US stock market structure allows brokers to sell fractional stocks to investors.
The US Stock market is blazing all guns and has entered 2021 on the back of a great bull run of the previous year. Several individual stocks, especially the investor favorites – Facebook, Apple, Amazon, Netflix and Google – collectively referred to as FAANG stocks, have risen by an average of 50 per cent in 2020 alone. If you are still contemplating and not sure as to how to invest in US stock market from India, read on to find out. The process to invest in US stocks from India is so simple, easy and quick, that it may surprise you. You can buy Nasdaq stocks from India or even trade in several thousand of ETFs and stocks on any other leading indexes like S&P 500 or Dow Jones.
But, stock prices of some of the top stocks in US stock market are at high level and may appear expensive. Sample this: Facebook, Apple, Amazon, Netflix, Microsoft and Google are trading at approximately $263, $128, $3167, $500, $212, $1722 respectively. This means you will require at least Rs 2 lakh to own one single share of Apple, Rs 2,31,191to be little more precise.
Own US stocks in fractions
However, the good news is that you can still own a portion of any US stock by investing as low as Rs 100. This is possible as owning US stocks in Fractions is allowed by regulations. “US market structure allows for brokers to sell fractional stocks,” says Vinay Bharathwaj, Co-founder and Co-CEO of Stockal. Fractional share investing helps one to keep accumulating stock in fractions thus participating in the growth story of the company in the long term.
You don’t have to be a millionaire to invest in international stocks. If you want to invest in your favourite stock, the price is not a barrier. Simply decide how much you need to invest and the number of shares will be automatically calculated for you. For example, if a share is trading at $230 and you want to invest $100, then you will get 0.43 shares of the company. Similarly, you can own shares of different companies in fractions and build a diversified stock portfolio across sectors, market capitalization even with small amount of money.
Fractional share investing
“US allows for Dollar-based-investing. For instance, on the Stockal platform, people can invest very small amounts and still get holdings of marquee stocks. Basically, you get the amount of stock for the value of money invested. So if you invest Rs.1000 in Apple (which is at about Rs.10,000), you get 0.1 Apple. If you invest Rs.750 in Apple, you get 0.075 Apple,” says Bharathwaj.
No US stock, no matter how highly priced, is out of reach. When you start small and gain the understanding and confidence about US stock market, you can then take giant leaps and invest higher amount. There are thousands of stocks across different US indices such as S&P 500, NYSE or Nasdaq and you can build a portfolio with exposure to one or more of them even with limited funds.
“Fractional investing is very useful because even by investing a small amount, you can build a diversified portfolio. For instance, an Indian investor could even invest a total of Rs.5000 or 10000 and still have Google, Amazon, Tesla and Apple in her portfolio. Creating diversified portfolios is important for investors and in that sense, it’s great that even a small investor can have the same level of diversity as a large investor,” adds Bharathwaj.
Brokerage account for international trading
The process to open a brokerage account for international trading is user-friendly. It starts with the registration on a global stock trading platform, fulfilling KYC and RBI’s LRS ( INR-USD buying) requirement, transferring funds from domestic bank account to brokerage account. The global trading account is ready and you can start buying US stocks. For trading, you can even start with a small amount but with Rs 5000 it can be a good beginning. Once accustomed to the account operation, you can invest big money for higher returns!
One of the many factors that has worked in favour of FAANG stocks was the rising interest of global investors in digital and work-from-home companies. They appear to be better placed in a world reshaping itself in the aftermath of pandemic outbreak. And, if you want to participate in the growth of these and other blue-eyed stocks of the US market, you can do so even with limited funds through fractional investments.