Swastik Nigam, CEO, Winvesta, 0
Diversification is a key principle of longterm investing. Investors should treat foreign investments as a type of diversification. The idea is to have different types of investments in terms of company size, industry, investment type(stock MF, and others), and geography. Diversification generally spreads out portfolio risk and absorbs brief market fluctuations. With global diversification, when the stock market in one part of the world plummets, having investments in the other part may help.
But what's the best way to achieve this diversification? How can you protect your investments when an event like this impacts all the asset classes together? How can your portfolio be better prepared if the impact is asymmetrically higher for India?
It's been over 15 years since Indian equity investors were first allowed to invest in foreign equities. You could have invested in Facebook, Amazon, Google, and other blockbuster equities when they were starting (through private investments)or when they went public.
Back then, a majority of Indian investors were either conservative or focused on domestic markets. The awareness about global investing and access to high quality research was limited. There was also a lack of seamless investment channels. Opening a brokerage account and executing a trade in the US would have taken considerable effort unlike today.
So what should you keep in mind while investing in US Stocks?
You can invest in the US stock market under the RBI's Liberalized Remittance Scheme or LRS. The scheme allows every Indian resident to remit up to $250K per year. This limit is per individual, including minors, which means that a family of four can remit up to $1 million per financial year. This includes investments in stocks, real estate, bank deposits, foreign travel, and student education too.
A key factor to consider while investing in the US market is the fluctuation in the exchange rate. In recent years, the Rupee has seen an average decline of 3-5 percent against the US dollar. When you invest in US markets, you also invest in the US Dollar and bear the associated risk. When the US Dollar appreciates, it gives an extra boost to your portfolio value and vice versa.
You must also consider the newly introduced Tax Credited at Source or TCS. Under the new rules, all the foreign remittances above Rs.700,000 in a fiscal year will incur a five percent TCS. However, this is just advance tax collection, and not a tax on the amount remitted.
Note that investing in US markets gives you access to opportunities that are not present in the domestic markets. Sectors and themes like Electric mobility, Robotics and AI, Cannabis, and SPACs, and others, have been absent from a purely domestic portfolio. Thus, by investing in US markets, you are not only diversifying geographical risk, but also industry risk.
The US stock market is one of the top choices to invest in when it comes to diversifying your portfolio across geographies. To start investing in US stocks, you can open a US brokerage account within minutes with Winvesta. Once the account is ready, you can simply remit funds through online banking and start investing in your favourite stocks and themes. With 4500+US securities, a seamless intuitive interface and strong regulatory compliance you get the best of everything!
You can invest in the US stock market under the RBI's Liberalized Remittance Scheme or LRS. The scheme allows every Indian resident to remit up to $250K per year. This limit is per individual, including minors, which means that a family of four can remit up to $1 million per financial year. This includes investments in stocks, real estate, bank deposits, foreign travel, and student education too.
Investing In Us Markets Gives You Access To Opportunities That Are Not Present In The Domestic Markets
A key factor to consider while investing in the US market is the fluctuation in the exchange rate. In recent years, the Rupee has seen an average decline of 3-5 percent against the US dollar. When you invest in US markets, you also invest in the US Dollar and bear the associated risk. When the US Dollar appreciates, it gives an extra boost to your portfolio value and vice versa.
You must also consider the newly introduced Tax Credited at Source or TCS. Under the new rules, all the foreign remittances above Rs.700,000 in a fiscal year will incur a five percent TCS. However, this is just advance tax collection, and not a tax on the amount remitted.
Note that investing in US markets gives you access to opportunities that are not present in the domestic markets. Sectors and themes like Electric mobility, Robotics and AI, Cannabis, and SPACs, and others, have been absent from a purely domestic portfolio. Thus, by investing in US markets, you are not only diversifying geographical risk, but also industry risk.
The US stock market is one of the top choices to invest in when it comes to diversifying your portfolio across geographies. To start investing in US stocks, you can open a US brokerage account within minutes with Winvesta. Once the account is ready, you can simply remit funds through online banking and start investing in your favourite stocks and themes. With 4500+US securities, a seamless intuitive interface and strong regulatory compliance you get the best of everything!