- Vested Finance CEO Viram Shah shares what has kept most Indians from investing in the US and answers the reasons and reasons for investing in international markets.
- In 2020, Vested Finance closed trading revenues of $ 100 million.
- The three-year-old startup recently raised $ 3.6 million in a seed funding round.
For Mumbai-born Viram Shah, who was doing his Masters in Business Administration in the United States, it was frustrating that while Indians use most of the products of major US companies, they don’t actually invest in them.
The former JP Morgan investment analyst then teamed up with friend Darwin Arifin to launch Vested Finance – an online investment platform that allows Indian investors to invest in the US stock market.
In 2020, Vested Finance exceeded $ 100 million in trading volume. The three-year-old startup recently raised $ 3.6 million in a seed funding round from Moving Capital, Ovo Fund and TenOneTen Ventures in the US and from Inflection Point Ventures and Venture Catalysts in India.
Speaking to Business Insider, Shah shares what has kept most Indians from investing in the US and answers the reasons and reasons for investing in international markets.
Is It Even Legal To Invest?
Shah shares that the most common question he had to answer when they started Vested Finance in 2018 was whether it was legal to invest in U.S. stocks from India. Questions followed such as how to get there and what investment opportunities exist.
The answer is, Indians can start investing in the US stock market by opening an overseas account with an Indian broker, opening an account with a foreign broker, or investing through mutual funds with global stocks.
Vested has partnered with US stock brokerage company DriveWealth and worked with 25 Indian companies across brokers, bank brokers, fintech clients and distributors. “We started with a B2C (Business to Consumer) format and gained customers who would like to invest internationally. Over time, many existing financial institutions have reached out to us saying we want to offer US investments to our customers, but we don’t want to go through the hassle of partnering with US platforms and so on, ”Shah told Business Insider.
His current clients include Axis Securities, Kuvera, Angel Broking and 5Paisa.
Lack of awareness is the biggest competition
However, Shah believes that the biggest competition right now does not come from other companies, but from the fact that there is not much awareness of international investment. “The space as a whole is still evolving. A lot of things still need to be optimized on the customer journey,” he said.
But the potential is huge. In India, the number of people investing in the Indian stock market has increased dramatically.
Zerodha founder Nithin Kamath recently took to Twitter to share the number of new Demat accounts added in 2020. This is a clear indication of the increased interest in investing. December 2020 marked the fifth straight month that one million Demat accounts were added per month in India.
Here is the annual Demat supplement for the past 20 years. Stock brokers have as high a beta as possible. If someone asks … https://t.co/ROnzodOxEI
– Nithin Kamath (@ Nithin0dha) 1613734086000
And Shah believes that in an ideal scenario, every Indian retail investor should diversify their portfolio to include 15-20% international investments.
Taxes and high withdrawal fees keep customers away
Currently, the Reserve Bank of India allows an Indian to invest only up to USD 250,000 (2 crore) per year overseas without applying for special permits.
However, keep the following in mind when investing in a US stock: Profits are subject to exchange rates, and some brokers may charge high commissions.
Shah believes the withdrawal fee continues to be a huge problem for US stock investments, but the sector has improved significantly. “The withdrawal fee used to be $ 35 per transaction and is now $ 11. We expect it will continue to decline as things get leaner, ”he said.
Vested Finance, like most other stockbroking platforms, does not charge any commission. So one wonders how do they make money? “We have an upfront account opening fee of £ 399. We also have a premium plan that offers value-added services and, among other things, reduces the withdrawal fee. Over time we expect a lot of different opportunities as we will hopefully get a broker license in the future, ”he said.
Which “safe stocks” can you bet on?
While Tesla, Facebook, and Apple were the most popular U.S. stocks for Indians, pandemic-driven stocks like Pfizer, Zoom, and Netflix continued to be a hit in 2020, according to Shah.
However, for beginners on the US stock market, Shah recommends investing in exchange traded funds (ETFs). An exchange traded fund, which is very similar to a mutual fund, is a mutual fund that trades stocks, bonds, and stocks. “The best way to do this is to pick an index ETF, a technology ETF, and balance it with a debt fund and some gold investments. It’s a very simple strategy. We also offer pre-determined allocations known as vests that are popular with first-time investors, ”he said.
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