How to Trade in an International Market from India?

Are you thinking of investing in the US or other foreign markets from India? There are plenty of easy ways where you can kick-start this motive. Here we are going to discuss the most actionable and best ways you can initiate this move instantaneously.

Did you know that financial experts say the only way you can reduce market risk would be through diversifying your portfolio? And this has always been proven to be 100% correct. Unless the world is at the pinnacle of the end, or like the year 2020 which was filled with uncertainties, it is never likely for all industries in all sectors, in all countries to face detrimental conditions. It is exactly why diversification is the key to sound investments, so what’s the point of limiting diversification? 

If you have thought about investing out of India, you either recently saw another investor take home enormous profit, read about it, or heard of it from someone.

But why should you invest outside of India?

The 10-year returns of index funds such as US’s and S&P 500 have been giving returns as much as 13.6%. If you are new, that is a pretty decent amount of return. At the very same time, NIFTY funds have ranged to 8.39% in returns. Along with all of these, other countries also take over the trading attributes and returns. 

Most importantly, the United States is at the epicentre of technological innovations, Silicon Valley and it would be pretty strange if the 21st century’s globalized economy and its investors don’t benefit from this market’s specialized outcomes. 

Now, if you feel that isn’t incentive enough, here is another bonus point. Despite the occasional crisis, US stock market indexes are much less volatile to fluctuate than the Indian Market. So, this might leave you with a better return coupled with assurance. 

But from India, how much can you Invest in Foreign Stocks?

According to the Reserve Bank of India guidelines, you can invest up to $250,000 per person and year. It amounts to around $1.7 crore in Indian money. These limits can also be extended in some cases.

The Basics of Investing in the International Market:

The first thing to remember would be a Demat or Trading Account in India. If you have a Demat or Trading Account in India, you can start your trading operations for the companies that are listed on the Indian Stock Exchanges. But if you do not, the first job would be to open one of these accounts either physically or online platforms through various applications and websites.

So, if you are convinced that International portfolio diversification is something you would want to take up, then the grass is green on your side. There are tons and tons of avenues open for you to trade in international markets, while you are still in India. But these International Foreign Stocks are divided into two subcategories.

Direct Investments with Foreign Stocks:

Direct investments imply money invested by you directly going to foreign assets. The most crucial part is that there is no intermediate except for a stockbroker. The easiest way of trading Internationally is by opening an Overseas Trading Account with a trusted domestic broker in India or Overseas.

Indirect Investments in Stocks:

Indirect investments are when there is a presence of an intermediate that selects the fund’s ad stocks that are to be invested. It excludes the stockbroker himself. It can be global mutual funds and exchange-traded funds.

The benefit of indirect investments is that they don’t necessarily have a cap on a personal level. It means while the fund itself might have a cap, there is no limit to investing in the fund. These indirect funds include everything from Mutual funds, exchange-traded funds, and more. 

Top Reasons Why Many Investors Consider the US Stock Market:

A. People Always want to Invest in Their Favorites Brands 

 – Most brands we use today are produced or initiated in the US, beginning from the iPhone, to top-tier gadgets. Making them the most popular and renowned brand that everyone wants to be a part of it.

B. To Seize Bigger Opportunities 

 – Investing in foreign stocks leaves you with no boundaries. You can always hunt for better opportunities in International markets.

C. Diversification with Global Investments

 – Investing in Foreign Stocks leads to diversification. Even the Indian market at times can fall because of regional issues, but investing in the US market can mitigate those kinds of risks.

D. Currency Diversifications Strengthens your Portfolio

 – There are currency differences from country to country, and especially with the US dollar, it is one of the strongest currencies under the Indian rupees. It can boost opportunities over time.

E. Reduced Taxes

 – Otherwise, these are known as tax havens. Countries across the world offer an attractive tax incentive to foreign investors. These aspects strengthen other country’s investing environments and attract outside wealth.

How to Invest in Foreign Stocks?

Let’s take a tour of the step-to-step process of how you can start investing in stocks out of India. 

1. Account with Indian Brokers who Have a Tie-up with Foreign Brokers

There are plenty of full-service Indian brokers who have tie-ups with foreign brokers. These brokers make it very easy to open your overseas trading accounts with foreign brokers. 

2. Open an Account with Foreign Brokers

International brokerage firms permit Indians to set up an account and trade in US Stocks, mutual funds, and much more. Some US-based brokerage firms are even situated in India, which you can physically visit and move forward with.

3. Invest in Foreign Stocks through New Startup Applications

In past years there have been a lot of new applications launched in India and abroad to assist Indians to invest in foreign stocks. These startup companies can have you start and choose through foreign stocks effortlessly, offline.

The Cons of Investing Abroad:

There are two sides to every coin, and here are some things you need to know before you can dive in.

  • Be ready for the Higher Charges
  • The Profits are subject to currency exchange rates
  • As per RBI, only up to $250,000 can be invested overseas by Indians

Conclusion:

This article discusses three ways you can invest in foreign stocks along with that it also brings to the forefront the drawbacks and reasons why you should invest overseas. Moreover, at the pinnacle of the digital era, also leaves investors and traders going to global outreach.

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Christophe Rude

Christophe Rude

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