Friends or relatives residing in India periodically ask me about how they can invest in the US equity markets. How can they invest in things like a ultra-low cost S&P 500 ETF or Berkshire Hathaway or Google etc. Well, it is not only possible, but quite streamlined.
Indian citizens residing in India are allowed to invest up to $250,000 every year overseas as per this notification issued by the Reserve Bank of India (RBI): https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10192&Mode=0 This means that a family of 4 can invest up to $1 million overseas in a given year. There are a few U.S.-based discount brokerages like Interactive Brokers, TD Ameritrade, Charles Schwab International Account through which Indian citizens residing in India can set up an account and trade U.S. stocks, mutual funds and ETFs. No US mailing address is required. Note that these accounts can be opened by citizens of most countries. In fact, Interactive Brokers has a specific account type that allows Indian Residents to trade overseas. To start an application click here. The application materials need to be sent via email to this address: newaccounts.in@interactivebrokers.com. Their customer service number in India is +91.22.6128.9888. The Director of Sales in India is Ankit Shah. His phone number is +91.22.6128.9836, and his email address is ashah@interactivebrokers.com. Interactive Brokers (IB) is one of my favorites. Not only can one trade US stocks at super low commissions with them, IB has made the most inroads into allowing global trading with some of the lowest frictional costs. Through a US Interactive Brokers account one can buy stocks in most of the major markets around the world. Thus, opening an account with them opens up far more than the US markets for Indian investors. While the Indian markets offer plenty of compounding opportunities, it is not a bad idea for Indian investors to have atleast a small portion of their assets allocated to other geographies. US brokers and ETFs have some of the lowest frictional costs on the planet. And us compounders know all about keeping frictional costs low. Note: I am not compensated in any way by any of the brokerages mentioned in this blog post.
25 Comments
Leon
11/4/2016 12:47:37 am
Hello Mohnish,
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Mohnish Pabrai
11/4/2016 10:41:45 am
Hi Leon… You are almost right. While IB has some of the lowest trading costs around and is consistently rated highly by third parties, they do have that pesky $10 minimum monthly fee. It is worth noting that the $10 minimum monthly fee is waived if the value of your account is equal to or greater than $100,000. The fee is also waived for the first three months. For us compounders who like to "set it and forget it" if one 's account balance is expected to be less than $100,000, the other choices may work better. So, open a Schwab or TD Ameritrade account. If you find that your annual costs (including all commissions) are under $120/year and your account balance is less than $100,000, stay with them. Otherwise, IB is your friend.
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sai
11/5/2016 12:28:44 pm
Hi Mohnish,
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Mohnish Pabrai
11/5/2016 06:01:02 pm
Good questions. I do not know the answer on trading futures, but RBI may not care how or what you invest in. Best to check with a CA. Regarding wiring dollars, ask your bank manager.
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11/6/2016 08:46:44 am
You can't trade futures as margined trades arent allowed. You can write covered calls, and full cash secured puts. You can buy options. You can't do spreads. You can buy etfs even inverse etfs. If you buy bonds then I think there is a tax deduction on the interest paid before it comes to you.
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Rahul Deshmukh
11/7/2016 02:20:37 pm
Monish,
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Mohnish Pabrai
11/7/2016 10:11:11 pm
Thanks Rahul. Every year I do post-mortems on the good, bad and ugly with my investors via the annual meetings and annual letters. There was an extensive Horsehead post-motem in one of my letters and I answered several questions on it during our annual meeting. All my investors have received an extensive post-mortem on Horsehead.
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Rahul Deshmukh
11/7/2016 11:20:40 pm
Thank you Monish. I completely agree that every investor should do their own due diligence. The reason I asked this question was many of us, who are new to investing look up to legendary investors for insights NOT on what they invest in but what was their rationale for the investment. Those insights are more powerful in understanding the thought process of great minds. Furthermore, you learn a lot more from the analysis of mistakes that were made- things like when the crack were visible (if any), what were the next steps- hope for the best or abandon the ship, etc.
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Mohnish Pabrai
11/8/2016 12:27:03 am
I would like data on many past and present investments made by several prominent investors. Much is not available in the public domain and I have grateful for whatever is in the public domain. But I also recognize that most are not in the business of providing details of specific investments to Joe Public. Hence I've rarely (if ever) requested them for these publicly or privately. Am happy with whatever is there.
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11/9/2016 08:46:08 pm
Mr. Mohnish,
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Mohnish Pabrai
11/10/2016 04:34:12 am
To the best of my knowledge the others do not have any offices in India. I did provide links to their websites so you can compare and contrast. You can also google "best US discount brokers" etc. and read the various annual comparisons done by Barron's etc.
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Sumit Uppal
8/30/2017 08:18:14 am
Indian residents cannot open trading accounts with TD Ameritrade or any other Foreign broker as then they will have to withhold tax on brokerage payment required under section 195 of Income Tax Act.
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Sumit Uppal
8/30/2017 08:19:00 am
Indian residents cannot open trading accounts with ameritrade or any other Foreign broker as then they will have to withhold tax on brokerage payment required under section 195 of Income Tax Act.
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Pranav P Patki
1/8/2018 09:40:56 pm
Is it legal yo open account with brokers you mentioned considering both indian laws & laws of land i plan to invest?
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Sam
2/20/2018 05:27:55 am
Hi Mohnish,
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Ajay
3/12/2018 10:34:07 am
How can a NRI from Dubai invest in US Stocks (ETF) without going through the Indian Bank / Brokerage route.
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Akshay Kumar
7/20/2018 06:59:40 am
I was advised to open am Indian brokerage account with ties to US markets. On further researching I found out that many negative feedbacks were found like one with ICICI not returning the investors money and India Infoline giving your details to other party whobpester you to invest in their equities, one even Kotak investing your money without your knowledge.
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Kuljasbir Singh
6/24/2018 12:32:27 pm
Hi All , I am also trying to open account with Fidelity or TD Ameritrade and contacted there support agents. both of them say indian cannot open account with them , if you are NRI and resident of US you can.
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Akshay Kumar
7/20/2018 06:46:43 am
I am from Dubai as well, I left a comment here which is similar to your statement. Which brokerage are you using?
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Akshay Kumar
7/20/2018 06:45:22 am
Dear Mr.Pabrai,
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Akshay Kumar
7/20/2018 06:52:36 am
Also Mr.Pabrai, I forgot to include, is interactive brokers strong as firm?
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Mahesh Patil
8/18/2018 09:05:53 am
I am also interested in knowing is safe too for Indian investors.
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Rajesh Vyas
10/7/2018 02:08:27 am
Hello Mr Pabrai, I'm resident Indian, How the Demat Account with Interactive Brokers will be treated for tax purposes in both countries?
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jayesh patel
12/7/2018 09:54:28 pm
is it not allowed to open an account with other brokers directly like Suretrader, Centerpoint securities for da/ Active trader?
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December 2018
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