How to Buy Shares on Foreign Markets
Evidence of the rise of the global marketplace is everywhere. From cars to cat food, we use products made by foreign companies. Foreign investment gives investors the opportunity to diversify. In 1927, American Depository Records (ADRs) were created to make foreign investing easy. They enable American investors to own stock in foreign companies indirectly through shares in depository banks.
You can buy ADRs through U.S. brokerage firms. Large U.S. brokerage firms also can help if you wish to buy non-ADR stock on foreign exchanges.
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Things You'll Need
- U.S. brokerage account
- Foreign brokerage account
- Online brokerage account
Instructions
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Contact your U.S. broker to find out if it is able to buy the shares you wish to purchase on a foreign market. Keep in mind that, with currency fluctuations and time differences, you may not be able to purchase or sell shares at your price. Trading rules and technologies differ in foreign exchanges and your broker will charge you a higher commission for these trades.
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Open a brokerage account in the country where you want to make trades. Be fluent in the foreign language or use a broker fluent in English. You will have to wire money, exchange currency, and be subject to administration costs and foreign investment laws. Regulations may restrict or tax you when you want to return your investment to the U.S.
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Choose an online broker with global trading opportunities. E-Trade facilitates trade with Canada, France, Germany, Hong Kong, Japan, and the United Kingdom. Noble Trading and Interactive Brokers also make online trades in foreign markets.
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Tips & Warnings
If your goal is diversification and you do not have international investing experience, think about using professionally managed exchange traded funds (ETFs) and mutual funds that invest in specific countries and emerging markets.
Analyze whether the risks and inconvenience of buying shares on foreign markets forward your investment goals. There are more that 2,200 companies in 70-plus countries that do have ADRs.
References
Resources
- Photo Credit earth globe image by Goran Bogicevic from Fotolia.com
