There are tens of trillions of dollars worth of value in the international stock market. No longer are regular investors stuck with investing in their local real estate market. Now, a person in New York can invest in the Hong Kong, Australia, or London Stock Exchanges with ease.
International stock trading is fun and easy. So keep on reading and we’ll take you through the guide on how to do it and how to make a profit.
Buy Individual Stocks Directly on International Exchanges
In order to do this, you will need a brokerage account that gives you access to the international exchange that you want to trade on. You shouldn’t simply assume that every retail brokerage is going to let you trade on all international exchanges. So figure out which exchange you want to trade on and see which brokerages give you access.
If your brokerage does give you access to an international exchange, then you can purchase shares of a stock with American dollars, just like you with any regular American stock.
Brokerages like Monex can be very helpful here.
Access International Stocks via American Depository Receipts (ADRs)
An American Depository Receipt is a certificate that is issued by a financial institution that is based in the United States. This receipt will represent one share of the stock of a foreign company.
These receipts are traded just like American stocks on American exchanges. That means that you don’t need a special account with your brokerage account to access them.
Invest Internationally Through ETFs and/or Mutual Funds
You can utilize screening tools from your online brokerage to research and find different mutual funds and ETFs (exchange-traded funds) made up of international stocks. These are the best tools for new investors who want to add international investments to their portfolios.
It’s less risky because you don’t need to pick individual stocks. These funds tend to have low expenses and you can trade them just like any other account.
Associated Risks
Be aware that not all international stocks are of the same quality. You might find what looks like a really great Chinese stock but the Chinese government has a lot more influence over their stock market than the American government does over its own market.
Different governments can quickly influence the values of stocks by passing regulations and by starting investigations. This is why it is so important to diversify your portfolio.
The Importance of Using This Ultimate Guide to International Stock Trading
Hopefully, after reading the above guide, you now have a better understanding of how international stock trading works. As we can see, it is a fun and easy way to diversify your portfolio and increase your chances of success. But it still comes with its risks.
You should speak to your broker if you’re concerned about investing in international stocks.
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