Knowing how to buy foreign stocks is a basic skill if you want to have a diversified portfolio (specially given the current state of the U.S economy). This article briefly explains how to buy and sell foreign listings in a general way.
Open a brokerage account online in one the following brokerage firms (there are many firms offering international services, but I am only familiar with these):
Euro Pacific Capital
You can also open brokerage accounts made on the countries you intend to trade in, but this is obviously harder and too time consuming for most people since you would need to open many of them if you intend to use various exchanges across the globe… Also, it would make it very difficult to analyze all your holdings at the same time, read statements, or do your taxes. Most stocks are not listed on U.S. exchanges. By having them as viable options, you can diversify and increase the oportunies you have available at any given time.
Before you go trough the process of opening and funding an account, you should make sure they deal in the exchanges you are interested in and that you will be able to do so at a fair cost. Always compare your options!
Once you have an account in a broker that can execute orders on different exchanges across the world you should fund it with as much money as you wish. I put as much money as I possibly can on my accounts.
By now you should have read information provided by the brokerage firm on how to place your orders. When you know how and have an active account, all that is left for you to do is to search for companies you could be interested in. Acquiring information on most of these will be hard, but it is out there. Your broker can help you with this. Swab, Euro Pacific Capital and E*trade offer very useful research services and recommendations. Also if the stock has an ADR you could research that ADR. Why choose the original stock over the ADR? ADR’s cost you money to hold since banks charge for safekeeping. These costs are small, but they are there and many investors are unaware of them. Also price differences can make them cheaper! You can also benefit from dollar depreciation against that company’s base currency. Most foreign stocks, however do not have an ADR, so a source of information is crucial! Annual reports can certainly help.
When you have picked a winner all that is left for you to do is place the order.6
For more investing related articles check the resourses section underneath.
*PS: Interactive Broker’ s Website is not very user friendly.
Image credits: http://www.ptsltd-uk.com/images/Planet.jpg, www.flags.com, http://blog.kir.com/archives/images/money roll.jpg