How to Trade European Stocks

In turbulent economic times, it's not a bad idea to look abroad for foreign investments. Other economies, such as China's, are doing far better than ours, so why not cash in? That said, you must do your research. With the Internet at its apex, there's no excuse not to research your potential investments in great detail. You might also opt for a professional research team to do the legwork for you. Here's a guide on how to trade European stocks.

Difficulty:

Moderately Challenging

Instructions

Things You'll Need

• Foreign newspapers
• Internet access
• Broker with a hand in active overseas stocks
• Investment guidebook (for the beginner)

1. Go with your instincts. Perhaps you were visiting Germany and saw that a particular tire company's brand was everywhere you went. Or maybe your sister just flew back from Japan and has been raving about the latest gaming technology produced there. Whatever the case, your intuition is a great first step towards making your investment decision.

2. Use your reasoning skills. While you may have a good hunch, perhaps it's misfiring. This is where a broker that you trust can be of service. He may not be allowed to give you advice, but the same brokerage should have a research team that will provide up-to-date information on the foreign investments you're targeting.

3. Make sure you have the best papers from abroad. Top international newspapers with offices in the United States as well as your target country (England, France, etc.) will list the information you need. "The Financial Times," for example, lists World Equity Markets at a Glance, including Australia, Columbia, Mexico, Morocco, New Zealand and dozens of other countries (see Resources below).

4. Spend time in the country in which you're doing business. If you can't do that, make sure, again, that you have a broker you trust, and that they have a presence in wherever it is that your dream stock is located. Don't buy unfamiliar stocks in foreign countries without a strong understanding of what's involved. It's a good idea if the stock has an ADR (American Depository Receipt), a stock that trades in the United States but represents a specified number of shares in a foreign corporation. Or at least make sure your brokerage has a global presence in trading across borders. Whatever you do, don't put most of your savings into unfamiliar foreign stocks.

5. Make the trade and watch it grow--or not. Remember, the stock market is hardly foolproof. This is, at the end of the day, high stakes gambling. Make sure you're not investing at the expense of your child's college fund or the sanctity of your IRA.

Resources

• Financial Information
• The Financial Times