How to invest in Nasdaq from India?
In today’s technologically advanced world, investing in US equity markets from India is straightforward. Investing in foreign markets has become a crucial part of diversifying your portfolio.
What is Nasdaq? How does it work?
Nasdaq stands for National Association of Securities Dealers Automated Quotations; in case you didn’t know.
When it opened its doors in 1971, Nasdaq was the world’s first digital stock exchange. There are currently three indices in it.
The Nasdaq 100 index refers to the top 100 non-financial corporations listed on the exchange. The Nasdaq 100 firms account for more than 90% of the weighting of the Nasdaq Composite Index.
The Nasdaq Financial -100 is a collection of Nasdaq-listed financial companies
What is the difference between the Nasdaq and the NYSE?
Many people mistakenly believe that the New York Stock Exchange (NYSE) and the Nasdaq are the same. That is not the case, however. The NYSE is the world’s largest equities-based exchange and the oldest in the United States.
Most exchanges have abandoned the trading floor idea and now trade digitally. On the other hand, the NYSE still has a physical trading floor on Wall Street.
Its data center in New Jersey is also responsible for a significant portion of the trade. Nasdaq, on the other hand, lacks a physical trading floor. Since its debut, it has been trading electronically
Dealings: The primary distinction between exchanges is how securities are traded. The New York Stock Exchange is an auction-based market.
This means that both buyers and sellers submit competitive bids simultaneously. A stock’s current price reflects the maximum bid a buyer is willing to pay and the lowest price a seller is ready to take.
Nasdaq, on the other hand, is a dealer-based exchange. Multiple dealers list pricing at which they could purchase or sell a particular stock in this forum. The dealer, in this case, is a Nasdaq market-maker, someone who proactively transacts stocks on behalf of traders.
Both of these markets are controlled by traffic controllers. Traffic controllers generally link buyers and sellers, but their responsibilities on the Nasdaq and NYSE are distinct.
As previously stated, a market maker is a Nasdaq traffic controller who proactively buys and sells equities on behalf of traders.
The traffic controller at the NYSE is a specialist. He is in charge of determining the stock market’s opening price, approving limit orders, and dampening interest in specific equities.
How can an Indian investor invest in Nasdaq?
1. The direct way
By opening a US brokerage account through technology platforms or a foreign brokerage with a direct presence in India, you can invest directly in the world’s leading technology businesses like Apple, Microsoft, Google, Facebook, etc., listed on Nasdaq.
You must send funds to the United States to invest in US stocks. You can do this as an Indian resident under the RBI’s Liberalized Remittance Scheme, which allows you to send up to US $250,000 per person per year.
Stocks are intrinsically expensive because their prices are denominated in dollars. However, you can acquire fractional shares, so you can start investing in your favorite firms with as little as $1.
2. The ETF way
ETFs are another option for investing in Nasdaq from India. One approach is to purchase an ETF through a brokerage platform.
One example is Index ETFs, such as the Invesco QQQ Trust, which tracks the NASDAQ 100 index. Companies including Amazon, Apple, Microsoft, Meta (Facebook), Netflix, Google (Alphabet), and Tesla are among the ETFs’ top holdings.
Another method to engage in Nasdaq from India is to buy ETFs like the Motilal Oswal Nasdaq 100 ETF or the ICICI Prudential Nasdaq 100 index fund, which invests in US indices.
You can trade in these ETFs without opening a new brokerage account in the United States. However, tracking errors in these ETFs may negatively influence your gains.
3. The mutual fund way
In this situation, you’ll most likely be investing in funds of funds or a domestic mutual fund that invests in a US mutual fund on the Nasdaq.
Since the investment would be made in Indian rupees, there is no investment restriction. This strategy, though, may prove to be more expensive. An annual expense ratio will be required of you. These funds’ expenditure ratios are often higher.
As we’ve seen, there are numerous ways to invest in Nasdaq and join the world’s second-largest stock market from India.