Buying stock in a company provides you with the opportunity to benefit from the company's growth and profits. With the increased globalization of business you might find yourself wanting to invest in foreign-based companies. Some U.S.-based investment brokerage firms provide their clients with access to foreign stock markets. Although buying shares in overseas companies isn't as easy as investing in domestic ones, there are various ways you can invest in foreign markets.
1. Consult with your investments broker to determine whether they provide access to foreign stock markets. If your current broker does not offer this service you will need to open an investments brokerage account with a firm that does. Deposit sufficient funds into your brokerage account to cover your stock trade.
2. Research the company whose stock you wish to buy. It may be more difficult to obtain reliable information on foreign companies than it is on U.S.-based companies. Make sure the stock of the overseas company you want to buy is in line with your investment temperament and objectives.
3. Enter your buy order with your investments broker. The type of order you enter for overseas markets can be limited by your broker. The most common types of buy orders for overseas stock include the buy limit order, which places a limit on the amount per share you are willing to pay, and the buy at the market order, which will execute at the current market price of the stock. Some investment brokerage firms discourage placing these orders due to the risk.
- You can gain exposure to foreign stocks without going to the overseas market by purchasing American Depository Receipts (ADRs). ADRs represent ownership in foreign countries, but are traded on U.S. exchanges and are bought and sold with U.S. dollars. You can also gain exposure to foreign stocks by investing in mutual funds that invest in overseas companies and markets.
- Stocks purchased in overseas exchanges must usually be purchased with local currency. You will usually have the expense of converting your U.S. dollars to the local currency in addition to any commissions and fees charged by your broker. Gains on foreign stocks can also result in both foreign and domestic taxation. All stocks, both domestic and foreign, involve a level of risk -- you can lose some or all of your investment.
Items you will need
- Investments brokerage account
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