How to Invest in US Traded Foreign Stocks

Many of the best companies in the world are based outside of the US. Luckily, it's easy for an individual to invest overseas by investing in US traded foreign stocks. All you need is a brokerage account.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Brokerage account

1. Research the company in which you are interested and see if you think it would make a good investment. This is relatively easy to do with the Internet.

2. Find out if the stock is traded in the US so you can buy it here. The easiest way to do this is to go to the company's website and look in the investor relations area. If it has American Depository Receipts it will be easy to buy.

3. Buy American Depository Receipts. Also known as ADRs, these are the easiest way to invest in US traded foreign stocks. These involve a bank buying foreign stocks and then selling receipts to investors. They trade in the US just like regular stocks. You can buy and sell them at any brokerage.

4. Check out the over the counter market if there aren't ADRs. Although this has a somewhat dodgy reputation, some very blue chip foreign companies are traded over the counter in the US rather than as ADRs. Brokerages can get you these without much trouble.

5. Invest in Exchange Traded Funds. Also known as ETFs, these allow you to buy a basket of foreign stocks. They are traded in the US and can be bought and sold like a stock with any brokerage. They often invest in stocks that aren't traded in the US and which might be hard for an individual investor to buy. There are many ETFs and they can be researched easily on the Internet.

Tips & Warnings

• Many brokerages are able to buy directly foreign stocks trading on foreign stock markets for you. It will cost more than buying US traded stocks.
• Many Canadian stocks are dual listed, meaning they are traded in both the US and Canadian stock markets. So you don't have to buy ADRs, you just buy the stock that's traded in the US market.