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