San Jose News Bulletin: US stocks | Investments | Investment Plans – Why you should consider investing in US stocks

The New York Stock Exchange (NSE) is the largest stock exchange in the world for a reason. The US stock market is home to some of the best companies in the world. Trillions of dollars pass through this market every day. It is the playing field for the world’s largest investors. In other words, the US stock market generates an unimaginable amount of investor wealth every day. If you can easily reach for a piece of that pie, there’s no need to hold back.

Advantages of investing in US stocks:-

1. Diversification

When it comes to investments, diversification is always a good idea. The more variety you have in your portfolio, the better. Thus, geographic diversification can be a boon. You can increase your exposure to a completely different group of companies, which are governed by different laws and affected by different factors. In addition, the US stock market is more receptive to the newer innovative companies. Standards for listing on US stock exchanges are not as stringent as their counterparts in India. As a result, you get access to modern technology companies along with global tech giants.

2. Low volatility

The US stock market is more stable. Long-term investments are less volatile in the US than in India. According to Kuvera, the Dow Jones index has averaged 3.92% volatility in the past decade. By comparison, the BSE (Bombay Stock Exchange) Sensex was volatile 5.06%. Low volatility means that stock prices do not fluctuate much. There is not a lot of swinging motion. In other words, your money will grow steadily.

3. Faster growth

According to Vested, the Dow Jones index has grown by 196% in the past decade, while the BSE Sensex has grown by 150%. This means that the US markets have outperformed the Indian markets in the past.

How to invest in US stocks:-

There are two main ways to invest in US stocks.

1. Direct

The first is the direct method. You can open an offshore trading account. Earlier, you could only do this through an external brokerage platform. Now, however, even local brokerage platforms offer the same facilities.

2. Indirect

The indirect method is through mutual funds and exchange-traded funds (ETFs). There are many mutual funds that focus exclusively on US stocks and US indices. It’s as easy as investing in a regular mutual fund. In fact, you can even go the SIP route for this.

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Things to know before investing in US stocks

First, let’s talk about the Reserve Bank of India’s Liberated Transfers System. This chart governs how much you can invest in US stocks each year. As per the latest provisions, every Indian citizen is allowed to invest up to $250,000 every year.

These restrictions are due to the fact that any US investment you make will include foreign exchange. There are restrictions on the amount of foreign exchange that an individual can take out of the country or bring into the country. Even if it is for investment purposes, you still have to stay within certain limits or get special permission to go beyond them. As long as you stay under that limit, you won’t need to go through any further paperwork.

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Apart from that, you also need to take into account various taxes and fees. Since US stocks are governed by different laws, the corresponding fees are slightly different from common Indian stocks. For example, if your investment exceeds $7 lakhs, you will have to pay 5% TCS on the additional amount.

In terms of capital gains and dividend taxes, you don’t actually have to pay this to the United States. But you will have to pay foreign capital gains tax in India. This translates to 20% of the capital gain if the investment continues for more than two years. If it’s been kept for less than two years, there is no additional tax – the earnings are simply added to your taxable income.

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Investing in US stocks is similar to Indian stocks but very different at the same time. The same principles apply, the same logic applies. But the influencing factors may be slightly different. You will also have to track the US markets from time to time, to ensure that your investments are doing well.

Pro tip: To get started, stick to blue-chip stocks – well-established companies with solid financial funding. Do some fundamental analysis and invest for the long term. Don’t be swayed by Reddit trends and try to make money fast. Trends like these rarely continue, and more often than not investors end up losing their savings.