Looking to invest internationally? Here are five great ways to allocate a portion of your investment portfolio into foreign markets.
This acronym stands for American Depository Receipts. They are securities issued by banks which represent a certain number of shares of stock on a foreign stock exchange. They are one of the easiest ways to gain exposure to foreign brand names, for example Sony (SNE).
2. Invest in Country Funds
Investing in country funds can allow the investor to invest in a certain country without the hassle of opening an account there. In some cases, a country fund may be the only way for the individual investor to invest in a given country. For example, CH is a closed-end fund that invests in Chile stocks.
3. Invest in an Emerging Market Index
This would give wide exposure to a ranging set of emerging markets. EEM which tracks the MSCI Emerging Markets Index, has holdings in India, Mexico, South Africa, China, South Korea, Russia, Brazil and etc. Country diversification and lowering sovereign risk from concentration in a certain country are just two benefits to such an investment.
4. Invest Directly in Another Country
An account with Interactive Brokers or Saxo Bank would allow directly investing in dozens of markets (most of them are developed countries though). This may expose you to currency exchange rate risk, but may be a good way of investing if you actually have a specific company in mind which doesn’t have an ADR trading in the US.
5. Invest in Stocks Issued in the US
Some foreign companies prefer to issue their stocks in the US markets instead of their domestic bourses. Going public on NASDAQ sounds very prestigious for companies in China, and as a result they may actually be the BEST investments, as many of them are small businesses experiencing very strong growth. EDU for example is an immensely popular English training program in China that IPO’d in the US just above $20 and now trades around $70. FSLR has gained over 1000% since its IPO in November 2006. These are the growth companies and the true future of Chinese commerce.
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