If you are someone who wants to diversify your portfolio beyond the Indian stocks and mutual funds, you can explore US-based index funds.
But the question arises how do you invest in such index funds from India? In this article, you’ll learn about the steps of how to invest in US index funds from India. Let’s get started.
What are Index Funds?
Index funds are the passive investment vehicle that tracks any specific index and invests the collected corpus in the listed stocks of an index.
These funds try to replicate the asset allocation similar to the stock’s weightage in an index and give exposure to a full index at a lower cost.
If any stock is dropped or added to an index, the fund manager will also buy the same in an index fund. If the weightage of a stock changes, then the fund manager will also try to change the allocation percentage in an index fund.
By purchasing a unit of an index fund, you can get the full basket of stocks. The expense ratio of these types of funds is quite low as the fund manager does not actively manage the fund holdings.
Some of the indices that US index funds take as benchmarks are Standard and Poor’s 500 (S&P 500), Dow Jones Industrial Average, Nasdaq Composite, Russell 2000, etc.
Steps to Invest in US Index Funds from India
Investing in US index funds is as simple as investing in any Indian index funds. Here are the steps you need to follow to invest in US index funds from India:
1. Select a Stockbroker
The first step is to select a ruptured stockbroker like Dhan that allows you to invest in US funds. Select a stockbroker that is registered with SEBI because it ensures the safety and reliability of the broker.
You can also check out the price structure of a stockbroker and select the one that at least allows a free account opening feature. One also needs to understand the commission that a stockbroker will charge when you invest in index funds.
2. Open a Demat Account
The next step is to open a Demat account or ETF investing account by downloading the selected stockbroker’s app.
You can download the Dhan app from the Play Store or by scanning the QR code. After that, you need to enter your mobile number and email ID.
Next, you have to upload the required documents such as a PAN card, Aadhaar card, passport-size photograph, and bank account details.
To open a digital demat account, you have to E-sign the document. This can be done by entering the OTP sent to your Aadhaar-linked mobile number. After this, your Demat account will be opened.
3. Select from the List of Index Funds and Invest
Finally, you can select an index fund that matches your investment objective. You can select an index fund on the basis of returns it has generated in the past and the risk it holds.
You can compare the expense ratio of different funds and select the one that has the lowest one.
Below are a few examples of US Index Funds –
- Edelweiss US Technology Equity Fund of Fund Direct – Growth
- Motilal Oswal NASDAQ 100 Fund of Fund Direct Growth
You need to invest in index funds through any of the two modes which are SIP (Systematic Investment Plan) and lump sum. The SIP allows you to invest small amounts in regular intervals while in a lump sum, you can invest the amount in one go.
Click on the “Invest Now” button and enter the suitable amount. If you choose SIP, select the date and frequency of an installment.
Enter the OTP (one-time password) that you receive on your registered email address or mobile number. Click “confirm” and you will get the units of an index fund at the current NAV (Net Asset Value).
Why invest in US Index Funds?
Investing in US index funds provides a chance to invest in stocks of the global companies at a lower cost. No one has to manage or analyze them individually.
You just have to purchase the units of an index fund. You can get the full bundle of top global stocks.
Suppose you invest in ICICI Prudential NASDAQ 100 Index Fund, its benchmark index is Nasdaq 100 TRI.
The top stocks that you can get by investing in this index fund are Apple Inc., Microsoft Corporation, Amazon. com Inc., Broadcom Corporation and Meta Platforms Inc.
So, you get exposure to these global stocks and can diversify your investment portfolio sector and global economy wise.
Conclusion
We hope now you know how to invest in US index funds from India. Start by selecting a SEBI-registered stockbroker that provides the opportunity to invest in these funds.
After that, you need to open a Demat account with a stockbroker and select an index fund. That’s it, you are done.
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