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.
