In recent times, the Indian stock markets have grown considerably. For example, today, investors have the option to invest in stocks of other countries like the USA, UK, and others. Thanks to the rapid penetration of advanced technology. Also increasing knowledge base of investors who are exposing themselves to global stock markets. Lets’s have a look on the process to invest in US stocks.
If you want to buy the stocks of Apple from India, it is totally possible. This means you can expect to get whopping returns on your investment by investing in global stocks. And doing this is quite certain due to the rapid growth of foreign stock indices. For example, in the past 10 years, S&P 500 witnessed an increase of over 200% whereas the S&P BSE Sensex almost got doubled in the same period.
The major Wall Street indices including Dow Jones (DJI), NASDAQ (IXIC), and the S&P 500 (GSPC), also got doubled the returns for investors over a period of just 5 years.
Options to invest in US stocks for Investors in India
At present, there is only a single option available to invest in US stocks via Indian mutual funds. The investors who are willing to make such investments can invest in US stocks by choosing US-centred global mutual funds. These are primarily overseas FoFs (fund of funds) or other global mutual funds.
An international mutual fund refers to a scheme that principally makes investments in equity or equity-related devices of objects registered in the markets of a country other than India. This scheme invests in debt securities.
Things to keep in mind while focusing on US-Focused International MFs
Probable stock investors should remain aware of the point that US-based international mutual funds give the advantage of diversification.
International divergence is found to be beneficial (in regard to high returns) and perilous. It is usually perceived as dangerous in scenarios when you do not know much about their market, instructions, and guidelines, features touching their markets and economy, and other topology-specific elements.
Mutual funds that primarily deal in the US stocks markets confronted the optimum flows in the first six months of FY2021 as per the best broker for trading.
The below mentioned is an example of some of the US-based mutual funds and highpoints their performance based on losing returns.
Mutual Fund Returns (approx) Asset Management
ICICI Prudential US Bluechip Equity Fund 18.50% ICICI Prudential Mutual Fund
Motilal Oswal NASDAQ 100 ETF 20.19% Motilal Oswal Mutual Fund
Nippon India US Equity Opportunities Fund 18.92% Nippon India Mutual Fund
Reasons To Invest in International Mutual Funds
If you are looking to make an entry into the global investing arena, particularly in US markets, you can choose to invest in these mutual funds. Considering that, investing in international MFs is found to be apt for investors that have the following objectives:
- Permitting topographical broadening to reduce the risk of general equity portfolio
- The conception of hedge against the devaluation of the currency
- Complementing domestic exposure to equity with overseas economies
As per various global stock experts and the stop stock broker in India, there are several American firms like Amazon, Netflix, Microsoft, Facebook, Apple, are found to be well established to counter any disturbances in the global economy.
However, no investment is thought to be completely risk-free. Any kind of technical and political slowdown in the US can impact investments in the stocks of bigger companies as well. Usually, global mutual funds are well-matched for investors with a long-term investment prospect and advanced risk appetite. If you want a risk free investment you can invest in gold after looked on Gold rate forecast for upcoming days.
In addition, they should feel easy with the related risks of investing in various MFs.
Risks Associated With Investing in International Mutual Funds
Investing in international mutual funds are known to be accompanied by several risks:
- International stock market risk: International MFs render their investors’ investment to the political, economic, and other types of market risks associated with global economies. These risks may be on the upper side in the case of a few growing markets due to elements like shortage of liquidity and regulatory outline.
- Exchange rate risk: Foreign exchange rates are related to variations. Thus, in the case of such fluctuations, there comes an opposite effect on returns.
- Concentration risk: An international MF with a focussed investment collection may influence the returns if any sector faces downturns. It is associated with higher risk as well as upper return variations.
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Tax Implications of International Mutual Funds
International mutual funds incur taxes similar to any other mutual funds in India:
Long-standing capital gains or LTCGs on the recovery of units after 3 years of investment. It is subjected to taxation which stands at the rate of 20% with indexation advantages.
Short-term capital improvements or STCGs on MF units converted before the period of 3 years. It is subjected to applicable taxes on the basis of an investor’s tax block.
In the case of dividends going beyond the amount of INR 5000, the investments done are taxed based on an investor’s tax slab. Resident investors are usually taxed on the basis of the applicable TDS rate of 10% (which is at 7.5% nowadays). Non-resident investors are accountable to submit TDS at the rate of 20%.