Why should you invest in the US stock market?

 An array of new mobile apps and portals have made investing in the US markets a breeze. High returns from US stocks such as Tesla and FAANG (Facebook, Amazon, Apple, Netflix and Google) have fuelled investor interest. Mint explains how Indians can invest abroad.

The US stock markets account for 65% of the MSCI World Index, which represents stock markets across the globe. Over the past decade, the US has also been among the best-performing markets, particularly in tech stocks. Firms such as Alphabet, Microsoft, McDonald’s, Coca-Cola and Starbucks derive a significant share of their revenues from outside the US, giving investors a globally diversified portfolio. Foreign stocks are also used to diversify portfolios that already have Indian equities and bonds. Experts also suggest investing in stock markets of other regions such as Europe and BRICS nations.

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What kind of returns has it delivered?

In rupee terms, the Nasdaq index has returned around 25% compound annual growth rate (CAGR) over the past decade till 18 January, while the broader S&P 500 index has delivered 19.62% till 31 December. Some tech stocks have delivered better—Tesla is up around eight times over the past year in dollar terms. Rupee depreciation has typically boosted returns from US stocks. The rupee has fallen from around ₹46 to the dollar at the start of the decade to its current level of ₹73. Total returns on the Nifty 50 by contrast over the past decade have been around 11.8% compound annual growth rate.

How much can you invest in international stocks?

Under RBI’s liberalized remittance scheme (LRS), Indians can invest up to $250,000 in global stocks and bonds in a year. Tax collected at source (TCS) of 5% is deducted on remittances above ₹7,00,000 per year. This TCS can be adjusted against other tax liabilities such as tax on salary, biz income. Alternatively, you can claim it as a refund while filing your tax return.

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