| The Wisdom Of Owning Foreign Stocks | | | | need for doing currency conversions when you buy or |
| The title may have caught your eye; if you have never | | | | sell as these conversions happen behind the scenes. |
| considered owning foreign stocks, now might be a | | | | The price of the stock usually follows the price in its |
| good to start thinking about it. While some investors | | | | original country. Because of this, there are times when |
| may consider owning foreign stocks a little too exotic | | | | the US stock prices and the originating prices dont |
| for their blood, successful traders should view this as a | | | | match up well. When this happens, the US bank holding |
| speculative opportunity to reap some handsome | | | | the shares may actually bundle shares together and |
| profits. Many investors are attracted to foreign stocks | | | | one ADR share might equal two or more of the |
| by the chance to participate in growing economies | | | | original shares. Learning how to invest in foreign stocks |
| outside of the United States. In addition, when the US | | | | is actually quite easy. |
| economy is less than attractive or other economies, | | | | Benefits of Owning Foreign Stocks |
| especially some of the emerging economies, show | | | | Owning foreign stocks has several attractive benefits. |
| investment potential, an investor can find good | | | | These benefits include: |
| opportunities. | | | | Global Economy Investing in companies occurs all over |
| Do you have room for foreign stocks? | | | | the world and opportunities have followed. There are |
| Before you consider purchasing any foreign stock, you | | | | many emerging markets such as Eastern Europe, the |
| need to take inventory of your stock portfolio. This is a | | | | Pacific Rim, and Latin America. |
| good practice to perform periodically, reviewing your | | | | Portfolio Diversification In times when the US markets |
| portfolio and looking for holes; areas where your | | | | and economy dont offer the best investment |
| portfolio doesnt align with you stock trading plan. If you | | | | alternatives, looking to other countries can give you |
| have a conservative plan you will need to make sure | | | | more opportunities. |
| you dont already have too many growth stocks. If | | | | Uncommon Returns While there can be significant risk |
| your plan is more aggressive, look to see if you are | | | | involved, foreign stocks offer risk reward ratios that |
| ready to add more speculative holdings. Even if you | | | | are very attractive because of the potential for |
| are ready, most investment professionals recommend | | | | incredible returns. |
| holding 10% or less of your portfolio in foreign stock; if | | | | Risks of Owning Foreign Stocks |
| your trading plan is conservative, you should have | | | | In spite of the efforts to include foreign stocks in the |
| even less than 10%. This is consistent with holding of | | | | US stock market, there are still some very significant |
| speculative stocks in the US as well. | | | | risks. The currency exchange is a tricky problem |
| Problems with Foreign Stocks | | | | because currencies in other countries change much |
| The biggest problems with foreign stocks are the | | | | faster than in the US; this can create wrinkles in buying |
| difficulties in finding, evaluating and buying them | | | | and selling foreign stocks that may work against you. |
| confidently. There are a growing number of stocks | | | | Economic turmoil is another concerning factor since |
| that trade on the US stock exchanges. In addition, the | | | | few countries have the structure to protect |
| stock market community formed the American | | | | investments from inflation; inflation can have a |
| Depository Receipts, or ADR, more than 75 years ago | | | | devastating effect on your return on investment, even |
| to help in the trading of foreign stock. The ADR works | | | | when the profits are high. |
| like this; a US bank will buy a large block of stock in a | | | | Conclusion |
| foreign company and package them for reissue in the | | | | Owning foreign stocks can be very attractive to most |
| US stock market. You will be able to identify them as | | | | investors and they should consider it an option at some |
| foreign stock, because they always have ADR after | | | | point, in spite of the risks. Taking a conservative |
| the name. | | | | approach and using your portfolio as a shield can |
| Foreign Stocks in the US Markets | | | | potentially make foreign stocks a very good |
| One piece of good news for you; foreign stocks in the | | | | investment. |
| US markets trade in American dollars so there is no | | | | |