Foreign stock market investing has grown in recent years as market
participants become more informed about opportunities and access to
foreign markets have increased. New investment vehicles have also
been introduced which allow investors to gain exposure to foreign
stocks without actually purchasing them from the native country. Brokerage
platforms that cater to foreign stock trading also permit investors
at the retail level to gain access to a diverse range of foreign markets
without incurring high transactions costs. Previously, this access
was restricted to investors with large accounts in an institutional
environment. This article will cover some ways for investing in foreign
stock.
Interactive Brokers Account:
The Universal Account at Interactive Brokers allows investors with
$10,000 to open an account in the nominated currency of choice.
Account trading privileges can be configured across stock, forex,
currency, futures and option asset classes. With over 70 international
markets to choose form, investors and traders can use this account
for investing in foreign stocks. In most cases, individuals have
primary interest in a handful of markets. Data access privileges
need to be set for your markets of choice. These fees are passed
on by the exchanges and are necessary for receiving data and quotations
from the markets of interest.
American Depository Receipts:
Foreign companies trade on the US markets via American Depository
Receipts (ADR's). ADR's are issued by foreign banks and each one
represents one or more shares of a foreign stock. This is a way
to gain exposure to foreign stock market opportunities without having
to have an account to buy the stock in the native country. One can
purchase shares in companies that have principal business activities
in countries such as: China, India, Taiwan, Brazil, Australia, Singapore,
Japan, Brazil, Mexico and Argentina.
Exchange Traded Funds (ETF's):
Exchange traded funds are a basket of stocks that trade on an exchange.
ETF's focus on sector, region or asset classes. In the US, for instance,
there are many ETF's which are constructed based on foreign stock
investment holdings or specific regions. If you are interested in
China, you can gain exposure to this region by purchasing a fund
such as the Powershare Golden Dragon Halter USX China Fund ETF.
There are many other funds that comprise a basket of stocks from
regions such as Brazil and India. The Wisdom tree company has an
ETF based on high yield Japanese securities. You can discover more
foreign stock investing vehicles by investigating the ETF centers
on the Wall Street Journal (www.wsj.com) or Marketwatch (www.marketwatch.com)
websites.
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