Indian stock exchange market lists over 5500 companies, but still, a lot of stock marketers are interested in foreign stocks. Be it APPL, GOOGL (Alphabet), NFXL (Netflix), TWTR (Twitter), or any other company, and marketers heavily invest in these. The reason for this is simple, though these stocks are listed outside of India, they are still the reputed and top companies in their industry. Investing in these for longer is acceptable as they are associated with slightly lesser risk.
There is a problem with the situation for those who want to invest in these foreign stocks from India; how to invest? This is obvious as you won’t find these companies listed in any of the Indian Stock Exchange markets, be it Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). This article will solve this problem for you; here, we will discuss three ways to invest in foreign stocks right here, from India.
Let’s discuss the possible ways,
There are three ways using which you can invest in foreign stocks-
1) Indian Fund Houses with Foreign Tie-Ups
2) Direct Investment
3) Exchange-traded funds
Indian fund houses with foreign tie-ups may sound too complicated, but the process is easier. Indian stock marketers can access foreign stocks or invest in foreign currencies with the least effort. To get started with such opportunities, look for terms such as “Emerging Market” and “Europe Focus” that allow you to invest in foreign companies through the local market. Here is the procedure is to buy mutual funds that are invested in foreign stocks, and these can be traced using the NAV of the mutual funds.
An additional trick is to invest in funds of funds (FoF) mutual funds. These funds are invested into foreign stocks and give a certain boundary for the marketers when the SENSEX or Nifty are failing. Several global companies have outperformed despite the pandemic or the current failing market situation. One classic example of this is Lamborghini which grew its sales despite the pandemic and lockdown. It would be great to invest in foreign stocks through the Indian Fund houses.
Certain mature investors don’t wish to invest in mutual funds, and this is when the direct investment method helps them out. In this method, you are investing in foreign stocks from India and not just buying mutual funds.
A more direct and straightforward method to invest in foreign stocks is by utilizing the LRS correctly. The Liberalized Remittance Scheme allows the citizens of India to directly invest in foreign countries without having to ask for any permission. However, there is a certain limit to how much you can invest per year; as per LRS (Liberalized Remittance Scheme), you can invest up to $250,000 per year without any questions asked. It is important to realize this amount covers overall investments or expenditures in foreign countries and not only the stocks.
To invest in foreign stocks through the methods of direct Investment and LRS, you need to open a trading account with an international broker. You don’t need to necessarily have a US-based address or citizenship to open a trading account with brokerage firms located in the US and deal with the US stock exchange.
Once you have opened a trading account, you need to go select your shares and send money to the brokers directly through the Indian Banks. There is a certain money deduction which is also known as bank deductions, and then the other charges such as Tax and foreign currency exchange.
Usually, it takes 3-5 days for the money deduction to reflect in your bank transactions though the money is instantly deducted; you need not worry about it. Once you have bought the stocks, you can find them on the apps that the brokers suggest.
One such class combination is the IND Money app which acts as a medium to Drive Wealth, a US-based international brokerage that allows you to buy foreign stocks based in the US.
We have the option to invest in funds of funds (FoF) mutual funds to enter the foreign stock market; however, mutual funds do not suit all investors. Besides, if you are unsure of direct investments in a foreign market but don’t want to invest in mutual funds, we are left with only one option; Exchange Traded Funds (ETF’s).
The ETFs are slightly different than Mutual funds, and one of the biggest differences is when you can buy/sell them. Mutual funds can only be traded (buy/sell) when the market closes, while the ETFs can be traded at any time of the day.
You don’t need to specifically have a trading account with international brokers. You can invest in ETFs both through local brokerage and international brokers, and it is as easy as investing in mutual funds.
There is a certain caution that one needs to take when investing in EFTs; these funds need to be registered by SEBI (Security Exchange Board of India). There are a lot of scamious people who want you to invest in ETFs, and it is better to be cautious. Speaking of advantages, ETFs are a great investment as they reduce the training risk as simply replicates the movement of the index. Another advantage of investing in ETFs is the expense ratio is significantly lesser than the mutual funds.
Final Words
Investing in foreign stocks is not complicated, and they make a great investment too. Besides, there are certain brokerage apps that allow you to directly invest in foreign money within minutes. So, this is going to be an easy process. There are two other ways to invest in foreign stocks, either you go with the Indian fund houses associated with the foreign stocks and Exchange Trade Funds.
Companies that are listed in the stock exchange that is based out of India are called foreign stock exchanges for Indians. Similarly, for someone who is based in the US and looks into companies listed in Bombay Stock Exchange or NSE, it is foreign stocks for them.
There are three ways you can invest in foreign stocks from India,
1) Indian Fund Houses with Foreign Tie-Ups
2) Direct Investment
3) Exchange-traded funds
Yes, you can buy stocks based in the US from India. You can use the LRS and have a trading account with an international broker.