How Indians Can Invest in US Stocks Using Mutual Funds

Are you looking to grow your investment beyond India? If so, investing in US stocks via mutual funds from India offers a unique opportunity to tap into global markets. The United States is home to some of the world’s largest companies, like Microsoft, Amazon, Google, Tesla, Netflix, and Apple, all of which have consistently delivered high returns, shaping global markets. This has led many Indian investors to seek exposure to US stocks, benefiting from the growth and stability offered by the largest and most dynamic stock market globally.

Investing in US stocks gives Indian investors a chance to diversify their portfolio, lower risk, and access high-growth prospects. However, navigating the process of how to invest in US stocks from India might seem complicated. Fortunately, Indian mutual fund companies have developed streamlined solutions, providing exposure to the US stock market. If you want to know how to invest in US stocks for currency advantages, diversification, and growth potential, this article will simplify the process for you.

What are the Methods to Invest in US Stocks via Mutual Funds from India?

In recent times, India has seen exponential growth in the availability of Fund of Funds (FOF), Exchange-Traded Funds (ETFs), and international mutual funds. These options could be the best method to get exposure to US stocks. We will tell you about these and more below in detail.

Fund of Funds (FOF) in India

A Fund of Funds (FoF) is a mutual fund that invests in other mutual funds instead of directly holding stocks or bonds. These underlying funds can be domestic or international, offering investors diversification across asset classes, strategies, or geographies

International Mutual Funds in India

International mutual funds provide direct exposure to global securities, including US stocks. Some mutual funds may combine direct investments with index funds, providing broader market exposure. These funds offer a diversified portfolio, helping you access the US market and global growth opportunities.

Exchange-Traded Funds (ETFs)

ETFs mirror specific market indices and are available on various investment platforms in India. Some ETFs allow investors to track major US indices and gain exposure to US stocks, offering a convenient route for those interested in investing in US stocks from India.

Each of these methods bypasses the complexities of directly investing in US stocks while still offering professional management and international portfolio diversification.

How to Start Investing in US Stocks Through Mutual Funds in 2025

By now, you should have a better understanding of how to invest in US stocks through mutual funds. To help you understand better, here is a breakdown with detailed guidelines:

Step 1 – Select the Best FOF or US-Focused Mutual Fund

Begin by exploring mutual funds that invest in U.S.-focused funds, ETFs, or funds tracking major US indices like the S&P 500. Consider factors such as the management team’s track record, investment strategy, objectives, and historical performance before choosing the best fund to align with your investment goals.

Step 2 – Complete All Formalities for KYC

To begin investing, complete the Know Your Customer (KYC) process, which is mandatory under SEBI regulations. You can do this either online or offline, depending on the platform you choose to invest through.

Step 3 – Open a Demat Account for Mutual Funds

Once KYC is completed, you’ll need to open a Demat account to manage and track your mutual fund investments.

Step 4 – Choose Your Mode of Investment

Choose if you would like to invest in a Systematic Investment Plan (SIP) or as a lump sum. SIPs enable you to invest a constant amount of money at regular intervals, whereas lumpsum investment enables you to invest a high amount at one go.

Step 5 – Choose the Best Platform

Select a reliable investment platform that offers access to international mutual funds and US stocks. Share.Market by PhonePe is one such platform where you can explore curated international funds, including those offering exposure to US markets. 

Step 6 – Review and Monitor Your Investments

Track the currency movements and fund performance via an investment portal. As the value of US stocks increases, so will the net asset value (NAV) of your Fund of Funds (FOF), which is held in your Demat account.

Top Benefits of Investing in US Stocks

After following the steps to invest in US stocks, you will gain several benefits, including:

1. Risk Reduction and International Diversification

Investing in US stocks allows you to diversify your portfolio internationally, reducing the overall risk of your investment. For instance, during 2022, the S&P 500 outperformed India’s Nifty, which saw a decline of 4.1%. International diversification helps balance your risk against adverse market trends in India.

2. Access to Global Brands and High-Growth Sectors

By investing in US stocks, you gain exposure to global giants like Apple, Microsoft, and Tesla, which have shown remarkable growth. For example, Apple’s stock surged by 45% in 2023, and Microsoft saw an impressive 55% growth. Investing in US stocks gives you a chance to leverage the success of world-class organisations.

3. Currency Appreciation and Easy Investment Process

If the US market provides an 8% return and the rupee depreciates by 5%, your net return in INR would increase to 13%. 

Risks of Investing in US Stocks

Like any investment, there are certain risks associated with investing in US stocks:

Exchange Rate Risk

Fluctuations in the USD-INR exchange rate can impact your returns. A stronger rupee could reduce your profits, while a weaker rupee might increase them.

Higher Fees and Expense Ratios

FOFs and international mutual funds generally have higher expense ratios, ranging from 1.5% to 2.5%. These higher fees could reduce your returns over time, especially if you are investing for the long term.

Liquidity Risks

Some international mutual funds, like FOFs, may have lower liquidity, which could make it challenging to redeem your units quickly. If you need urgent funds, this could create an issue.

Regulatory Risks

Changes in regulatory policies or global events (such as tariff wars) could impact the US stock market. For example, tariff policies during the Trump administration led to significant declines in indices like the Dow Jones. 

What are the Tax Implications of Investing in US Stocks via Mutual Funds?

Investors should be aware of the tax implications of investing in US stocks via mutual funds in both India and the U.S Let’s break them down:

Tax Laws & Rates in India

• International mutual funds are taxed as debt funds in India.
• Short-term capital gains (for holdings of less than 3 years) are taxed according to your income tax slab.
• Long-term capital gains (for holdings of more than 3 years) are taxed at 20% with indexation benefits.

Are US Stocks Right for Everyone?

US stocks are ideal for investors looking to diversify their portfolios and enhance returns. These funds provide exposure to high-growth US sectors and have a history of strong performance. Investing in US stocks may be particularly beneficial for:

• Risk-takers: Investors with a high-risk appetite seeking significant growth.
• Diversification-seeking investors: Those who want to mitigate risk by diversifying internationally.
• Long-term investors: US stocks are suitable for those looking to ride out market volatility and benefit from long-term growth in the US market.

Checklist for Investing in US Stocks

Before making your investment, ensure you consider the following factors:

• Currency risk due to exchange rate fluctuations.
• Political and legal risks that could affect the US market.
• Higher costs that might reduce your investment returns.
• Tax implications that could impact your net profits.
• Market volatility may diminish potential returns.

Conclusion

If you’re considering investing in US stocks, the above guide should help you navigate the process. With increasing accessibility through SIPs and a range of options available, US stocks are poised to become a cornerstone of future growth for Indian investors. Assets under US-focused mutual funds are expected to grow significantly by 2026, driven by strong regulatory frameworks and high growth potential.

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