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RESOURCES:
Investing Articles
How to Invest Overseas - Intelligently!
By Scott Pearson
In recent
months, many advisors have talked a lot about the wisdom of
investing overseas, but most have failed to really address
the way to do that. For new investors, investing in the U.S.
is challenging enough, but investing across borders is often
even more daunting.
Many major
issues need to be addressed, but the first step is deciding
how to buy and sell. Here are some possibilities:
1. Direct
purchase in foreign markets. The most straightforward way
to invest in foreign markets is by buying shares directly
in the regional or national markets. This approach has some
drawbacks, however. First, one must buy through an account
with a broker who is registered in that nation. For Canadian
shares, this is relatively easy, since many U.S. brokers connect
with the Toronto exchange. But going beyond that zone leaves
us with few, and expensive, choices. Plus, shares on many
foreign exchanges are not subject to the same reporting requirements
as those on the NYSE or even the NASDAQ. Thus, we may not
know enough about the financial status of many international
companies available in this way. Also, since these shares
sell in foreign currency, we must calculate all the exchange
rates.
2. ADR’s.
American Depository Receipts are foreign stocks (actually,
certificates representing those stocks) selling on American
markets. As such, they are required to fulfill all the reporting
requirements and laws that U.S. stocks are, and hence are
much more transparent. Plus, the shares are priced in U.S.
dollars, simplifying the purchase process. ADR’s are
the most common method for American investors to invest in
foreign stocks, and include a number of the names I have recommended
in the past, including Unilever, Telefonos de Mexico, America
Movil, Korea Electric, Canon, Nokia, and Bancolombia, among
others.
3. American
multinationals. An even simpler way to play foreign markets
is to invest in American companies that do business overseas.
Companies like Apple, Coke, and Procter & Gamble do almost
as much business around the world as they do here in the U.S.
4. International
mutual funds. Mutual funds simplify the process of investing
overseas. A buyer can purchase one fund which may hold dozens
of different stocks that the fund managers have researched.
5. International
Index Funds: Exchange Traded Funds, such as iShares (formerly
known as WEBs), are benchmark indices of foreign markets.
Buying an index allows one to gain from a wide market rather
than trying to research individual stocks.
6. Closed-end
Country Funds. Like the index funds above, country funds focus
on a particular market. The difference is that these funds
are actively managed, and may often be available at a discount
to the value of their shares. If one watches carefully, one
can occasionally take advantage of great deals in these shares,
which trade just like stocks. Some examples are the Swiss
Helvetia Fund, the Brazil Fund, or the New Ireland Fund. Closed-end
funds may also be available that invest across national borders,
such as the Emerging Markets Telecom Fund, the Templeton Dragon
Fund, or the Latin American Discovery Fund.
In the
end, there are many ways to invest internationally. Use good
judgment, but be sure to take advantage of the opportunity
to diversify across borders. One thing is for sure: there’s
no longer any excuse for keeping all your eggs in one (national)
basket.
Scott
Pearson is an investment advisor, writer, editor, instructor,
and business leader. As President and Chief Investment Officer
of Value View Financial Corp., he offers investment management
services to a wide variety of clients. His own newsletter,
Investor's Value View, is distributed worldwide and provides
general money tips and investment advice to readers both internationally,
and in the U.S.
Scott
Pearson can be reached directly at Scott@valueview.net or
by visiting www.valueview.net
Article
Source: http://EzineArticles.com/
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