Is It Worth Investing in U.S. Stocks

By  //  January 30, 2022

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We’ve gone international for quite a lot of things. Though the organic way of living resides in parts and pieces, most of it is an important quality. If you look at a kid from uni walking by, what he has in his hand is an Apple iPhone, if you have to get candy – the first on the list becomes M&Ms.

Everything we choose to buy is mostly American, so why not stock, right? US stocks in today’s market are as famous as the US products we use on a daily basis. Who wouldn’t want to invest in companies like Apple and Microsoft, given their popularity and growth in the past decades?

If you are wondering if it’s worth investing in the US stocks everyone is talking about, you can find out here. We can look at the importance of exposure to the international stock market, how to do it and what are the best stocks for you to buy. Without waiting any longer, let’s get going. 

Exposure to the US Stock Market

There isn’t one basic reason for you to invest in the US stock market. The reasons are listed here for you to know what you would be getting yourself into if you choose to buy US stocks. So, let’s look at what happens through exposure to the United States market.

1. It is Defense Against the Rising Dollar

The basic reason why you have to invest in the US Markey is to protect your money from eroding against the rising value of the Dollar. Each time the rupee reduces against the dollar you will always know that you have some sort of wealth that is growing.

2. It Creates a Nest Egg

Investing in the US stock market makes it better if you plan on settling in America or while your children would be studying abroad. You will also get to be part of the world’s most mature economy and earn interest in the dollar.

3. You also get to invest in those brands you love

Facebook, Google, McDonald’s, Nike, or KFC, we all know how much we love them, and they are US companies. You for sure have been using these products and trust them and their growth. Investing in a company you understand would always help in making decisions. 

4. Regional and Geographical Diversification

The GDP of the USA is 10 times that of our country. This means you will be participating in a larger market, with the US-listed companies accounting for 35% to 40% of the capitalization. 

How to Invest in US Stocks?

As an investor, you will keep looking for the next opportunity to grow money. While the Indian stock market does give you ample growth opportunities and portfolio diversification, you can come across nations with the US market. So, it’s time we know how to invest in US Stocks and some US stocks to buy.

There are a lot of investors in India who have been investing in MNCs because they think that it has a higher level of governance, tech, transparency, and more. Still, investing in Indian subsidiaries is much more expensive than the proposition. There are various MNCs that are traded in US stock exchanges, and they have Indian subsidiaries that are also publicly traded in India.

On average, the investors from India pay 3 times higher multiples while they invest in the stock for Indian subsidiaries vs when they directly invest in the parent company of the US. Despite paying significantly higher multiples, the average returns can be quite similar. 

1. Through a US Brokerage Account

You can look at unique platforms that cater specifically to investors from India, which are quite a lot. They have no minimum balance or commissions to start off. You can open a brokerage account that processes in India.

Today, most platforms allow you to go paperless and be completed in minutes. Though before you start, here you need to have your PAN number, an image of the PAN, and your address proof. In order for you to open the account, you have first got to sign up with a trustworthy platform. The approach with the brokerage usually involves an overall lower cost for you but also needs you to wire funds to the US.

2. Invest in US Concentrated Mutual Funds in India

A brokerage account involves a limitation in how much you invest, but it is not the case with this method of investing internationally. This is because you are making investments within India and using the Rupee.

However, this approach is much more expensive than a brokerage account. You also have to keep in mind that the expense ratio for this is higher since it includes the fee of general management and additional expenses charged by the underlying international scheme. 

Things to Consider Before you Start Investing

There are certain things you would have to think about before you can start investing, and they are mentioned here for you.

1. The taxes

You have to consider the tax implications on your international investments to make your efforts Worth it. India and the US have a Double Tax Avoidance Agreement, and it prevents the taxing of the same income twice. The earnings on your international investments are of two types and are Dividend tax and capital gain tax, which you will have to think about.

2. Your Goals

Your goals form a crucial part of your investment plan. If you want to study abroad or relocate, your investments should be helping you attain these goals. These goals should be just more than your diversification aspect, but it’s bigger than that. 

3. Foreign Exchange Impact

The key factor of consideration of the fluctuations in the exchange rate that would keep happening. Lately, the Rupee has seen a decline from 3 to 5 percent against the dollar. When you invest in the US stock market, you also invest in the dollar and go through the associated risk. When the dollar goes up, it gives you an extra boost but this is also vice versa. When you remit the money for investing in the US, your bank could also charge you an FX conversion fee.

The US stock market is one of the top choices to invest in for diversification and growth across geographies. The country, as already said, is home to some of the biggest and greatest brands. You can shed more light on that thought with this piece. 

Conclusion

Hope you have got your part of it is worth investing in US stocks. It is a great way to generate more income and grow your wealth, but with the right tricks and tips up your sleeve.