HDFC Securities having tie up with Stockal, ICICI Securities and Axis Securities having association with Saxobank are some of the Indian brokerages you can opt for investing in international stocks. Other leading full-service brokers offering the service include Reliance Money, Kotak Securities among others.
2. Open account with international brokerage houses: Some of the international brokerages with presence in India such as Interactive brokers allow Indian natives to open their overseas trading account and trade in US stocks, mutual fund etc. There are similar other firms that offer the service such as Schwab International Account, TD Ameritrade etc.
3. Vested: If you seek further convenience and want to invest in international stocks and mutual funds while on the go, you can take on to the Vested app. Vested is an investment adviser registered with the US Securities and Exchange Commission. Here after downloading the app, you need to do complete some paper work, post which you can create an account. With no account opening charges, you are allowed unlimited trades that charge no commission and give you access to as many as 120 US stocks and ETFs. Additionally, there is no minimum balance requirement and you can also buy into fractional shares i.e. less than one share.
For customized portfolio, the adviser however charges some upfront payment together with monthly fee.
Further, an important point here that needs your attention is that shares are held by a third party custodian instead of the underlying investor. For the know-how on the same, you need to contact Vested's broker partner. The company has an association with US SEC-registered broker Drivewealth.
4. Cube Wealth: Investing in US markets give your portfolio a geographical diversification. Another reason to invest is to protect your wealth from eroding against the rising value of the dollar. Each time the rupee falls against the dollar, your dollar-denominated assets gain. It also makes sense if you plan to live in the US or have children studying abroad", Satyen Kothari, founder and CEO of Cube Wealth is quoted as saying in a leading business daily. After you are done with the regulatory task such as filling up of LRS form, it will take about as many as 2-3 weeks time. Post which you can begin trading into stocks with minimum investment of $750. The platform provides you access to nearly 3400 securities listed on the NYSE and NASDAQ.
Herein your brokerage account is opened with the company's partner and in the US user's account is maintained with DriveWealth.
Fractional shares i.e. in respect of those shares which carry high price per share can also be bought into via Cube Wealth's platform.