Investing in US mutual funds from India allows you to diversify your portfolio while enjoying exposure to the world’s largest and fastest-growing financial market.
The most common way to make these kinds of investments is through Funds of Funds (FoFs) or other types of foreign mutual funds that invest in the US market.
These funds generally invest in equities or equity-related instruments of companies listed on the US market, as well as debt securities.
In this detailed article, we’ll take you through the methods, considerations, and strategies to invest in US mutual funds from India.
How to Invest in US Mutual Funds
Currently, there is just one option to invest in US stocks which is through Indian mutual funds. You can invest in US stocks by selecting US-focused international mutual funds.
These are primarily overseas FoFs (fund of funds) or other foreign mutual funds including Exchange-traded funds.
Mutual funds that invest in other mutual funds instead of individual stocks are known as FOFs. So, rather than investing directly in stocks or other securities, the fund manager invests in a portfolio of US mutual funds.
On the other hand, ETFs offer exposure to overseas markets with a clear, structured investment technique since they resemble an underlying index.
Both of these options are cost-effective and the best methods to gain exposure in the US markets.
Why Should You Invest in US Mutual Funds from India?
Here are the advantages of investing in US mutual funds.
1. Portfolio Diversification
Investing in mutual funds that include US stocks might assist you in diversifying your portfolios and minimize overall investment risk.
This is because the US stock market is one of the world’s largest and most established, with coverage from a broad spectrum of businesses and sectors.
Also, you can bring stability to your portfolio by investing in a mature market compared to India’s emerging markets which tend to be volatile.
2. Access to Leading Companies
The US is home to multiple global companies and technology giants. Many of the world’s most successful companies, like Apple, Amazon, and Google, are listed on the US stock market.
By investing in US stocks, you can obtain exposure to these companies along with benefit from their profits and growth.
3. Professional Fund Management
These mutual funds are run by qualified and skilled fund managers who perform extensive research and analysis. You can benefit from these professionals’ experience when making investing decisions, which can lead to higher returns and better risk management.
4. Opportunity for Long-Term Growth
Investing in US mutual funds could serve as a long-term growth plan. The US economy has demonstrated strength and adaptability throughout the years, and a well-constructed investment portfolio can benefit from the potential long-term growth of the US market.
Process to Invest in US Mutual Funds in India
Here is how you can invest in US mutual funds on Dhan.
- Open an Account: Open a trading account with Dhan. We offer you a wide range of mutual funds that invest in US stocks. Our pricing structure is transparent and we also offer you tools to select the best fund.
- Complete the Know Your Customer (KYC): This includes submitting the relevant documentation, such as proof of identity, address evidence, and photographs. The KYC procedure is a legal necessity for investing in mutual funds. Dhan hardly takes a few minutes to complete this process.
- Explore and Select US Mutual Funds: For this, you need to consider fund performance, past returns, expense ratios, and the fund manager’s performance record. Diversify your investments among multiple types of funds to mitigate risk. Do your research to make an informed decision.
- Investment Amount: Once you select the fund, you need to enter the amount you want to invest. You can choose a method between SIP or lumpsum for investing.
- Regular Monitoring: Examine the performance of your US mutual fund investments. Stay updated on global market trends, economic indicators, and changes in regulations that may affect your investments.
Factors to consider while investing in US Mutual Funds
Here are the top factors that you must consider to ensure you are making a smart investment decision.
1. Risks Involved
US-focused foreign mutual funds provide diversification benefits. However, it is essential to understand there are risks connected with overseas markets, such as regulatory complexities and economic factors.
These funds also possess foreign market risk, exchange rate risk and concentration risk. So, you need to thoroughly examine these risks before making a final investment.
2. Suitability
These funds are suitable for you if you have a high-risk tolerance and want to take exposure in US markets. Also, if you have a longer investment horizon, you can benefit from the US economy’s historical resilience and expansion.
It is not suitable for short-term investors.
3. Tax Implications
Learn about the tax implications of investing in US mutual funds from India. The tax treatment differs based on factors such as the time frame of investment, capital gains, and dividends.
Final Thoughts
Investing in US mutual funds provides prospects for diversification and exposure to the global markets.
Understanding the regulatory framework, carrying out thorough research, and implementing smart investment strategies can help you successfully go through the challenges of foreign investing.
Happy Investing 💰
Note: This blog is not to be construed as investment advice. Please do your own due diligence when investing in mutual funds. The mutual funds mentioned above are examples, not recommendations.
