International stocks offer great opportunities to diversify and broaden your portfolio, but they also pose unique risks.
Political and economic unrest in foreign countries can significantly lower stock returns. Furthermore, different rules can limit how much data investors have access to at once and its timeliness. Furthermore, investors need to understand investment taxes.
Multimarket accounts
As emerging economies expand and middle classes worldwide become more globally connected, financial advisors often suggest allocating a portion of your portfolio towards international stocks. You can purchase them via direct investing, ADRs and mutual funds.
But investors must keep certain key considerations in mind when investing internationally, including rules regarding data reporting from publicly-traded companies in different countries and lower liquidity than that in the U.S. markets.
Today it has never been simpler and cheaper to invest in international stocks. To do this, the easiest and simplest method is through your local stock broker; many offer American depository receipts (ADRs) from multiple foreign markets. Or use a global online brokerage account, often free to open with trade fees ranging from $0.65 per share on Schwab to zero fees when buying and ETFs or stocks and ETFs altogether - see example for pricing at Schwab global account).
Brokers that buy foreign shares
Foreign stock investing can be an excellent way to expand your portfolio and gain exposure to companies experiencing rapid expansion. Before taking the leap, however, several considerations must be kept in mind before taking the plunge: First is that trading on international exchanges requires using a broker with access to these markets; also currency conversion fees and brokerage charges could apply as additional expenses.
Modern trading technology has made international stock investments easier for brokers. If your current broker can only buy local shares, it might be time to switch brokers for greater options. International investments include those available in developed economies like UK, Australia and Japan as well as emerging ones with the potential for rapid growth - choosing which international stocks is appropriate will depend on your risk tolerance, cash flow needs and investing experience.
Local offices or partners
If you're investing internationally, local offices or partners may be necessary to buy foreign shares more cost effectively and more quickly. While this method may be less risky due to varied securities regulations and reporting requirements between markets, foreign companies may fail to meet U.S. investors' standards for transparency and communication.
International stocks offer investors significant diversification and new opportunities to take part in explosive growth. Many of the fastest-growing economies outside the US are projected to experience some of this century's most remarkable economic expansion; investing in their stocks can give you a share of it. ADRs (American depositary receipts) represent equity stakes equal to predetermined number of shares on an exchange where these companies operate - great examples being Dutch semiconductor equipment maker ASML Holding and Chinese video streaming site iQiyi are just two such ADRs traded globally.
Local bank accounts
For most investors, purchasing international stocks through your local stock broker is the easiest and simplest way to invest. Unfortunately, getting funds into your broker account may prove challenging at times; to facilitate the process faster you may wish to open a local bank account in addition to using your broker if they have relationships with certain banks that could make this easier for you.
Alternately, you could also use a local bank transfer. This EFT service is commonly utilized in certain countries and regions for sending funds between banks in that same nation or region - similar to domestic ACH transfers but typically cheaper.
EFT provides many advantages, from reduced fees and quicker transfers, to grouping payments together and sending them all at the same time, saving both time and money by consolidating them into one payment run; additionally, funds can be converted into local currencies to save on exchange rates.
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