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According to data from the Reserve Bank, the amount to be invested in international stocks and bonds rose by 58% to $747 million in FY22. Information shows that in March, it was $104.5 million.

Under the current rules, domestic mutual funds can invest up to $7 billion in foreign stocks and an additional $1 billion in exchange-traded funds (ETFs).

Even though investor tastes have changed a lot over the years, the rules set in 2007-2008 have not been changed. The Mutual Fund Association of India (Amfi) is talking with SEBI and the Reserve Bank about how to solve this problem.

Here are some tried-and-true ways to make money in U.S. markets:

ETFs

Investing directly in stocks requires a certain level of knowledge. Without it, investors could lose money. But you can choose to invest in mutual funds or exchange-traded funds (ETFs), which give you access to several U.S. stocks at once. ETFs also give you access to certain sectors, like healthcare or energy, by letting you buy an ETF that tracks these sectors instead of buying stocks in these sectors individually.

Today, Indians are also interested in investing in theme-based ETFs, which, instead of investing in specific sectors, focus on emerging themes like energy, electric vehicles, cloud computing, mobility, or even global ETFs that offer broad, diversified exposure to U.S. and global – European, BRICs, and emerging and frontier – equity markets. Since ETFs are passively managed, their expense ratios are lower than those of actively managed mutual funds. An expense ratio is a measure of how much of a fund’s assets are used for administrative and other operating costs.

Direct Stocks

Even though the Indian stock market is known for giving investors long-term growth opportunities, diversifying across countries gives the stock portfolio the long-term stability it needs. You can open an overseas trading account right away with a domestic brokerage that has partnerships with fintech companies that offer a global investing platform.

In return, these fintechs have partnerships with foreign brokers (brokerage accounts are usually insured by SIPC and FDIC up to $250,000 in stock equivalent and another $250,000 in cash equivalent) who act as middlemen and handle your trades on the foreign market. This makes it easy and safe to invest in the global market as a whole.

The INR-USD exchange rate is good for Indian investors because it gives them a way to diversify their domestic portfolios.

Mutual Funds

You can also buy foreign stocks by trading in mutual funds that are listed on exchanges outside of India, such as in the U.S., Japan, Shanghai, London, and Korea. This is probably the easiest way to buy foreign stocks because you don’t have to open an overseas trading account.

Even though international mutual funds have benefits like diversification by geography and portfolio, they also have their own risks and benefits. Changes in the country’s market or in the sectors on the exchange can have a big effect on the performance of the fund as a whole. Also, these funds have regular costs and costs that are part of the international plan in which they are investing.

Because of this, the cost will be higher than most of the other standalone funds. Before you start investing in these funds, you would also need to add up all of your costs.

Before you invest in the U.S. market, there are some important things to keep in mind.

Double Taxation

It can be scary to invest in U.S. stocks if you don’t know how dividends and capital gains from short-term and long-term investments are taxed. In any given fiscal year, if you get dividends from US market companies, they will be taxed at a flat rate of 25%.

Long-term gains (from stocks held for more than 24 months) will be taxed at 20% in India, but there will be no tax consequences in the US. When it comes to short-term gains, which are made on stocks held for less than 24 months, the amount received will be taxed according to the Income Tax (IT) department’s slab rates.

If you made money after taxes were taken out at the source, you can say so when you file your taxes. India has agreements to avoid double taxation with more than 88 countries, including the U.S., Australia, Canada, China, Korea, Russia, the United Arab Emirates, and the United Kingdom. The tax withheld in the U.S. can be used to pay the tax in India.

Exchange rates change all the time

The value of INR vs. the U.S. dollar is one of the most important things that affects how much money you can make in the US markets. In the past few years, the price of the rupee has dropped by 4% to 5%, which can cause investors to take on the risks that come with currency fluctuations.

The American dollar is one of the best things about investing in U.S. markets. As its value goes up, so do your investments, even if the rest of your portfolio stays the same. So, the more the dollar does well, the more your portfolio will grow.

It’s also important to remember that Indian banks charge a small fee for foreign exchange, which can be anywhere from 0.5% to 2% depending on the bank and investment advisor you choose. The best way to do this is to save up a lump sum and then transfer it to cut down on the costs of doing this often.

Getting the Most Out of the Liberalized Remittance Scheme (LRS)

A person who lives in India and invests in the U.S. can buy stocks through an authorised finance partner up to the limit of $250,000 per year. According to the new tax rules, all foreign remittances that are more than INR 7 lakh in a fiscal year will be taxed at the source at a rate of 5%. (TCS).

This tax collected during the remittance can be claimed on form 26 AS at the time of the annual tax return, so it is not an extra cost. Also, this LRS benefit isn’t just for buying stocks. It can also be used for education loans, travel, and sending money to someone who doesn’t live in India.

How to Choose the Best Platform

There are many different ways to invest globally, so it’s important to choose the right platform provider for your global portfolio with care. The platform you choose should be able to give you a safe brokerage account with easy digital steps. Also, the platform should be able to offer a wide range of stocks and ETFs from all U.S. market sectors. You should also do your research and choose a platform that is well-known on global markets and works with brokerage firms in the United States.

Some other things to think about are how much it costs to open an account, whether the investment platform works with banks, how good the customer service is, and whether it has any other unique features that will make investing a rewarding experience.

Investing in U.S. markets can be very confusing because there are so many new terms, processes, and rules. But you can easily learn how to invest in the U.S. from anywhere in India if you practise and use trusted platforms. You can also listen to analyst debates and read articles and case studies that go into the details of global investment. This will keep you informed and up-to-date.

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