If you’re an avid follower of global equity markets, you may wonder if Indians can invest in stocks of US companies. Are there brokerages that allow it? Is it cost-effective? Is it legal? Can you become a shareholder in your favourite American companies? How much can you invest?
The Reserve Bank of India (RBI) mandates that every Indian citizen can invest up to $250,000 per year in overseas stocks. This means that if you’re a family of two, you could put in half a million dollars in US stocks annually.
But, is there a way to do it quickly, directly, and securely?
Meet Vested, a 15-month-old startup that is simplifying investing in the US stock market for Indians. It is headquartered in Mountain View, California, with an office in Mumbai.
Started in August 2018 by three South Asian students at UC Berkeley, Vested claims to be the first online brokerage, which allows Indians to make commission-free investments in US equities, and also undertake fractional investing (less than one full share of equity is known as a fractional share).
What is Vested and what it offers
On Vested’s web-and-app-based platform, you can create an account seamlessly. It requires no minimum deposit, charges zero commission, and has a simplified remittance process (INR to USD) via top Indian banks (ICICI, HDFC, Axis, and YES Bank).
The startup credits the first $5 as soon as you open an account.
Viram Shah, Co-founder and CEO of Vested, tells YourStory, “We’re the first platform that enables Indians to invest in US stocks and ETFs directly and legally. Owing to fractional investing capabilities, partnerships with Indian banks, and a curated list of stocks, the international investing process is now 10X easier.”
The platform has curated a list of 120 US stocks spanning across sectors like tech, real estate, healthcare, finance, telecom, among others. These include companies listed on NYSE and NASDAQ, and some of the world’s most valuable brands including Google, Microsoft, Amazon, Apple, Facebook, Netflix, and Uber.
As an investor, diversification in foreign stocks allows you to mitigate the risks in your investment portfolio, insulating you from local stock market fluctuations.
Vested claims that it already has “thousands of brokerage accounts” on its platform and is growing at a rapid pace. It says more than 25,000 users have already subscribed to its emailer.
Besides India-born Viram, the startup’s other co-founders are Darwin Arifin from Indonesia, Eric Huynh from Hong Kong, and Yinghan Lin from Singapore. “We were classmates in the Bay Area, and started up from our houses in Berkeley,” Viram reveals, adding, “We all have similar backgrounds and are connected on the same pain point.”
Key product features
Besides kickstarting the users' investing process with a complimentary $5 in their accounts, Vested also offers stock recommendations matching their risk profile.
“We spent the first few months just interviewing potential customers. We found that there were two core pain points: foreign investing was too expensive, and the process was very cumbersome. People would think about it and then give up. Also, no platforms allowed fractional investing. I wanted to buy an Amazon share, but it cost Rs 1.5 lakh, and I couldn’t.”
Hence, the startup decided to allow micro-investing or fractional investing for as low as $1. “That’s how you enable access and build trust,” claims the CEO.
In less than three months, Vested’s app has recorded more than 10,000 downloads on Google Play Store. It offers a simple dashboard to track portfolio value, total investment amount, cash amount, analysis of daily returns, total returns for each stock or ETF invested in, stock performance charts, investment data, share information, and more.
The app also shows a sector-wise breakdown of US stock performance and brings the latest finance news and insights from The Financial Times, Bloomberg and other sources.
Investors can even generate tax documents on the app to produce in front of tax authorities at the end of every financial year.
Operations, biz model, funding
Over “three-quarters of a million dollars” has been invested on Vested so far through 3,000 brokerage accounts. The startup is targeting one lakh investors in five years.
Viram says, “At present, our monetisation is based on an advisory kind of a model. We're also in talks with partner-banks for commissions on fund transfers."
“Going ahead, we plan to roll out pre-built portfolios for customers, for which they would be charged an upfront fee of $3,” he adds.
The startup has raised about $1 million from a clutch of angel investors in India, Singapore, and the US.
In January, Ovo Fund in the US and Hustle Fund from Singapore as well as a few renowned angels from India put in an undisclosed sum in the company. Later, in June, Vested received prize money from UC Berkeley’s startup accelerator LAUNCH.
And, in July, it went on to close an undisclosed pre-seed round from Mumbai-based incubator Venture Catalysts.
There’s more to come with personal investing in foreign stocks picking up heat.
Earlier this month, at YourStory’s flagship annual event TechSparks, Zerodha Founder Nithin Kamath revealed that his company was in talks with a few US brokerages to allow Indians to invest abroad. As India’s largest brokerage firm, Zerodha's move could potentially trigger a lot of action in the space.
Viram, too, reckons that a B2B model is the way to go in the long run. “We started as a B2C model and went directly to the retail customer. But now, we want to partner with companies that can offer our services to their clients,” he says.
Vested wants to ensure that at least 15 percent of its user’s investment portfolio is international. Viram signs off with, “Our mission is to enable sustainable wealth creation by helping local investors to go global.”
(Edited by Saheli Sen Gupta)