How to invest in the us stock market from India?
What is covered?
- Introduction
- Comparison between Indian & US Stock Market
- What is the Difference between NYSE & Nasdaq Exchange?
- Eye-opening Fact
- What are US Stock Market Indices?
- What is the Dow Jones Industrial Average (DJIA)?
- What is the NASDAQ Composite?
- What is the S&P 500?
- Why should you invest in US Stock Market?
- How to open a US Stocks account with INDmoney?
- Conclusion.
Introduction
How many US products we do consume in a day?
If we are the consumers of those products. Why not becomes the owners of those products?
That might be why there are so many Indians who were going crazy behind this, as to how we can invest in the US Stock market but as usual, before we start investing, we should understand the basics of the US Stock Market. Now we would focus on today's article and after that, I am also going to talk about the app through which you can also invest in US stocks.
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Comparison between Indian & USA Stock Market.
Indian stock markets
- The very first point of difference is that in India we have BSE (Bombay Stock exchange) and NSE (National Stock exchange) as major stock exchanges.
- What is the timing in the Indian Stock market? The timing in the Indian market from 9:15 in the morning to 3:30 in the afternoon.
- Which are the major indices or what we call the mass index? In India Sensex and Nifty. Everyone knows this, the BSE index is Sensex and NSE Index is the Nifty indices.
The US Stock Markets
- There are NYSE (New York Stock Exchange) and Nasdaq Exchange in the USA, which are the major stock exchanges in the USA.
- But if I'm talking about US Stock Market open from 9:30 in the morning to 4 pm in the afternoon.
- In the USA - Dow (, Nasdaq, S&P 500 and one of the upcoming releases this Russell 2000 which focuses on small caps for all these indices in the USA.
So I hope you have understood all these indices in the USA, as well let's move on with one more important point about circuit filters. Circuit filters are market-wide circuit breakers.
So what is a circuit filter means?
That the market holds or stops after certain conditions are hit.
What is the Indian scenario? If markets crash by 10 per cent there's a halt at 15 another halt and if the market crashes by 20 per cent market stop for the entire day these are the levels of fault or stoppages.
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What's about the USA?
In the USA the levels are 7 %, 13% and 20%. So I hope you have understood the comparison of circuit filters or market-wide circuit breakers in India versus the USA.
One last amazing point of difference between the Indian stock market and u.s stock market is that can we invest in fractional shares so just as an example.
I'm sure many of you might not have invested in MRF share why so expensive 80 000 rupees plus for one share, so expensive!!. I can't afford it right it would have been so amazing. If I can invest 100 shares of MRF but unfortunately, that's not allowed okay. So in India, we are not allowed to invest in fractional shares. The minimum share that you have to buy is one.
But in u.s stock markets fractional investment in shares is allowed. so I hope you have understood the major five points of differences between Indian stock markets and u.s stock markets.
What is the Difference between NYSE & Nasdaq Exchange?
The regulator of the capital markets in India is SEBI. Who is the regulator of capital markets in the USA right now?
We just try to understand the difference between Indian stock exchanges and the u.s stock exchanges. Now let's dig down deep and understand the two major stock exchanges in the US, one is NYSE and the other one is NASDAQ. So let's compare them one by one first we are going to compare NYSE's major points versus NASDAQ's major points.
So first NYSE is one of the oldest stock exchanges and NYSE was founded in 1792, NASDAQ was founded in 1971 and it is the world's first and largest electronically traded stock market.
Now also let's understand as a second important point that NASDAQ and NYSE both are huge in their market capitalization. I'll give you a simple comparison our entire Indian economy is like 3 trillion dollars, but if I compare it with the market capitalization of an NYSE it is 25 trillion dollars that's for NYSE and for NASDAQ it is 20 trillion dollars that's the second-largest.
I just wanted to tell you genuinely we are really small compared to the u.s economy. Is there any scope of improvement? the answer is obviously yes right. Right now NASDAQ has 3300 companies that are currently listed. NYSE has 2800 companies that are listed now moving ahead.
ALSO, READ Top 7 Stocks with Monopoly businesses - Analysis of Shares.
What type of companies are listed in NASDAQ?
- More technology-based companies are listed, whereas if I'm talking about NYSE more blue-chip industrial companies are listed in NYSE.
- One amazing interesting piece of information as a last point of differentiation is that NASDAQ doesn't have a trading floor but NYSE even today has a trading floor means what you remember that scam movie 1992 in that those brokers make some symbols and by which they buy and sell shares, that is gone it doesn't happen in India.
Today but in NYSE even today physical floor does exist but it's just for fun maybe just a part of the tradition because the overall volume of physically traded shares is very tiny as compared to the total volume of the exchange.
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Some Interesting Facts.
The next two minutes are going to be a true eye-opener for you. Let's understand what I meant by what kind of companies were listed in NYSE and in NASDAQ. In NYSE traditional blue-chip companies are listed and in NASDAQ IT-related companies are listed.
Now, what does that mean let's understand so in the NYSE stock biggies are Berkshire Hathaway, Alibaba group holding company, Johnson and Johnson, Jp morgan chase and company, Exxon Mobile Corporation, Bank of America, Walmart stores Inc, Wells Fargo and company, Visa Inc, Proctor and gamble company, AT & T inc and Pfizer inc so all these are.
What all these are companies that are blue-chip traditional companies now which companies are the stock biggies which are listed in NASDAQ. It's Apple, Amazon, Microsoft, Alphabet that's Google, Tesla, Facebook, NVidia, Paypal, Netflix, Intel, Adobe, Zoom.
Amazing names but did you understand the difference? why intel was not listed in NYSE?
Amazon Alphabet (Google), Microsoft were not listed in NYSE these are listed in NASDAQ. Does this happen in the Indian stock market? No, so let's understand how the Indian stock market really behaves?
Now check out the names of companies that are listed in BSE versus which are listed in NSE, all these stock biggies in BSE have Reliance TCS, HDFC Bank, HUL, Infosys HDFC ICICI Bank, Kotak Mahindra, SBIN, Bajaj Finance and HCL Tech.
And guess what are the companies in NSE? they are the same isn't that different from u.s stock markets. Absolutely so I hope you have understood the difference in the USA both the stock exchanges had different companies but in India, all the stock biggies are exactly the same in BSE as well as in NSE. I hope you understood this amazing piece of information. I'm sure many of you might have really got that feeling that wow this was really something new.
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What are US Stock Market Indices?
Now let's move on with comparing the indices like as I told you India has BSE and NSE. USA has three major stock market indices which are DJI there is a DOW JONES Industrial Average, NASDAQ & S&P 500, as I mentioned some time ago Russell 2000 which tracks all the small-cap companies but we are not going to talk about that index right now, we are going to focus only on top three.
What is the Dow Jones Industrial Average (DJIA)?
So let's understand them one by one now let's start with understanding the DOW JONES Industrial Average DJIA also called DOW 30 called the DOW JONES or the DOW. It tracks 30 blue-chip companies which are listed on NYSE and NASDAQ, which means what I'm sure you might have confused how come an index can track companies that are listed on both NYSE and NASDAQ like in India we have Sensex which tracks companies on BSE and we have nifty which tracks companies only on NSE, so in India, it's something like there is an index which is related to a specific stock market is that a case in the USA.
An interesting point of difference DOW JONES Industrial Average tracks the top 30 companies that 30 companies from NYSE and NASDAQ. One more important point of the DOW JONES Industrial Average is a price-weighted index.
What do we mean by price-weighted index stocks?
Which have higher prices will be given more weightage, stocks with lower prices will be given comparatively lower rates.
ALSO, READ Top 15 Mutual Funds & 9 Stocks that gave highest returns in Jan 2021.
What is the NASDAQ Composite?
Now, what does NASDAQ represent? NASDAQ represents an index of more than 2500 companies which are listed in NASDAQ. What does this mean NASDAQ? Is the name of that index as well as the stock exchange? so like in India we have BSE whose index is Sensex, we have NSE whose index is NIFTY, but here in the USA what is the scenario? NASDAQ is the name of the index as well as the stock exchange.
One more amazing point is that NASDAQ covers those companies which are listed in NASDAQ but which are headquartered even outside the USA. Now is this also different from India like in India we track only those companies which are headquartered in India & we will not cover companies that are headquartered outside India.
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What does NASDAQ cover?
NASDAQ covers the top 2500 companies which may or may not be headquartered in the USA right one last point interesting point about NASDAQ is that it is a market-cap-weighted index so like if you remember. I told for dow it gives more importance to price, this NASDAQ will give more importance to market capitalization.
What is the S&P 500?
Now let's move on with the last index which is the S&P 500 index. The full form is standards and poor's 500, so when I was a student to be very honest I always felt that the S&P 500 tracks the income level of people standard people poor people but it has got nothing to do with it. S&P 500 doesn't track the income levels it tracks the 500 largest USA publicly traded companies.
Okay, which companies these companies have to be headquartered in the USA. So this is a little bit different from NASDAQ this index is also a market-cap-weighted index, which means it'll give more importance to market capitalization rather than the price of stocks.
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Why should you invest in US Stock Market?
Let's understand the top five reasons. Why we should invest in stocks that are listed in the USA stock markets?
- The first reason is Diversification we always say that don't put all your eggs in one basket but how do we interpret this some money should be invested in stocks, some should be invested in a mutual fund, some in gold some in traditional investment instead of all these things if I use only stocks.
Why should we invest in stocks which are listed outside India?
Actually, that can give us a good geographical diversification also to our portfolio. So I think the number one reason why we should invest in USA markets number one point is Diversification.
- Number two is that USA markets have outperformed the Indian stock markets. If you want to look at it visually see how u.s markets have always outperformed the Indian stock markets. So if you see all in all the pattern was the same but the rate at which the returns were given by USA stock markets was a shade higher as compared to the Indian stock market.
- Reason number three why should we invest in u.s stock markets we'll get exposure to all these high-tech company stocks like Apple, Amazon, Google Alphabet. Basically, why not invest in these shares if I'm using the products of these companies day in and day out.
- Reason number four reason why we should invest in u.s stock market is to get a very amazing advantage of the depreciating Indian rupee.
Let's take an example to assume today's rate of one dollar of INR versus USD is one dollar is equal to 72 rupees. Way back in 1947 the rate was one dollar is equal to one rupee.
Now assume that then I was allowed to invest in u.s stock markets. And at that time, some share of ABC incorporated whatever that was priced at one dollar okay and today the price of that same company. Today, it is one dollar only so as an investor did I gain anything 1947. Also, it was one dollar today it is one dollar as an investor did I gain anything nothing? Wrong I gained a lot 73 times. I've enjoyed how are you at that time for investing in that one dollar share I have invested how much only one rupee today.
'If I sell that share how much am I going to get? 73 rupees!!! so that is the impact of a depreciating rupee.'
- The last reason we can invest even in fractional shares. Fractional investment is allowed in simple words. I can invest in 1/10 tesla. I can invest in a one-fifth share of Berkshire Hathaway and that's all I think these are the top five reasons.
I believe why we can invest in u.s stock markets now coming to the grand finale.
How do we invest in companies which are listed in the USA?
For that, you need to open an account and you can open an account with Ind money. Free of cost in just two minutes even when you buy or sell shares. The brokerage is zero so free brokerage free account opening. That's where you can start your journey of investing in stocks, which are listed in the USA stock market. Check the link!
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Well I hope you have enjoyed this article don't forget to share this article with your friends, let them also understand how to invest in USA stock markets in the most simplified way.
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Happy Investing!!
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Disclaimer: We make all articles for educational purposes. We don't give any buy/sell recommendations. Before investing in any stock do your own research and then invest in the long term.
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