Benefits Of Using Robo
The main advantage of robo-advisors is that they are low-cost alternatives to traditional advisors. By eliminating human labor, online platforms can offer the same services at a fraction of the cost. Most robo-advisors charge an annual flat fee of 0.2% to 0.5% of a client’s total account balance. That compares with the typical rate of 1% to 2% charged by a human financial planner .
Robo-advisors are also more accessible. They are available 24/7 as long as the user has an Internet connection. Furthermore, it takes significantly less capital to get started, as the minimum assets required to register for an account are typically in the hundreds to thousands . One of the most popular robo-advisors, Betterment, has no account minimum at all for its standard offering.
In contrast, human advisors do not normally take on clients with less than $100,000 in investable assets, especially those who are established in the field. They prefer high-net-worth individuals who need a variety of wealth management services and can afford to pay for them.
Efficiency is another significant advantage these online platforms have. For instance, before robo-advisors, if a client wanted to execute a trade, they would have to call or physically meet a financial advisor, explain their needs, fill out the paperwork, and wait. Now, all of that can be done with the click of a few buttons in the comfort of one’s home.
How Do You Buy International Stocks
Buying international stocks is surprisingly easy. You can probably even do it through your existing brokerage account. Heres how:
- Buy individual stocks directly on international exchanges. To do this, however, your brokerage account must give you access to these exchangesand not all brokerages do. If yours does, you can simply purchase shares using U.S. dollars, like you would any other investment. If yours doesnt, then youll need to
- Access international stocks via American Depository Receipts . ADRs are certificates issued by U.S.-based financial institutions that represent a share of a foreign companys stock. Theyre traded just like domestic stocks on U.S.-based exchanges, meaning you dont need a special brokerage account to access them.
- Invest internationally through ETFs and/or mutual funds. You can use screening tools at your online brokerage to research and identify different ETFs and mutual funds composed of international holdings. These are the most straightforward tools for beginning investors to add international exposure to their portfolios as they dont involve stockpicking, have generally low expenses and are easily traded daily through normal investment accounts.
Invest Regularly And Continuously To Increase Your Investment Amount
The stock investment gives the best returns when you invest for the long term. Do not invest in lump sum at just one time and wait for the next 10 years to see how much returns you got. Invest regularly whenever you get a good opportunity. Further, increase the investment amount as your savings increase.
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How To Invest In Indian Stocks From The Us
Let us first get to know the Indian stock market in brief before we dive into how you can invest in it.
The two top stock exchanges in India are the Bombay Stock Exchange and the National Stock Exchange . BSE is the oldest stock exchange established in 1875 while NSE established in 1992 is the biggest stock in India in terms of volume. NSE provides higher liquidity than BSE despite having a lower number of listings than the BSE. The market capitalization of NSE is at about $2.27 trillion and BSE is $2.1 trillion. BSE’s index Sensex has 30 companies while NSE’s index Nifty has 50 companies.
All the stock exchanges in India are regulated by the Securities and Exchange Board of India .
Open An Investment Account
All of the advice about investing in stocks for beginners doesn’t do you much good if you don’t have any way to actually buy stocks. To do this, you’ll need a specialized type of account called a brokerage account.
These accounts are offered by companies such as TD Ameritrade, E*Trade, Charles Schwab, and many others. And opening a brokerage account is typically a quick and painless process that takes only minutes. You can easily fund your brokerage account via EFT transfer, by mailing a check, or by wiring money.
Opening a brokerage account is generally easy, but you should consider a few things before choosing a particular broker:
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Screening And Filtering The Right Stocks Using Financials
There are thousands of stocks listed on BSE and NSE and its almost impossible to investigate each and every one of them by going through their entire financial information.
Therefore, for your initial consideration, you can use the below easy to implement screening criteria to filter out those stocks whose fundamentals look strong.
- Price to Book value < = 1.5 or low compared to peer companies within the same industry
- Price to Earnings < 25 or low compared to peer companies within the same industry
- Current Ratio > 1
You dont have to scratch your head to get the above financial information. Online screener tools available on financial platforms like Moneycontrol and EquityMaster provide this information readily.
For example, with the help of Equitymasters free stock screener tool, I applied the above screening criteria to filter some of the stocks for my initial consideration.
You can then check the other financial ratios as part of the screening criteria by clicking on the company factsheet
To know more in detail about the parameters I have used in screening criteria to filter out stocks you can refer this article on financial ratios.
Investing In Indian Stocks From The Us
The most common choice among investors includes investing in India-focused mutual funds in the US, Exchange-Traded Funds , and Exchange-Traded Notes based on Indian stock or American or Global Depositary Receipts .
To have access to the Indian stock market from the US, you will have to either open an account with an international brokerage firm regulated by the U.S. Securities and Exchange Commission or open an account with a SEBI-registered Indian stockbroker.
You can open an account with any known Indian brokerage firm such as Zerodha, Sharekhan, Motilal Oswal after providing the prerequisites to start trading in the Indian stock market.
International brokers such as Interactive brokers having a presence in the NSE allows you to trade in Indian shares, options, futures, indices. You can open a brokerage account to start buying and selling stock directly from the Indian stock exchange.
Non-Resident Indians, as well as resident Indians, have the opportunity to open specific accounts with such brokers. Through these accounts, Indian investors can also access NSE stocks based on their location.
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Yes Indians Can Invest In The Us Stock Market
Yes investors from India can invest in the US stock market. If they are interested in diversifying beyond Indian stocks and financial instruments, beyond the Sensex or the Nifty 50, Indian investors can do so by investing in the S& P 500, Dow Jones, Nasdaq or other US listed companies.
Investing in US stocks or ETFs by Indian investors is permissible under the RBIs Liberalized Remittance Scheme , by using purpose code S0001 . Read more about the LRS and US investing here.
Invest In What You Know And Understand
Will you buy an ABC company which produces Vinyl sulphone easter and dye intermediates even though you have zero knowledge of the chemical industry?
If you will, then its like giving some stranger a one lakh rupee and expecting him to return the money with interest. If you are lending money to someone, you ask a number of questions like what he does, what his salary is, what his background is, etc. However, while investing Rs one lakh in a company that people do not understand, they forget this common logic.
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Stock Market Supply And Demand
The stock market also offers a fascinating example of the laws of supply and demand at work in real-time. For every stock transaction, there must be a buyer and a seller. Because of the immutable laws of supply and demand, if there are more buyers for a specific stock than there are sellers of it, the stock price will trend up. Conversely, if there are more sellers of the stock than buyers, the price will trend down.
The bid-ask or bid-offer spread represents the difference between the highest price that a buyer is willing to pay or bid for a stock and the lowest price at which a seller is offering the stock.
A trade transaction occurs either when a buyer accepts the ask price or a seller takes the bid price. If buyers outnumber sellers, they may be willing to raise their bids in order to acquire the stock. Sellers will, therefore, ask higher prices for it, ratcheting the price up. If sellers outnumber buyers, they may be willing to accept lower offers for the stock, while buyers will also lower their bids, effectively forcing the price down.
Learn The Difference Between Investing In Stocks And Funds
Going the DIY route? Don’t worry. Stock investing doesn’t have to be complicated. For most people, stock market investing means choosing among these two investment types:
Stock mutual funds or exchange-traded funds. Mutual funds let you purchase small pieces of many different stocks in a single transaction. Index funds and ETFs are a kind of mutual fund that track an index for example, a Standard & Poors 500 fund replicates that index by buying the stock of the companies in it. When you invest in a fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio. Note that stock mutual funds are also sometimes called equity mutual funds.
Individual stocks. If youre after a specific company, you can buy a single share or a few shares as a way to dip your toe into the stock-trading waters. Building a diversified portfolio out of many individual stocks is possible, but it takes a significant investment.
The upside of stock mutual funds is that they are inherently diversified, which lessens your risk. For the vast majority of investors particularly those who are investing their retirement savings a portfolio comprised mostly of mutual funds is the clear choice.
But mutual funds are unlikely to rise in meteoric fashion as some individual stocks might. The upside of individual stocks is that a wise pick can pay off handsomely, but the odds that any individual stock will make you rich are exceedingly slim.
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What Are The Costs Of Buying Us Shares
A couple of decades ago, investing in global companies was fairly costly. Today, many online trading platforms allow Indian investors to buy and sell shares in India, the US and other international markets for just about US$2 a trade in brokerage fees. There are many that have scrapped the brokerage fee altogether.
However, not all trading apps in India offer US stocks. Some only offer Indian shares or they may charge additional high fees for the service. Before signing up for a new account or broker, its important to check which countries are on the books and what the associated fees are.
Each platform works in a different way, however, the same general rules apply as with buying Indian shares with a few additional considerations. For example, youll be charged a brokerage fee and a foreign exchange fee when you trade shares. Brokerage fees are sometimes higher on international accounts and there may be additional costs such as an inactivity fee.
Alternatively, you can invest in a portfolio of US stocks via exchange-traded funds .
Benefits Of Stock Exchange Listing
Until recently, the ultimate goal for an entrepreneur was to get his or her company listed on a reputed stock exchange such as the NYSE or Nasdaq, because of the obvious benefits, which include:
- An exchange listing means ready liquidity for shares held by the company’s shareholders.
- It enables the company to raise additional funds by issuing more shares.
- Having publicly tradable shares makes it easier to set up stock options plans that can attract talented employees.
- Listed companies have greater visibility in the marketplace analyst coverage and demand from institutional investors can drive up the share price.
- Listed shares can be used as currency by the company to make acquisitions in which part or all of the consideration is paid in stock.
These benefits mean that most large companies are public rather than private. Very large private companies such as food and agriculture giant Cargill, industrial conglomerate Koch Industries, and DIY furniture retailer Ikea are among the world’s most valuable private companies, and they are the exception rather than the norm.
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By Step Approach To Invest In Share Market In India 2021
George F. Baker, an American financier and philanthropist once famously gave the mantra
To make money in stocks you must have the vision to see them, the courage to buy them, and the patience to hold them.
There are literally thousands of companies listed on the BSE and NSE. Unless you are armed with an approach that you could use to filter out, you would get lost in the sea of companies.
The investing approach that I am going to share with you is the one that I personally practice to filter stocks before investing in them.
Value investing is an ocean in itself and its practitioners go through a tedious process of analyzing stocks by reading through the financial statements, annual reports, and various other information pertaining to the financial health of the company before investing.
But, based on my learnings over the past many years, I have come up with the following simple and practical steps that you use to kick-start your journey of picking stocks even without having deep financial knowledge.
You will need a Demat account to start investing in stocks. I would recommend to open Zerodha account.
Taxation On Investing In Indian Stocks
Income from the sale of equity shares comes under ‘Capital Gains’: when the shares are sold at a higher price than the purchase price.
Tax on Short term capital gains: If you sell equity shares listed on a stock exchange within 1 year of purchase, the gains are taxable at 15%.
Tax on Long term capital gains: Tax is exempted on gains made on stocks held for over 1 year. However, if the long-term capital gain is more than Rs 1 lakh, a tax of 10% is levied. The benefit of indexation is also not available to the seller.
Tax on income from F& O: Treated as a business income, it will be taxed according to the tax slab rates in India.
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Basic Advice Before You Start Investing
When you are new to the stock market, you enter with lots of dreams and expectations. You might be planning to invest your savings and make lakhs in return.
Although there are thousands of people who have made a wealth from the stock market, there are also hundreds of thousands who have not.
Here are a few cautionary points for people who are just entering the world of investing.
How Are Indians Taxed For Their Investments In The Us Stock Market
When you invest in the US stock market, there are two types of taxation events:
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Diversify And Reduce Risks
Diversification is considered to be the only free lunch in investing. In a nutshell, by investing in a range of assets, you reduce the risk of one investment’s performance severely hurting the return of your overall investment. You could think of it as financial jargon for “don’t put all of your eggs in one basket.”
In terms of diversification, the greatest amount of difficulty in doing this will come from investments in stocks. As mentioned earlier, the costs of investing in a large number of stocks could be detrimental to the portfolio. With a $1,000 deposit, it is nearly impossible to have a well-diversified portfolio, so be aware that you may need to invest in one or two companies in the first place. This will increase your risk.
This is where the major benefit of mutual funds or ETFs comes into focus. Both types of securities tend to have a large number of stocks and other investments within their funds, which makes them more diversified than a single stock.
Difference Between Share And Stock Market
The investment decisions are influenced upon company past, present, and future growth. A company offers public shares of a company is a form of prospects which is known as IPO. IPO stands for Initial Public Offering. It is a process of offering shares of a private organization to the public in a new stock issuance.
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