Investing money in stocks or mutual funds has been a better option selected by men to grow their earnings. To be a professional investor, one must diversify his investment portfolio. This will minimize the risk and allow you to enjoy higher returns. Now investors have started to invest in US Stocks to seek global diversification in their portfolio. Along with AMZN share, Groww has explored tech giants like Apple Inc, Alphabet Inc, and Microsoft Inc. With these, US stocks include fast-food chains, entertainment stocks, and motor stocks among others.
Investment in Stocks
Investing is all about laying your money to an endeavour now and enjoying the growth of it in later years. Though you can’t be sure of growing a huge capital, you can have higher hopes. And most importantly you don’t have to spend much time on it if you don’t want to.
Investing in stocks doesn’t require a lump sum amount of money, and you don’t need to be wealthy for that. You need to know a few important things –
- A clear view of your financial goals -This is the first step and most important one. This step includes questions like why are you Investing, what are your needs, is it for a long-term financial need or a short, how long you need to invest, and how much will be your returns approximately.
- Your risk tolerance capacity – You must invest according to your risk-taking ability. Investments in stocks come up with several risks and at times you may not get the returns you expected. Find the proper risk bucket that you can tolerate.
- Investment horizon calculation – You choose stocks according to your investment horizon though it may not generate good returns, you can expect reasonable returns.
- Start with little investment – You can start with just Rs. 100 and invest in stocks that your income can handle. As your income or savings increases, you can add stocks to your portfolio.
- Avoid Penny Stocks – Some stocks provide shares at Rs 10 or less. These stocks are highly risked prone ones. Their costs are low may be because of no demand or the company is about to collapse.
- Save money for investment – Try to save money from your income rather than mere expenses. This is easy if you have a budget plan for every month. As your savings increases, you can invest more in stocks.
- Make smart investment decisions – Earning a bonus or a huge gain and investing a huge sum in stock at a bad market condition is not at all a smart decision. You are certainly going to lose your capital. So think before you are investing. Don’t let emotions to work while investing. Your decision must be dependent on facts and data.
- Diversification of your investment portfolio-This is very important. Don’t invest in a particular sector and suffer from greater risks. But diversifying your portfolio will minimize the risks and increase the return rate. The amount of gains and losses gets properly balanced.
Speaking about stock diversification, investors should broaden their investment by adding US stocks in their portfolio.
All about investments in US Stocks
US Markets is the hub for great technologies and promising businesses. Now you must be wondering about why to invest in the US stocks. Well, there are certain reasons for it. These are –
- These stocks are less volatile than domestic stocks.
- You can get a more diversified investment portfolio as most of the mega global companies are having their headquarters in the US.
- Over the last few years, the US stock market has been performing way better than the domestic stock market.
- You get chances to invest in the most promising companies in their initial stages.
One good news for Indians is that now you can invest up to 250000 dollars or approximately Rs. 1.9 crore yearly without any permission. This has been guaranteed by the Reserve Bank of India under the Liberalized Revenue Scheme (LRS).
Ways to Invest in US Stock market
There are two ways of Investing in US stocks – Direct and indirect investments. These are further subcategorized.
- Direct Investment – You can invest directly by the help of a domestic broker or a foreign broker.
- Help from Domestic Broker – You can open an Overseas Trading Account by the help of a domestic broker. They have connections with US stockbrokers. There are certain restrictions according to the brokerage firm and the cost of investing may be higher. You must have all the documents and a clear idea of all the costs.
- Help from Foreign Broker – Staying in your country, you can ask help from a foreign broker while opening an overseas trading account.
- Indirect Investment – You may not directly invest in US stocks and hold an indirect position.
- Investment in Mutual Funds – Invest in funds that are investing in US stocks. This will save you from hassles, opening an overseas trading account, and keeping a minimum deposit. Before buying a scheme, note down the expense ratio of the fund.
- Invest in Exchange-Traded Funds or ETFs – This can expose you directly or indirectly. You can either purchase a US ETFs through a domestic or a foreign broker, or a domestic ETF of international indices.
- Invest through Apps – Several start-up companies have launched mobile apps for the peoples to invest in US stocks easily.
On a closing note
If you are knowledgeable about the US stocks, made proper research, and understood everything clearly, then only directly invest in the stocks by opening an overseas trading account. The charges of investment are higher than domestic stocks especially due to currency conversion, brokerage charges, and other fees. You need to pay taxes properly, according to the US and domestic taxation laws. Remember investing in US stocks means you are adding a global diversification element in your portfolio. Know the advantages and disadvantages, consider your goals and risk-taking ability. When you are ready in every aspect, start investing.