While foreign stocks may be an enticing opportunity, they are also accompanied by higher fees and charges.
Stock markets rise and fall. Such is the cyclical nature of the market. One of the best ways investors can protect their wealth in all circumstances is by having a diversified portfolio that is able to weather the shocks of the global markets. With foreign established markets like the US, UK, Germany and Japan being less volatile than Indian markets, investors can use foreign stocks as a buoy in stormy markets.
That may be just one of the reasons why investors are often interested in investing directly in foreign stocks. But how does one go about doing so? While indirect investment in foreign stocks can be made through the use of ETFs and mutual funds, for direct investments investors need to do a couple of additional steps.
For investing in stocks like APPL (Apple), GOOGL (Alphabet), NFXL (Netflix), and TWTR (Twitter), investors need to open an overseas trading account with a broker. This can be done with major full-services and discount brokers who have tie-ups with foreign brokers. ICICI Direct, HDFC Securities, Kotak Securities, and Axis Securities offer investors the choice of opening overseas trading accounts.
Investors can also directly open an overseas trading account with foreign brokers that have a presence in India. Foreign brokers that operate in India include Charles Schwab, Ameritrade, Interactive Brokers and others.
You have to keep in mind that by investing in foreign stocks you must abide by the rules and regulations of the Liberalised Remittance Scheme as put forth by the Reserve Bank of India. Under the guidelines, investors can only invest up to $250,000 (Rs 1.9 crore) in a single financial year without requiring any special permission.
Investors will also have to pay higher fees and charges to brokers when investing in foreign stocks, including a 5 percent TCS for remittances above Rs 7 lakh. Due to the Double Tax Avoidance Agreement, investors can claim the tax paid in the US on long-term capital gains and dividends as tax credits in India.
(Edited by : Sudarsanan Mani)
First Published: IST