[earthian]

Hello Guys:

I am contemplating investing in the US market. While the emerging markets would provide better returns, I would still like to hedge country risk by having a portion of my total investments in a different country and find that the USA would probably be the safest in that regard. I have a bank account in the US and diligently show it in my returns every year to our IT authorities. I have no source of income in the US at present.

The questions that I am grappling with are:

1. Channel investments through an Indian broker ( who would have an arrangement with a US broker) or directly with a US Broker?
2. Send money through the LRS to my bank account in the US and then deal with the US broker or send through LRS directly to the US broker?
3. Stocks or MFs or ETFs? Or a combination?
4. Treatment of income in the US or India? Issues ?
5. Do I require an ITIN if I am investing in the US directly from my US account?
6. Best resources to start: Fidelity, Charles Schwab, TD Ameritrade or? Pros & Cons?

I was doing some research on the Net and suddenly realised that we have a wealth of information amongst our members here.

Hope I get some advice. Shall be going to the US for Christmas and could use the opportunity to open accounts with a Broking Firm if required.

[Simhi]

I am not aware of various ways of investing in US market except that we could do it through Indian Mutual Funds. For e.g. Franklin India Feeder - Franklin U.S. Opportunities Fund. You can get more information at https://www.franklintempletonindia.c...w?FundID=16293. I am sure other Indian fund houses also have similar schemes.

Other references
1. https://economictimes.indiatimes.com...w/59298260.cms
2. http://www.valueresearchonline.com/story/24266

[blackwasp]

Originally Posted by earthian

I am contemplating investing in the US market.

Sometime last year, I had the wild idea to own one stock of my favourite companies - Apple, Tesla, Ferrari etc. and to that extent contacted Icici Direct, where I have an account. They said that they will have a tie up with an overseas broker who will be the actual purchaser on your behalf at the other exchange. However, the commissions and fees totally make it unfeasible unless you are going to invest a significantly large sum every month, or at the minimum every quarter. For smaller amounts, its best to invest in local markets.

Here is a rate list I got:


From my research back then, you should be trading around $1000-2000 a month and be making a profit more than the exchange's growth rate to actually end up with something after all the cuts. Needless to say I chucked the idea from the investment point of view.

[SmartCat]

Originally Posted by earthian

[*]Channel investments thrugh an Indian broker ( who would have an arrangement with a US broker) or directly with a US Broker?[*]Send money through the LRS to my bank account in the US and then deal with the US broker or send through LRS directly to the US broker?

Easiest way to invest in foreign stocks is via www.interactivebrokers.co.in

It's an American company with operations in India. You can transfer funds directly from your bank account in Rupees. Not just USA stocks - you can even buy European and Asian stocks via interactivebrokers.co.in

Stocks or MFs or ETFs? or a combination?

You can invest in stocks and ETFs via interactivebrokers.co.in. For mutual funds, you can opt for Indian ones that invest in foreign mutual funds. Here is the compete list - choose from 30 international funds:
https://www.valueresearchonline.com/...t=21&x=10&y=11

Treatment of income in the US or India? Issues ?

When you invest through interactivebrokers.co.in, you have no tax liability in USA (I think, not 100% sure). Your tax liability in India is equivalent to that of debt mutual funds. 30% on short term capital gains and 20% on long term capital gains ( 3 year holding period) after indexation (returns minus consumer inflation)

Originally Posted by earthian

I am contemplating investing in the US market. While the emerging markets would provide better returns, i would still like to hedge country risk by having a portion of my total investments in a different country and find that the USA would probably be the safest in that regard.

One simple option would be to invest in GOLDBEES ETF through NSE. USA stocks is not such a great hedge - because there is 80 to 90% correlation between US stocks and emerging market stocks. Remember that in every major crisis (2000, 2008), USA stocks too went down along with Indian stocks.

But Gold has negative correlation with stocks. Gold in rupee terms will go UP in value when there is local crisis (since Gold is denominated in dollars) or global crisis. Historically, Gold has returned 12% CAGR over the past 40 or 50 years. As a thumb rule, you can expect (consumer inflation rate) + (dollar INR depreciation rate) from Gold.

[earthian]

Originally Posted by Simhi

we could do it through Indian Mutual Funds. For e.g. Franklin India Feeder - Franklin U.S. Opportunities Fund.

Thanks. I was keen on investing in US$ directly with a broker based in the USA.

Originally Posted by blackwasp

Sometime last year, I had the wild idea to own one stock of my favourite companies - Apple, Tesla, Ferrari etc.

What can i say? Like a bad cold, did you inadvertently pass it on to me?

However, the commissions and fees totally make it unfeasible

Yes, going through two brokers would double the costs.

Originally Posted by smartcat

Easiest way to invest in foreign stocks is via www.interactivebrokers.co.in

Thanks. Shall check that out.

One simple option would be to invest in GOLDBEES ETF through NSE.

Umm. Not keen to increase gold as an asset class in my overall portfolio.

USA stocks is not such a great hedge - because there is 80 to 90% correlation between US stocks and emerging market stocks.

Thought it was the other way about. If the US stocks catch a cold, our exchanges sneeze. Could you elaborate?

Remember that in every major crisis (2000, 2008), USA stocks too went down along with Indian stocks.

The dot com bubble and the sub prime crisis originated in the US and hence it's stocks fell... with the emerging economies following suit. Would a crisis in India affect the US markets? To some degree and for some stocks maybe. Agree?

[SmartCat]

Originally Posted by earthian

Thought it was the other way about. If the US stocks catch a cold, our exchanges sneeze. Could you elaborate?

That is correct. Global crisis affects Indian stocks, primarily because FIIs will pull out money from Indian (and global) stocks and put it in safe treasury bonds.

The dot com bubble and the sub prime crisis originated in the US and hence it's stocks fell... with the emerging economies following suit. Would a crisis in India affect the US markets? To some degree and for some stocks maybe. Agree?

That is correct assessment too. A financial or political crisis in India will NOT affect global markets. But the crisis in Indian stocks is likely to be temporary (3 months). Examples:

Year 2004: When UPA came to power instead of NDA
Year 2016 end: Demonetization.

Most foreign pension funds or mutual funds need to keep a certain India allocation (5 to 10%) - and hence FII money will eventually flow into Indian stocks since they are long term bullish on India. Some tips to take advantage of these temporary crashes:

1) Keep certain percentage (say 20%) of funds in FDs or debt/liquid funds. Use these funds to buy stocks during such times.
2) If there is a financial or political crisis in India, INR will suffer badly against dollar and other currencies. Allocating some capital towards export sector (IT, pharma, commodities etc) stocks is a good idea. These stocks will not fall (might even go up) as much as other stocks providing some hedge to the portfolio.

However, I',m not sure how FIIs will react if there is a war in the Indian sub-continent. I guess for such an eventuality, having some funds in foreign stocks is a sensible thing to do.

[earthian]

Originally Posted by smartcat

However, I',m not sure how FIIs will react if there is a war in the Indian sub-continent. I guess for such an eventuality, having some funds in foreign stocks is a sensible thing to do.

Well, i can answer that. FIIs will pull out. Indian stocks of most companies would take a sharp hit. It makes sense to have a small share of your investment portfolio in $ in a strong economy market.

[NetfreakBombay]

Originally Posted by blackwasp

From my research back then, you should be trading around $1000-2000 a month and be making a profit more than the exchange's growth rate to actually end up with something after all the cuts. Needless to say I chucked the idea from the investment point of view.

Does this platform charge monthly / annual fees that make it uneconomical for smaller holdings ?

[blackwasp]

Originally Posted by NetfreakBombay

Does this platform charge monthly / annual fees that make it uneconomical for smaller holdings ?

There is a minimum commission of $15 per trade or 0.02 per share, whichever is higher.

So, everything time you buy and sell, a minimum of $15 dollars will be deducted each time. Further, the minimum order value should be $50 as well, which means on a $50 order, you actually end up with $65.

It just doesn't seem worth it for small time or rather low value holdings. The overseas brokerage plan is on top of you ICICI Direct commissions and fees. So overall, you end up paying a lot for a small trade.

These are not the latest rates, so there could be changes in the 2017 plan. But it'll be more or less the same.

[NetfreakBombay]

Originally Posted by blackwasp

So, everything time you buy and sell, a minimum of $15 dollars will be deducted each time. Further, the minimum order value should be $50 as well, which means on a $50 order, you actually end up with $65.

Say if one buys stocks worth $5k and holds for few years; will there be any fees apart from these commissions (during buying and selling).

[blackwasp]

Originally Posted by NetfreakBombay

Say if one buys stocks worth $5k and holds for few years; will there be any fees apart from these commissions (during buying and selling).

I think the fees for the ICICI Direct may apply. I'm not sure on the exact nature of their fees, but I'm guessing it might be a fixed amount monthly.

[Thebat]

I certainly wouldn't recommend ICICI Direct for investing in foreign markets, the employees have no idea on how to open a saxo bank account or on how to use it. The charges are also too high for the service provided.

I would highly recommend ETF's which invest in various stock markets across the world. I am personally investing in Motilal Oswal Nasdaq ETF which can be invested using the ICICI Direct platform.

Disclosure - I am a former ICICI direct employee and am completely aware of the product and my answer is in no way associated with my connection to the company.

[vamsi.kona]

Originally Posted by earthian

Well, i can answer that. FIIs will pull out. Indian stocks of most companies would take a sharp hit. It makes sense to have a small share of your investment portfolio in $ in a strong economy market.

In the event of a war big enough to affect global economy, there would certainly be a decline in stocks across the globe. However, during normal market corrections/movements, Indian markets are slowly moving along their own fundamentals. As you said, earlier there used to be huge influence of FII's over market movements, but their grip has declined to some extent, at least this year. Domestic Investors are moving into the markets through MF route, which I believe is just starting of a investing culture replacing FD's and PO deposits. In CY 2017 (Till Nov) FII flows were around 46K crores while MF's invested around 117K crores. This trend may continue going forward.

So, while there would certainly be impact of a fall in US markets, local fundamentals would come into play and decide the extent of fall.

Link for Stats
http://www.moneycontrol.com/stocks/m...ty.php?flag=MF

[maddy42]

Good thread: I started directly investing in the past 6 months in the US markets as i currently reside here. Requirement was a bank account linked to the app only trading platform called robinhood. There is no transaction fees for trade and they are slowly expanding features to options too currently and are on the way to start a website too.

Pros: Zero transaction fee on buy or sell
App only platform so you have the resource on the go anytime you want.

Cons: Day trading needs a minimum balance of $25000
No website so finding extensive data is a issue on phones
As its convenient you feel the urge to check prices frequently on the app!

Maddy

[earthian]

HDFC Securities has introduced a new service for Global investing. At first sight, does not seem to offer any thing different for some other players in the field.

Such service providers unfortunately provide only part of my requirement. In order to hedge country risk in toto, i would like part of my investments in the US, transacting in the US, earning in the US and paying taxes in the US, with the balance if any in India -if the proceeds are repatriated.

The brochure can be viewed here: Global Investing Brief for customers copy.pdf