Money Talk With Slater

Making Money Across the Board

Best Ways to Invest in Foreign Markets (Part II)

The world is a big place. Where will you invest?

Once the right type of fund is picked, the next step is deciding where in the world to invest. Most financial advisors advise that younger investors look for higher-risk funds with the probability of a huge return, while senior investors look for lower-risk funds that offer more stability. This typically translates to large emerging market exposure for younger investors and create market exposure for senior investors.

Lastly, finding certain mutual funds is as simple as using free online tools such as the Wall Street Journal Fund Screener or Yahoo! Finance Fund Screener. In the meantime, ETFs can be discovered by browsing through some of the biggest ETF providers such as iShares or SPDRs. Finally, investors must discover high-return, low-cost funds that satisfy their risk appetite and investment objectives.

Buy Individual Foreign Stocks Hassle-Free with ADRs

Investors that want a hands-on approach can simply buy numerous individual foreign stocks which are U.S.-traded securities that show ownership in the shares of foreign companies. Since they are denominated in dollars and traded on the AMEX, NYSE, or NASDAQ, ADRs don’t need any difficult currency conversion or foreign exchange transactions.

Sadly, there are several foreign stocks that aren’t available as ADRs and must be bought on foreign exchanges like the London Stock Exchange (LSE) in Europe or the Toronto Stock Exchange (TSE) in Canada. While some international brokerages provide a low-cost way to buy these stocks, like InteractiveBrokers, investors must carefully check their brokerage’s fee schedule before trading.

When your plan of selling and buying of ADRs happens in American dollars, any dividends presented to you will be denominated in the foreign currency and then changed into U.S. dollars upon distribution. As a result, there might be some currency exchange rate risk included in those situations.

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