Buy foreign stock and invest in emerging markets worldwide

As I have always said that investing in the stock market is a game of diversification and that is why I am going to tell you to buy foreign stock even if that means that you will have to buy these stocks from a broker who specializes in the international stock exchanges.  

Well do not worry here is the way to invest in the foreign stock markets  

ADR or the American Depository Receipts is one of the best ways to invest in the stock market of the emerging countries without even thinking of using another broker. You use the existing discount stock broker like E*trade or Ameritrade or Schwab to buy the stocks. These ADR’s represent the underlying stocks which are listed on the exchange of the home country.

Then the discount stock brokers have expanded their operations in countries like Canada, France, Germany, Hong Kong, Japan and Britain and that also will mean that rather than buying ADR’s you can buy the shares of the company directly from the stock exchanges of these countries. That is not to say it will be cheap because the commission for the international trade will be much more than the regular commission for domestic trades.  

Invest in ETF or mutual funds to buy international stocks

There are specific mutual funds that are there which track the companies in the international markets as well as there are country specific ETF’s which is a proxy of investing in the foreign markets

Well all is not hunky dory and there are a lot of risk factors associated with the stocks such as having the currency risk. With the dollar value plunging you may be making money whereas the dollar value surges you may end up losing money. Another major thing is the political risk especially in countries like China, Mexico and Brazil.  

One such fund is the ishares MSCI EAFE Index fund or iShares MSCI Japan

You shoul have about 20 – 30% of your portfolio in the foreign stocks.

Barclays(BCS)

ABN Amro(ABN)

Novo Nordisk(NVO)

Infosys(INFY)

Glaxo Smithkline Beecham(GSK)

How do I invest in China and India stock markets?

Well the best way is to invest in the ADR’s as generally the companies that have the ADR’s listed are good blue chip stocks in the home country and because of the ADR’s listed here they are also very much the epitome of good accounting norms.

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