How to Trade in the Foreign Stock Markets
As the world financial markets become more connected, more investors are learning about investment opportunities in other countries. Sometimes the economic landscape at home does not provide compelling stock market strategies when compared with the advancing markets of other nations, especially developing countries. In 2010, there are many ways to trade in the foreign stock markets. Each method carries a mixture of ease versus flexibility. Some techniques for investing internationally require a lot of research, while others are quick trades that do not require extensive study of foreign companies. The strategy that works best for you depends on your goals.
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Instructions
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Purchase shares of an international exchange-traded fund (ETF). Foreign ETFs are available for nearly any country, and many mix different countries to provide investment exposure to many developing economies simultaneously. These are the easiest way to trade in the foreign stock market, because you can buy ETFs with your existing domestic brokerage account. They trade exactly as stocks do, but the actual performance of an ETF is based on the performance of its included assets. For example, the Brazil Index Fund with ticker "EWZ" tracks the Brazilian stock market. It rises with approximately equal gains as the overall stock market of that country. The All Country Asia fund under ticker "AAXJ" averages the returns of all major stock indexes of Asia, excluding Japan, so you can quickly gain exposure to that continent's stock markets. You can even gain exposure in both Brazil and Asia in the Emerging Markets Index under the single ticker of "EEM." This ETF combines major Asian stock market returns with the Brazil market to provide an average performance of these countries for your portfolio. Dozens of other ETFs track nearly any country of interest.
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Buy shares of foreign companies that trade on the American stock exchanges. Some international corporations seek exposure to American investors, so they list their stocks directly in American markets so anyone can buy shares. These are called American Depository Receipts (ADRs), and anyone can buy them just like regular stock. This is a convenient way to invest in specific foreign companies under a normal domestic brokerage account. However, the options are limited as not all foreign companies provide ADRs. Usually only the largest companies in the world choose to list on exchanges outside their home nation.
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Open an international brokerage account that provides direct access to other stock exchanges. If you are a hands-on investor who doesn't mind researching foreign companies to find individual stocks worth buying, this is the most flexible option. A global trading account gives you access to any public stock on the exchanges you trade. You are not limited to ADRs, and you can be specific with the stocks you wish to own. Brokerage services for international investing are becoming more popular and available, so opening such an account should not be a problem.
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