Step-By-Step Guide To Using LRS For Overseas Investments | Buy Tesla Stock For ₹100 | Moneynomics

Summary

This video explores the importance of international diversification in investing, highlighting how Indian investors often focus too heavily on local markets. Experts discuss the process of investing in global stocks, particularly in the US, using platforms like Ind Money, Vested Finance, and Appreciate. Viewers learn about the benefits, such as fractional shares, the impact of the rupee's depreciation, and access to global ETFs. The video also covers tax implications, including capital gains, dividend taxes, and remittance limits. With growing accessibility, global diversification is seen as a key strategy for long-term portfolio growth.

Takeaways

• 😀 Most portfolios in India are concentrated in Indian stocks and bonds, leading to periods of underperformance, especially during global downturns.
• 🌍 International diversification is essential for long-term financial stability, as it helps to avoid putting all investments in one basket.
• 📉 Indian mutual funds investing in global stocks have become limited since 2022, making it difficult to invest internationally through them.
• 💡 The LRS (Liberalized Remittance Scheme) allows Indian investors to open foreign brokerage accounts and invest in international stocks.
• 📱 To start investing in the US stock market, platforms like INDD Money, Vested Finance, and Appreciate offer online registration and KYC through Aadhaar and PAN.
• 💳 The process of linking a bank account with a foreign brokerage is streamlined, with 24-hour settlement time for some partnered banks like ICICI, HDFC, and Axis Bank.
• 💵 Forex charges when transferring funds abroad are typically between 1% and 2%, lower than the high charges at airports for foreign exchange.
• 💸 Investing in US stocks offers the advantage of rupee depreciation against the dollar, potentially offsetting some Forex costs.
• 🪙 Fractional investing is a key benefit of US stock markets, allowing investors to buy portions of stocks like Tesla for as low as ₹100, which isn’t possible in India.
• 📈 Global ETFs available on US stock exchanges provide access to a wide range of international markets, including emerging markets like Brazil, Mexico, and China.
• 💼 Capital gains tax on US stocks for Indian investors is 12.5% for long-term holdings (over 2 years) and taxed according to income slab rates for short-term holdings.
• 📑 Foreign assets and income need to be reported in Schedule FA of Indian income tax returns, with penalties for mistakes, though recent reforms have eased this requirement.

Q & A

Why is international diversification important for investors in India?

International diversification is important because it reduces the risk of having all investments concentrated in a single market. While India has great prospects, there are periods of underperformance, and global diversification allows investors to access better growth opportunities and avoid market volatility in India.

What is the current challenge with Indian mutual funds that invest in global stocks?

Indian mutual funds that invest in global stocks have reached their limit since 2022, making it difficult for investors to access these global stocks through them. As a result, investors need to turn to other options, such as LRS (Liberalized Remittance Scheme), to invest in international stocks.

What are the three prominent platforms for investing in US stocks from India?

The three prominent platforms for investing in US stocks from India are INDD Money, Vested Finance, and Appreciate. These platforms allow Indian investors to open foreign brokerage accounts and invest in international stocks.

How can Indian investors open a foreign brokerage account to invest in US stocks?

To open a foreign brokerage account, investors need to install the respective platform's app, complete the KYC (Know Your Customer) process using their Aadhaar and PAN cards, and undergo a video verification process. This entire process is done online and typically takes about 5 to 6 minutes.

What role do partner banks play in investing through platforms like INDD Money, Vested Finance, and Appreciate?

Partner banks help facilitate fast money transfers between the investor's Indian bank and the foreign brokerage account. For example, Vested Finance partners with ICICI, HDFC, and Axis Bank for quicker settlement (within 24 hours). Other platforms, like INDD Money and Appreciate, partner with Yes Bank.

What are the foreign exchange (Forex) charges when remitting money abroad for investment?

The foreign exchange charges typically range from 1% to 2%, depending on the platform and bank. While not negligible, these charges are lower than the 10% fees that might be encountered when exchanging currency at an airport Forex counter.

How does currency depreciation affect investments in US stocks for Indian investors?

When the Indian Rupee depreciates against the US Dollar, Indian investors benefit as their investments are in US Dollars. This depreciation can offset the impact of Forex charges, making it a potentially favorable situation for long-term investors.

What are the benefits of fractional investing in US stocks?

Fractional investing allows investors to buy portions of a stock rather than whole shares. For example, an investor can buy Tesla stock for as low as ₹100, which is not possible in the Indian market. This opens up opportunities for people with limited funds to invest in high-value stocks.

How can global ETFs enhance the investment strategy of Indian investors?

Global ETFs give Indian investors access to international markets that may not be available through Indian platforms. These ETFs track countries like Brazil, Mexico, and China, which can be appealing for investors looking to diversify beyond the Indian market.

What tax implications should Indian investors be aware of when investing in US stocks?

Indian investors are subject to capital gains tax in India, with long-term capital gains (after 2 years) taxed at 12.5%, while short-term gains are taxed based on the investor's income slab. Additionally, US dividends are subject to a 25% withholding tax, but this can be claimed against Indian income tax. There's also a 20% TCS (Tax Collected at Source) on remittances over ₹7 lakhs in a year, which can be adjusted against the investor’s tax liability.