Transcript

In this video, we will take a look at 6 most common investing mistakes you need to avoid when investing in the US stock markets. So, let’s dive in!

Mistake 1: Focusing on picking certain stocks

First, focusing on picking certain stocks is one of the key mistakes you should avoid when investing in the US markets. Your investment portfolio should be tailored to your specific risk profile and should consist of an appropriate mix of stocks and ETFs. Ideally, if you are new to the US markets, you would want to start with an ETF-only portfolio.

Mistake 2:  Investing in a stock just because it is trending

The second mistake to avoid is investing in a stock just because it is trending. Do not invest in the stocks just because they are in the news or because you feel that you have missed out on a stock’s rally and that you cannot afford to lose out any more. It’s important to remember that you don’t really invest in a stock but actually the business that is underlying the company. Similarly, never invest based on hot stock tips or advice on social media.

Mistake 3: Trying to time the market

So, the third mistake to avoid is trying to time the market. Buying a stock when the price is at the lowest and selling it when it is at the highest is something everyone would like to do, even I would. However, remember that even the most successful investors are not able to time the markets. Rather than trying to time the market, it’s important to invest consistently and with a longer time horizon especially when starting off in a new market like the US.

 Mistake 4:  Ignoring tax implications

Another mistake to avoid is ignoring tax implications. There is a capital gains tax on shares purchased in the US from India. You will not be taxed in the US, however there are tax liabilities in India. When investing in stocks, if you hold them for more than 24 months, the taxation rate in India is at 20% with indexation benefit. If you invest for less than 24 months, it’s considered as short-term capital gain and is taxed as per your income tax slab. For ETFs the long-term threshold is 36 months. Dividends are taxed at 25% and the tax is withheld in the US. What you can do is you can take credit for this dividend tax paid when filing for taxes in India.

Mistake 5: Not understanding forex rates

Another mistake to avoid is not understanding foreign exchange or forex rates. When you are transferring Indian funds or rupees to your brokerage account, the exchange rate matters. Because you are converting rupees to dollars. Banks will charge you a foreign exchange conversion fee. And hence, it’s advisable to use a platform say Vested that has tie-ups with banks to provide you favourable exchange rates and a much lower markup fee. 

Mistake 6:  Liberalized Remittance Scheme Regulations

Finally, you should not ignore  the Liberalized Remittance Scheme regulations or the LRS regulations when investing in the US markets from India. LRS is what governs how much money an Indian can send internationally and for what purposes. Under the LRS, an Indian cannot take margin to invest internationally, so you cannot take a loan, you cannot invest in speculative instruments, so derivative products you cannot do, you cannot trade in forex pairs.

Alright! So, that was it for today. These are all the 6 mistakes that you should always keep in mind to make the most of your US investing journey as you get started becoming a global investor!

Ready to begin your US investment journey?

Sign up with Vested today.

Sign up now

Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.