Diversify Globally with Mutual Funds in India

Yes ! Many Mutual Funds in India now allow the investors to invest in US Stocks. Read this article to know why you should invest in US stocks oriented Mutual Funds for greater returns.

If you want to outperform the market returns, the best answer is to diversify your investment portfolio into different sectors, industries and market capitalization. However, very few investors tend to look beyond India’s borders for investment opportunities. But now a days Indian retail investors are diversifying as well as widening their investment horizon to gain massive returns from foreign equity markets.

Diversifying across countries also helps to reduce the volatility of the portfolio. Lower fluctuations in the Net Asset Value (NAV) means greater peace of mind.

Buying foreign stocks allow Indian investors to diversify their portfolio, seize bigger opportunities and also maximise gains. Moreover Investing in a developed economy which is home to various giant business houses is always a good decision.

Therefore Investment in US stocks is very good idea to create wealth.

To know about the right Investment opportunities in US markets through Mutual Funds, send us mail at info@pawealth.in OR Call/Whatsapp 9988275566

(A) Can an Indian individual investor invest in US stocks?

The Reserve Bank of India (RBI) released guidelines under the Liberalized Revenue Scheme (LRS) that permitted an Indian Resident to invest up to $ 250,000 abroad in one financial year without any approval required from the Reserve Bank of India.

(B) How to Invest in US Stocks?

The retail investors can invest indirectly and get the exposure in US Markets as they can start investing with small portfolio.

The following ways allow investors to invest just like Domestic Investments in India:

Invest in US Stocks via Mutual Funds in India and ETFs

(i) Mutual Funds in India

This is the easiest way to invest in stocks listed on exchanges outside India. You don’t need to open an overseas trading account or maintain a minimum deposit that can be the case with some stockbrokers offering direct international investments.

There are many mutual funds in India that invest in US stocks and/or mutual funds. You can invest in these funds if you want to save yourself the hassle of choosing the right stocks for investing. “Ensure that you invest in US oriented mutual funds following an unbiased recommendation from independent professionals. The selection & allocation for these funds require continuous in depth research. Professionals recommend considering various factors like funds’ allocation, investors’s risk profile, time duration, fund manager’s quality and many more.

There are some mutual funds which partly invest in Indian stocks and in US stocks thus giving you the benefit to invest in domestic as well as international market at the same time.

(ii) Exchange Traded Funds

You can also gain exposure to US stocks by investing in ETFs. There are direct and indirect routes available for ETFs. You can purchase US ETFs directly via a domestic or international broker or purchase an Indian ETF of international indices. 

(C) Reasons to Invest in US Stocks via ETFs/Mutual Funds in India

There are hundreds of products and services that originate in the US and are used globally. No wonder the country is home to some of the world’s biggest companies in terms of market capitalization and brand value. So if the world is using the products of these companies at such level, then it would be good if an investor invest in their stocks to diversify the portfolio for higher returns.

1. Opportunity to Invest in Global Brands

Investing in US markets will provide opportunity to invest in biggest emerging trends of world. While investing in US stocks an investor can invest in biggest global brands like Amazon, Microsoft, Apple, Visa, Salesforce and many other. Thus this will provide an opportunity to investors to diversify the portfolio to international markets in the companies that generate good returns and are well known around the globe.

The demand for the products/services of these companies is immense & growing further.

2. Largest and Most Liquid Market

Market Capitalisation refers to the total value of outstanding shares of a listed company which can be traded. US is the top most country in the world in terms of market capitalisation and moreover US stock market is also one of the most liquid market in the world. The NYSE and the NASDAQ are the largest stock operators worldwide.

Invest in US markets with recommended mutual funds by PA Wealth
The above info graph shows top 8 countries with largest stock market., i.e (the sum of Market Cap of all listed companies in the country)

3. Invest in MNCs directly rather than the local indian subsidiary

Many investors living in India invest in international MNCs. As they assume there is a higher level of governance, technological proficiency and transparency in MNCs. However, investing in Indian subsidiaries is often a more expensive proposition. Parent companies shows better returns as compared to their Indian subsidiaries. Thus it is profitable if an investor directly invest in parent companies via US stocks.

4. Superior returns

The US stock market outperformed the Indian stock market and various other stock markets of different countries over the last decade in pure dollar terms. Moreover Historically, the US stock market indices have been less volatile than the Indian stock market indices as the returns has been increased over a period. The periodic returns of NASDAQ increased tremendously.

Nasdaq outperformed India and many other countries and it is good idea to invest in US through Mutual funds in India

(D) Performance of some US Equity Funds

Parag Parikh Flexi Cap Fund

Trailing Returns of the fund as compared to category average

PPFAS felxi cap mutual fund outperformed BSE

Motilal Oswal NASDAQ 100 Exchange Traded Fund 

Trailing Returns of the fund as compared to category average

Invest in Motilal Oswal Nasdaq fund for outperforming the market

Franklin India Feeder Franklin US Opportunities Fund 

Trailing Returns of the fund as compared to category average

Invest in US market with Franklin India Feeder Franklin US Opportunities Mutual Fund

Top five holdings by these funds

top US companies in which indian investors can invest through Mutual Funds in India

(E) Taxes on Cap Gains

The Funds which allocate less than 65% in US Equities are taxed as per taxation on Capital Gains from sale of Equity Funds in India. On the other hand, the Funds which do not invest in Indian Equities rather invest in only US Stocks or where the allocation in US equities is more than 65% are taxable as per taxation on Capital Gains from sale of debt mutual funds in India.

Applicable Tax Rate on Capital Gains from sale of Equity Mutual Funds in India

Tax on Equity mutual funds in india

Applicable Tax Rate on Capital Gains from sale of Debt Mutual Funds in India

Tax on Equity debt funds in india

*Benefit of Indexation is available in case of Long Term Capital Gains on sale of debt funds.
*LTCG in case of Debt Funds arises in case of sale/switch after 36 months from date of acquisition.

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References:  News Publications, Industry’s Publications, Publications by Mutual Fund Companies. 

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by us. Other logos, product and company names mentioned herein are trademarks of their respective owners.   

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