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):
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: email@example.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 firstname.lastname@example.org.
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.