What are US Stocks?
The US stock market is one of the world’s oldest and largest stock markets. It has more than 6,000 domestic and international companies listed on its stock exchanges. The US stock market hosts some of the biggest global names across all sectors. The types of companies listed on the US stock exchanges are mega-cap, large-cap, mid-cap and small-cap.
Mega cap stocks are the largest companies with a market cap above USD 200 billion. Large-cap companies are stocks with a market cap of more than USD 10 billion. Mid-cap stocks belong to companies with a market cap in the range of USD 2 billion to USD 10 billion. While small-cap stocks belong to companies with a market cap between USD 300 million and USD 2 billion.
Who Should Invest in US Stocks?
Investors seeking international exposure should consider investing in US stocks. Diversifying internationally will help the investment portfolio in generating significant returns. Investing in US stocks will help you benefit from dollar appreciation as well.
However, you need to closely track the US economy and the markets. Furthermore, investing in US stocks has its own risks. The inherent volatility in the markets and also the forex risks are inevitable while investing internationally.
How to Invest in the Best US Stocks?
The US stock markets used to be out of reach for Indian investors. But now, things are different. There are many ways to invest in US stocks from India. You can invest in best US stocks right now in the following two ways:
- Direct investments: Own the stocks of US companies directly by opening an overseas trading account with a domestic broker or overseas trading account with a foreign broker
- Indirect investments: Put your money in mutual funds or ETFs that invest in the US market.
Benefits of Investing in US Stocks
Following are the benefits of investing in best US stocks now:
Access to Global Companies
US companies host the biggest tech companies and globally recognized brands. The US stock market also has companies from China, Germany, Japan, etc. listed on its exchanges. These companies are well-known all over the world. Because the US is a global power, its stock market is worth investing in.
Diversification
Through US stock, you can spread out and diversify your investments in the US economy to reduce economic risks. A country’s stock market is affected by political issues, elections, the budget, etc. Diversifying your money is a good way to protect your investments from a sudden impact. Even though gold and bonds are good investments, putting money into US stocks is a good way to diversify your portfolio. Also, it may have the potential to set you up for good returns.
Fractional Investing
You can do fractional investing in the US markets. To elaborate, 1 share of Apple is about USD 163, i.e., approximately INR 13,000. It may seem quite expensive to invest in the US stock market. However, Indians can invest in fractions. You can buy Apple shares in fractions for INR 2,000 or INR 5,000, as it may seem fit for you. Thus, investing in US stocks is for everyone who wishes to diversify their investments geographically.
Benefit From Dollar Appreciation
When you buy US stocks as an investment, you pay for them in dollars. While buying US stocks, you are betting not only on the stock’s value but also on the dollar. If the dollar goes up against the rupee, your investment goes up, too.
Being Part of the US Growth Story
The US is home to some of the biggest tech giants. Innovation comes every day. New companies, technologies, and products emerge from time to time. Having access to participate in the growth story of such companies and the economy will help you generate significant returns.
Things to Consider Before Investing in Best US Stocks
The following are the things to consider before investing in the top US stocks:
- Financial knowledge and expertise: You should know how the US market and global investing work. You should invest only if you have the time and knowledge to study the market.
- Cost of investment: Investing in the US market is more expensive than in the Indian market. You must pay bank charges, brokerage fees, and taxes on your investment.
- Exchange rates: You face exchange rate risk when investing in foreign markets. This can have an adverse impact when you invest or withdraw your money.
- Taxation of gains and dividends: You must pay taxes on your gains and dividends from US stocks. The dividends are taxed at 25%, and the long-term gains (holding period more than 24 months) are taxed at 20% in India. But they are not taxed in the US.
The short-term gains (holding period less than 24 months) are taxed as per your income tax rate in India. If the US company deducts tax at source, you can claim it back when you file tax in India. This is because India has a DTAA agreement with the US and 88 other countries to avoid double taxation.
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As an expert in the field of international investing and financial markets, I bring a wealth of knowledge and experience to shed light on the concepts discussed in the provided article. With a deep understanding of the global financial landscape, I can provide valuable insights into US stocks and the intricacies of investing in them.
US Stocks: A Comprehensive Overview
The article begins by highlighting the prominence of the US stock market, which is not only one of the world's oldest but also among the largest. The market boasts over 6,000 listed companies, encompassing both domestic and international entities. The classification of companies into mega-cap, large-cap, mid-cap, and small-cap is crucial, as it helps investors gauge the size and market capitalization of each.
Investing in US Stocks: Strategies and Considerations
The article rightly points out that investors seeking international exposure should consider investing in US stocks. Diversification is emphasized as a means to generate significant returns, and the article aptly mentions the need to closely track the US economy and markets due to inherent volatility and forex risks.
Two primary methods of investing in US stocks are discussed: direct investments and indirect investments. Direct investments involve owning stocks directly through overseas trading accounts, while indirect investments entail putting money into mutual funds or ETFs focused on the US market. This provides investors with flexibility and options based on their preferences and risk tolerance.
Benefits of Investing in US Stocks: A Multifaceted Approach
The article delves into the numerous advantages of investing in US stocks:
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Access to Global Companies: The US stock market hosts globally recognized brands and major tech companies, providing investors with exposure to a diverse range of industries.
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Diversification: Investing in US stocks allows for portfolio diversification, spreading out investments to mitigate economic risks associated with a single market.
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Fractional Investing: The ability to invest in fractional shares makes US stocks accessible to a broader audience, enabling individuals to invest in high-value stocks with smaller amounts.
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Benefit From Dollar Appreciation: As investors pay for US stocks in dollars, they stand to benefit from dollar appreciation, contributing to potential returns.
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Being Part of the US Growth Story: With the US being a hub for innovation and home to major tech giants, investors have the opportunity to participate in the growth story of influential companies and the overall economy.
Considerations Before Investing: Prudent Decision-Making
The article aptly concludes with important considerations for potential investors:
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Financial Knowledge and Expertise: Investors should possess a sound understanding of the US market and global investing before venturing into US stocks.
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Cost of Investment: The higher costs associated with investing in the US market, including bank charges and brokerage fees, should be taken into account.
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Exchange Rates: The impact of exchange rate fluctuations on investments is highlighted as a potential risk that investors must consider.
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Taxation of Gains and Dividends: The article provides a detailed overview of the tax implications, emphasizing the need for investors to be aware of tax rates on gains and dividends and the existence of Double Taxation Avoidance Agreements (DTAA).
In conclusion, the article provides a comprehensive guide for investors looking to explore the world of US stocks, covering essential concepts and considerations for informed decision-making.
