Vested Review: A Gateway to US Stocks and ETFs for Indian Investors

The Indian stock market offers a plethora of investment opportunities, but for investors seeking diversification and exposure to global giants, the US market holds immense appeal. Vested Finance emerges as a potential solution, allowing Indian residents to invest in US stocks and ETFs directly from India. This in-depth review explores Vested's features, fees, benefits, and potential drawbacks to help you decide if it's the right platform for your investment goals.

What is Vested?

Vested is a fintech platform that simplifies investing in US stocks and ETFs for Indian residents. Launched in 2016, it removes the complexities associated with traditional methods like international brokerages and eliminates the need for a US bank account. Vested operates as a Registered Investment Advisor (RIA) with the Securities and Exchange Commission (SEC) in the US, ensuring regulatory oversight for investor protection.

Benefits of Investing in US Stocks and ETFs with Vested

• Diversification: The US stock market boasts a wider range of established companies and innovative startups compared to the Indian market. Vested allows you to diversify your portfolio beyond Indian equities, mitigating risks associated with a single market.
• Exposure to Global Leaders: Invest in iconic companies like Apple, Amazon, Microsoft, and Tesla, gaining potential growth from the performance of these established players.
• Invest in Fractional Shares: Unlike traditional brokers requiring whole share purchases, Vested allows you to invest in fractional shares. This feature is particularly beneficial for high-priced stocks, making them more accessible to investors with limited capital.
• Zero Commission Fees: Vested charges no commission fees for buying and selling US stocks and ETFs. This is a significant advantage compared to traditional brokers who typically charge per-trade commissions.
• Fractional Currency Conversions: Invest in US stocks with rupees, eliminating the need for currency conversions beforehand. Vested handles the conversion process at competitive exchange rates.
• Tax-Efficient Investing: Vested offers tax-harvesting features to help investors optimize their capital gains taxes. This strategy involves strategically selling investments at a loss to offset capital gains from profitable ones.
• User-Friendly Platform: Vested provides a user-friendly mobile app and web platform, making it easy to navigate for both experienced and beginner investors.

Investment Options on Vested

Vested offers a wide range of US stocks and ETFs, including:

• Large-Cap Stocks: Invest in well-established companies with a proven track record and potential for steady growth.
• Technology Stocks: Gain exposure to the ever-evolving technology sector with investments in companies at the forefront of innovation.
• Consumer Staples: Invest in companies that provide essential goods and services, offering a degree of stability during economic downturns.
• ETFs (Exchange-Traded Funds): Invest in a basket of stocks that track a specific market index or sector, providing instant diversification with a single purchase.

What are Vested Vests?

• Vests are ready-made, curated portfolios of US stocks and ETFs.

• Each Vest has a specific investment theme or strategy, making it easy for investors to gain diversified exposure based on their goals.

• Vested partners with experienced investment advisors to design these Vests, ensuring professional management and asset allocation.

Types of Vests

Vested offers a variety of Vests, including:

• Asset-Based Vests:
  • Focus on providing diversification across different asset classes like US stocks, bonds, and REITs (Real Estate Investment Trusts).
  • Example: Vested's "All-Weather Vest" is inspired by Ray Dalio's All-Weather portfolio strategy.

• Theme-Based Vests:
  • Center around specific sectors or industries like technology, clean energy, or healthcare.
  • Example: The "Cloud Kings Vest" focuses on major players in the cloud computing industry.

• Strategy-Based Vests:
  • Aim to follow specific investment strategies or philosophies.
  • Example: The "Quality at a Fair Price Vest" invests in companies with strong fundamentals and reasonable valuations.

Risk Profiles

• Vests come with varying degrees of risk depending on their focus and composition.

• Asset-based Vests tend to be less volatile, while theme-based can be more concentrated, thus potentially having higher risk/reward profiles.

• Vested provides information about the risk profile of each Vest.

Who are Vests Suitable for?

• Beginner Investors: Vests offer a guided approach to investing in US markets. The built-in diversification and professional curation help beginners build a solid foundation.

• Investors Seeking Specific Sectors: Theme-based Vests let you invest in sectors you believe in without picking individual stocks.

• Investors Wanting Simplified Diversification: Asset-based Vests can be a great option if you want exposure to broader US markets beyond specific industries.

• Investors with Limited Time for Research: Vests save the effort of extensive stock research and portfolio structuring.

Important Considerations

• Alignment with your goals: Ensure a Vest's theme aligns with your investment objectives and risk tolerance. Do some research on the underlying assets to understand what you're investing in.

• Fees: Some Vests might have associated fees beyond Vested's standard charges.

• • Not Actively Managed: Vests may have periodic rebalancing, but they are not designed for frequent trading or tactical adjustments like a managed fund.

Advanced Features or Limitations

Order Types

• Basic Orders: Vested primarily supports market orders for buying or selling. This means your order will be executed at the best available price at the time of placement.

• Limited Advanced Orders: There is some support for limit orders. You can set a maximum price for buying or a minimum for selling.

• Missing Order Types: Vested currently doesn't offer other common advanced features like: * Stop-Loss Orders: No ability to automatically sell if a stock drops below a certain price. * Stop-Limit Orders: More nuanced orders combining aspects of limit and stop-loss functionality. * Good Till Canceled (GTC) Orders: No option for orders to remain active beyond a single trading day.

Margin Trading

Vested does not provide margin trading facilities. This means you cannot borrow funds from the broker to increase your buying power, which would also amplify potential losses.

Other Complex Strategies

• Options Trading: Vested does not offer the ability to trade options contracts.

• Short Selling: You cannot short sell stocks on Vested, as it's designed primarily for long-term investing in US markets.

Why the Focus on Simplicity?

Vested's approach seems geared towards simplicity and long-term investing. Their platform and features cater more to:

• Beginners looking for straightforward entry into US markets

• Investors who prioritize buying and holding for diversification

• Those who want fractional shares and a zero-commission structure

Who Might Find Vested's Features Limiting

• Active Traders: Traders needing advanced orders, real-time data, or charting tools will find Vested lacking.

• Investors Employing Sophisticated Strategies: If you use options, margin, or short-selling, Vested isn't suitable.

Alternatives If advanced features are essential, consider:

• Traditional Indian Brokers with US Access: They may offer more order types and tools but likely have commissions and higher minimums.

• • International Brokers: Platforms like Interactive Brokers provide a full suite of advanced tools, options, margin trading, etc., but can be more complex and expensive.

Account Opening and Funding Process

Opening a Vested account is a relatively simple process. You'll need to provide your PAN card, address proof, and complete a KYC (Know Your Customer) verification. Once your account is verified, you can fund it using various methods like UPI, bank transfer, or net banking.

Fees and Charges

As mentioned earlier, Vested charges no commission fees for buying and selling US stocks and ETFs. However, there are a few other fees to consider:

• FX Markup: A minimal markup is applied when converting rupees to US dollars for investment purposes.
• Account Inactivity Fee: A fee is charged if your account remains inactive for an extended period.
• Withdrawal Fees: A minimal fee is charged for withdrawing funds from your Vested account to your Indian bank account.

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Tax Implications for Indian Investors in US Stocks: A Filing Guide

Investing in US stocks and ETFs with Vested has tax implications in India. You'll be liable to pay capital gains tax on any profits earned from these investments. The applicable tax rate depends on the holding period of your investments (short-term or long-term) and your tax bracket. It's crucial to consult with a tax advisor to understand the specific tax implications for your situation.

Here's a breakdown of the taxes you might encounter and how to approach them when filing your Income Tax Return (ITR):

Types of Income Taxed:

• Capital Gains: Profits earned from selling US stocks are subject to capital gains tax in India.

• Dividends: Dividends received from US companies are also considered taxable income in India.

Capital Gains Tax:

• Holding Period: The tax rate depends on how long you hold the US stock before selling it (holding period).

• Short-Term Capital Gains (STCG): If held less than 24 months, taxed at your income tax slab rate.

• Long-Term Capital Gains (LTCG): If held for 24 months or more, taxed at a flat rate of 20% with indexation benefit. Indexation adjusts the purchase price for inflation, potentially reducing your taxable gains.

Dividends:

• Flat Tax: Dividends from US companies are subject to a flat 25% withholding tax by the US government under the Double Taxation Avoidance Agreement (DTAA) between India and the US.

• Foreign Tax Credit: You can claim a credit for this 25% withholding tax paid in the US against your Indian tax liability on these dividends.

Filing your ITR:

• Schedule CG: Report capital gains from US stocks on Schedule CG of your ITR form. Mention the holding period, purchase price, sale price, and any claimed indexation benefit.

• Schedule OS: Report any dividend income received from US companies on Schedule OS of your ITR form.

• Tax Deduction Certificate (TDC): If you received a dividend from a US company with a registered branch in India, you might receive a Tax Deduction Certificate (TDC) reflecting the tax deducted at source (TDS) in India.

Things to Keep in Mind While Filing ITR:

• Maintain Records: Keep all purchase and sale records for your US stocks, including dividend income statements, for accurate tax filing.

• Consult a Tax Advisor: Tax laws can be complex. Consulting a qualified tax advisor specializing in international investments is highly recommended. They can guide you through the specific requirements based on your unique situation and income level.

• • Foreign Income & Assets: If your total income from foreign sources exceeds a certain threshold, or your total foreign assets exceed a specific limit, you might need to file additional forms with your ITR.

Is Vested Right for You?

Vested is a compelling platform for Indian investors seeking an easy and affordable way to invest in US stocks and ETFs. Here's a breakdown to help you decide:

Who Should Consider Vested:

• Investors Seeking Diversification: If you're looking to diversify your portfolio beyond the Indian market and gain exposure to global leaders, Vested offers a convenient solution.
• Budget-Conscious Investors: With zero commission fees and fractional share purchases, Vested caters to investors starting small or wanting to invest in high-priced stocks.
• Tech-Savvy Investors: Vested's user-friendly mobile app and web platform make it ideal for investors comfortable managing their investments online.

Who Might Want to Look Elsewhere:

• Active Traders: Vested's platform may not cater to active traders who require advanced charting tools and real-time market data.
• Investors with Large Capital: If you have a significant amount of capital to invest, traditional brokers might offer more investment options and potentially lower FX markups for larger transactions.
• Investors Needing Regular Customer Support: If you require frequent or real-time customer support, established brokerage firms might provide a more robust support infrastructure.

Alternatives to Vested

Here are some alternatives to consider for investing in US stocks and ETFs from India:

• Traditional Brokerages: Established Indian brokerages like Zerodha or ICICI Direct offer access to US markets, but typically involve commission fees and may require a minimum investment amount.
• Global Investment Platforms: Interactive Brokers or Charles Schwab offer a wider range of investment options but have higher account minimums and potentially complex account opening procedures for Indian residents.

Comparing Platforms for Investing in US Stocks & ETFs from India

• Regulations: Vested is a US-registered RIA, while traditional Indian brokerages might have different regulatory frameworks. International brokers have their own regulations depending on their country of domicile.

• Account Inactivity Fees: Vested charges a fee for inactive accounts. Check individual brokerages for their policies.

• • Withdrawal Fees: Vested charges a fee for withdrawals to Indian bank accounts. Compare withdrawal fees across platforms.

Success Stories: Testimonials from Real-World Investors

1) The Diversification Seeker

• Name: Priya S.

• Background: Experienced investor in the Indian stock market, seeking more diversification to reduce overall portfolio risk.

• Quote: "Vested opened up a whole new world of investment possibilities. I now have exposure to strong US companies that weren't accessible before. It feels good to spread my investments across different economies."

2) The Tech Enthusiast

• Name: Rahul P.

• Background: Young professional with a keen interest in disruptive technology companies.

• Quote: "I've always wanted to own a piece of the big tech giants, but their share prices were out of reach. Thanks to Vested's fractional shares, I'm building a portfolio of my favorite innovators."

3) The Beginner Investor

• Name: Neha R.

• Background: College student with limited investment experience.

• Quote: "Vested made investing in the US market so simple and less intimidating. Their app is easy to use, and I love that I can start with small amounts and still invest in companies I believe in."

4) The Strategic Investor

• Name: Vikram M.

• Background: Seasoned investor who appreciates curated portfolios.

• • Quote: "I don't have the time to research every individual stock. Vested's Vests offer a well-constructed way to invest in themes I find compelling, like cloud computing or the future of healthcare."

Conclusion

Vested bridges the gap for Indian investors seeking exposure to the US stock market. Its user-friendly platform, zero commission fees, and fractional share purchases make it an attractive option for beginners and budget-conscious investors. However, if you're an active trader with substantial capital or require extensive customer support, traditional brokers or global investment platforms might be better suited.

Before Investing with Vested

• Do your research: Research the US stocks and ETFs you plan to invest in and understand the associated risks.
• Consult a financial advisor: Discuss your investment goals and risk tolerance with a registered financial advisor to determine if Vested aligns with your overall investment strategy.
• Understand the tax implications: Familiarize yourself with the tax implications of investing in US stocks and ETFs as an Indian resident.

By carefully considering these factors, you can make an informed decision about whether Vested is the right platform to help you achieve your investment goals in the US market.

Additional Considerations

• Account Security: Vested employs industry-standard security measures to protect user data and assets. However, it's essential to maintain strong passwords and practice safe online habits.
• Regulatory Environment: The regulatory environment for international investments can change. Stay updated on any regulatory changes that might impact your investments with Vested.

Final Thoughts

Vested offers a unique and valuable service for Indian investors seeking a convenient and cost-effective way to participate in the US stock market. By carefully weighing the benefits and drawbacks and conducting thorough research, you can determine if Vested is the key to unlocking your US investment goals.

FAQ: Addressing Your US Investment Concerns

1. Currency Fluctuations: How does the USD/INR exchange rate affect my returns?

• Impact: Currency fluctuations can amplify gains or losses. As you invest in US stocks with rupees, your returns when converted back to INR depend on the exchange rate at the time of selling.

• Example: If you buy US stocks when the USD/INR is 80 and sell them when it's 70, you gain an additional rupee advantage, even if the stock price remained the same. The opposite happens if the exchange rate worsens.

• Mitigating Risk: Consider long-term investing to ride out short-term currency volatility. Some platforms might offer hedging tools, but those come at an additional cost.

2. Time Difference: Can I place trades during Indian market hours?

• Market Hours: US markets operate on Eastern Time, with significant overlap with Indian nighttime. You cannot trade directly on the US exchange during Indian market hours.

• Vested's Solution: Vested allows you to place orders during Indian daytime hours. They accumulate these orders and execute them during US trading hours. There might be a slight delay between your order placement and when it gets processed on the US exchange.

3. Taxation: What taxes will I need to pay on US stock investments?

• Capital Gains: Gains on selling US stocks are subject to capital gains tax in India. Short-term capital gains (held for less than 24 months) are taxed as per your income tax slab. Long-term capital gains (held for longer) are taxed at a flat rate of 20% with indexation benefits.

• Dividends: US companies might pay dividends, which are also taxable in India.

• Consult a Tax Advisor: Tax laws are complex and can change. It's highly recommended to consult a qualified tax advisor for personalized advice on how to declare your US stock investments and your tax liabilities.

4. Platform Safety: What if Vested shuts down?

• Asset Protection: Remember, your stocks and ETFs are not directly held by Vested. They work with a US-based custodian (DriveWealth) where your assets reside. Even if Vested ceases operations, your investments will remain with the custodian.

• Finding Your Stocks: Make sure you have records of your holdings independent of the platform for easy recovery in such a scenario.

• • SEBI Regulations: Vested's partner broker-dealer in India is subject to SEBI regulations, offering some degree of oversight.

Disclaimer: The information provided in this article is for educational and informational purposes only. It does not constitute investment advice, tax advice, or a recommendation to buy or sell any specific stocks or ETFs. Investing in US stocks carries inherent risks, including fluctuations in stock prices, currency exchange rates, and changes in tax laws. Before investing, please consult with a qualified financial advisor to assess whether investing in US stocks aligns with your financial goals, risk tolerance, and tax situation.