I was always curious how to invest in US markets from India. Here are the steps I did to make it happen and I made my first set of investments yesterday.
It is very easy to open account for US trading sitting in India using interactivebrokers.co.in
Process is fully simple and online. Once we submit the forms (there is an online photo session) as well, it takes 2-3 days to open the account
Funds have to be transferred via Wire to Interactive Brokers in USD to trade in US stocks
Interactive Brokers for the first 3 months does not charge any fee. However post 3 months, they will charge USD 20 as activity charge if your balance is less than USD 500. The activity charge is waived off in case we have a liquidable account balance of USD 1,00,000 or more
Indians can invest up-to USD 250,000 a year as per our IT laws. I plan to invest USD 250,000 annually into this account in tranches
I started with a USD 100,000 investment. Plan is to pick a mix of Tech Leaders + High Growth Tech Stocks + Disruptive Bets + Pharma companies + Traditional firms and invest somewhat equal amounts in them. Here is my first tranche of investments (Will add few companies very rarely to this list and will top up)
High Growth Tech:
Google, Amazon, Adobe, Apple, Atlassian, Netflix, Nvidia
Disruption:
ARKG, ARKN, Nutanix
Pharma:
Catalent, ThermoFisher Scientific
Traditional Leaders:
3M, Honeywell, Caterpillar, Texas Instruments
I expect at-least 3 to 4 of above to be 3-4X in 5 years making up for any laggards in portfolio.
Considering the amount you want to invest, did you think of PMS, AIFs? Or you want geographical diversification? Or the opportunities are few in India compared to US to make 3X-4X returns on your invested capital?
Not sure, why you started this thread? I am assuming it is for just FYI ??
Have you fully understood the brokerage cost per trade, other fee structure, tax implications in India/US? Appreciate if you could elaborate them in your post.
Regarding ARKN / ARKG, Kathie woods is still untested. It was easy pickings last year when everything was going up. I’ve decided to stay away from ARKx ETFs and take sector bet directly by investing in the leading disruptors.
Brokerage is almost ZERO with many US brokers like TdAeriTrade,Charles Schwab but tax implications HIGH as there are not Indian Listed company hence long term capital gain is also around 20%,correct me if im wrong.
@sameernics
The fee structure is above as informed to @Sandy1
Tax rates are at marginal slab of the individual if it is short-term and 20%if held long-term. My understanding is long-term is 24 month holding
The costs of investing in US stocks is additional due to the exchange fees. Rupee keeps depreciating against dollar and so the exchange fees is somewhat offset over time by the dollar getting stronger.
@Lynch
Taxation is only when you sell. I don’t intend to sell these holdings. When I do sell, it will be at 20%/marginal tax slab based on whether it is STCG/LTCG based on the holding term
This cannot be linked to existing demat as this is for the US
@x3c
That is why I plan to diversify across 15 companies or so. My list of companies is shared. These are long-term value plays.
Taxation for long-term is 20% and for short-term is at marginal rates of the individual. Holding period for long term is 24 months I believe
Lastly, all questions seems to be on brokerage and taxation. These are all not a big consideration for me given long horizon and continued top-ups.
Okay. Looking at your investment plan is USDs, you seem to be a HNI.
Just curious what is the rational behind selecting only those stocks as long term value plays. Could you share your thoughts on each of those individual stocks? Thanks.
Sure Sameer. Here is my rationale behind the picks
Big in Tech Keep getting bigger: Google, Amazon, Apple fall into this bucket
Google: Their labs could throw up the next trillion dollar market cap idea by doing crazy things like slowing ageing. Google is a money machine even if they were to do nothing for several years
Amazon: They are disrupting every traditional industry.
Apple: airpods themselves are a 20BB dollar sales business. Think of the scale. How many in the world have iphones today
Nvidia: Deep Learning runs only on Nvidia GPUs. They have a monopoly there
Google, Amazon, Apple, Nvidia are close to being called the dominant player in their respective ecosystems
Revenue visibility
Adobe, Atlassian are SaaS companies and there can be predictability of up to 80% of their revenues. Huge runways for both of them
Disruption:
Rather than shortlist idea stocks that require time, invested in the ETFs of the leaders ARKG and ARKN
Pharma:
I don’t understand pharma much but Sajal (@unseenvalue) is a buyer in Catalent, Thermo. fisher Scientific and in Lonza. Hence just followed what his pharma brain said
3M, honeywell, Caterpillar trade at high P/E in India but just below 30 in the US. I see the as Coffee Can stocks
Texas Instruments is out of fashion but still is a critical component in many products
Ultimately, in tech, the company that has a hiring bar attracts better talent and that talent goes on to do amazing things. I expect that these firms will do well and an approach of investing regularly in them (There is a cap of USD 250K per investor per year from India) will ensure good diversification and wealth creation.
In India, such high quality tech firms are not available. One can invest in Nasdaq but the combination of companies is not the one that I prefer to invest in.
Agree. But income is realized only when the stock is sold. The idea is to keep buying the same companies in the same proportion for years. To buy and sell short - term, I do only in Indian stocks in zerodha/upstox
I will update the thread here with my real positions. I do that so that there is transparency as to if the technique works or not.
If one does not sell the stock, we just list the foreign stocks in TR_FA in ITR2 that most of us file (unless we trade options)
Good point. Had not thought about this!
I have a friend who has been doing this US stock investing for several years and very good returns. I would rather pay a good CA 25000 Rs than lose lakhs due to opportunity cost
Taxation, Tax filing, brokerage are not reasons to lose out on opportunities is what I feel
Interesting !!
Not sure what time frame and what kind of return target you have in mind whilst decided to invest in US stocks? Personally, I have never understood geographical diversification. I believe no region is insulated enough when it comes to equity markets.
Well, I still believe, with that kind of money ($250K/annum), you could earn good returns in Indian markets itself, provided you have invested in right stocks at the right time. Anyways, wish you good luck !!
