8 Ways to Invest in Foreign Markets
The United States might have the largest economy in the world, but it’s far from the only economy (Foreign Markets) . There’s a whole world out there. However when the US economy is faltering, there are plenty of other economies doing well. In contrast, It’s much easier to invest successfully in a thriving economy than in one that’s struggling.
But most investors don’t know where to start. Likewise, Do you get on the phone and call Tokyo when you want to invest in a Japanese stock?
In 2012, the US was less than 19% of the world economy. However the combined rest of the world still holds a much larger amount compared to that of one country, although it is a small amount for that particular country. Do you think there might a few good investments in that other 81%? Of course!
Fortunately, there are several easy ways to invest overseas:
1. American Depository Receipts (ADR). These are US traded stocks that represent foreign stocks. Similarly, If you’ve ever owned Sony stock, you almost certainly owned ADR shares. You didn’t actually own a share of actual Sony stock.
– They trade these on the US stock exchanges and quote them in US dollars. This eliminates the need for currency conversions.
2. Buy the stock on a foreign exchange. Investors cannot purchase all foreign stocks with ADRs. Many foreign stocks can be purchased on the London or Toronto stock exchanges. Nonetheless there are international brokerage houses that can help with this type of investment, but the fees can be steep. Check before you buy.
3. International Mutual Funds. There are US funds that invest exclusively in foreign markets. International funds tend to invest with a broad scope.
4. Regional Mutual Funds. These are similar to international funds, but tend to invest within a certain region, such as the Middle East.
5. Country Mutual Funds. They limit these to a specific country, such as China or Russia.
6. Sector Funds. Sector Funds stay within an industry, but cross borders. A sector fund that invests in gold mining all over the world would be for instance.
7. Exchange Traded Fund (ETF). An ETF is like a mutual fund that tracks a specific index. For instance, they compose an Oil Index (OSX) of 15 different stocks. Many ETFs contain foreign stocks. Moreover, this is a great way to invest internationally within an industry.
– ETFs are priced, purchased, and sold like stocks. Remember that mutual funds are priced at the net asset value (NAV). The price of an ETF is whatever the market will bear. They always sell mutual fund shares at their actual value. Still, it wouldn’t be a bad idea to try pricing an ETF with the NAV and see where it stands.
8. Invest in foreign currency. Currency trading can be exciting and serves as an excellent means to reduce risk in foreign investments.
However, currency trading is not for the weak of heart. Many people have made a fortune in currency trading. Many have been wiped out. If you have the expertise, it can be a great way to invest in a foreign market.
There are several ways to invest in foreign markets. It’s time that investors opened their eyes to all the investing opportunities around the world. There are many companies and investment vehicles based in other countries. It would be a shame to miss out on all these foreign economies.
The US is less than 20% of the global economy. If you’re not investing internationally, you’re missing out on over 80% of the opportunity! Therefore, look abroad for your next investment for fun and profits.