Your Guide To US Stock & ETF Investing 🌏

We’ve all heard of the quote “if you love a product, buy its stocks”. As I write this on my Apple iPad Pro, I have a delivery en-route from Amazon and both Google and FB are part of my daily browsing habit. This mail, however, is not about my product choices ☺️ but about investing in global best in class companies, the majority of which happen to be listed on US stock exchanges.   If you’ve been following our recommendation, you already own these tech behemoths. Since we started in 2017, we’ve recommended a 13% equity allocation in an international mutual fund. Now, with our partnership with Vested Inc, there is a direct, and lower-cost route to owning your favourite US stock and ETFs.

In the past 5 years, both the S&P 500 and Nasdaq have outperformed the Indian benchmark handily. A longer 20-year history starting from the peak of the dot com bubble would reverse that outcome with the Indian benchmark outperforming slightly. We note this because we do not want you to invest in US stock &ETFs based on the recent outperformance. That would be against all the advice we have ever shared.

FAQ

Who can invest abroad and what all will I need? 

Resident and NRIs that are not US citizens or US residents can invest in US stocks though this means.

Is international investing legal in India?

Yes. Vested, our US stock partner, follows the RBI’s Liberalized Remittance Scheme (LRS) guidelines. Instituted by the RBI, the LRS is a set of policies that governs the maximum amount and purposes of remittance.

Under the LRS, an Indian resident can send up to $250,000 abroad annually without seeking approval from the RBI. The LRS has made it easier for Indian residents to study abroad, travel, and make investments in other countries. Learn more about it here or refer to RBI’s website for the most up-to-date regulations. Please see Article 6(iii) for specific LRS regulations regarding equity investments.

What are the costs involved in setting up a US stocks account?

There is a one-time account setup fee of ₹399 to create your US investing account. Please note, there is no cost involved to buy/sell either stocks or ETFs on Kuvera via Vested.

What documents do I need to set up an account with Vested to start investing in US stocks?

To open an account, you will need –

1/ PAN number

2/ An image of your PAN card

3/ A proof of address (you can use Aadhar card, your utility bill, mobile phone bill, bank, or credit card statement).

Note: All bills and statements must be within the last 3 months and must have your name on it. The whole process is paperless and can be completed in minutes.

How do I fund my US stocks account?

Investments in US equities must be made in US Dollars(USD). You must wire (remit) USD to Vested partner bank in the US to fund your account. To do this, you must fill out an LRS form (it’s called the A2 form) and submit it to your bank.

Do not worry! Once your account is set up we will send you detailed instructions to wire money to your US stock account.

How will taxes work for US investing?

For US stock users there are two types of taxation events:

(1) Taxes on investment gains: You get taxed in India for this gain. You will not get taxed in the US. The amount of taxes you have to pay in India depends on how after how long you exit the investment. If you exit after 24 months, it is treated as long-term capital gains and the gains will be subject to 20% tax with indexation benefit. Below 24 months is short-term capital gain and is taxed according to your income tax slab.

(2) Taxes on dividends: Unlike investment gains, dividends get taxed in the US at a flat rate of 25%. Fortunately, the US and India have a Double Taxation Avoidance Agreement (DTAA), which allows taxpayers to offset income tax already paid in the US. The 25% tax you already paid in the US is made available as Foreign Tax Credit and can be used to offset your income tax payable in India. 

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