Coverage

There’s never been a time in which it’s easier to capitalize on emerging economies and developing nations, as well as established companies in Europe and Asia. Investing in foreign stocks also offers diversification, so that you’re not tied to the fortunes of a single country. Most analysts view a 10% stake as conservative, while as much as a third would be considered aggressive. Keep in mind, such stocks may be more volatile, due to increased political risk and less regulation than US-based investments. In addition, currency risk needs to be taken into account.

A few of the ways to make foreign investments include direct investment; American depositary receipts (ADRs); global depositary receipts (GDR); mutual funds; or exchange-traded funds (ETFs)

• Foreign stocks can be bought directly through a global account through many home country brokers, or by opening an account with a local broker in the desired country. Note, this can be very complicated and is not for casual investors.
• ADRs are issued by foreign companies, and listed, traded, and settled just like US shares.
• Like ADRs, GDRs are depository receipts but are traded on foreign exchanges.
• Mutual funds may be the simplest way to gain access to foreign markets—purchased just like any US fund, in a wide variety of types, from conservative to aggressive.
• International ETFs are a similarly convenient way to access foreign markets, easy to buy and sell without trying to pick individual stocks.

Foreign investing can be exciting, but risk tolerance always needs to be part of the equation.