How to invest around the world using one brokerage account?
Have you ever wondered how to invest in Russia, Brazil, China or any other county around the world? How can you buy shares in a foreign company? How can you invest in emerging markets funds? Do you have to go there physically to find investing possibilities? The answer to these questions are much easier than you thought.
Dual listing is a term used to refer to a company which shares are listed on more than one stock exchange. Dual listing is a method used for raising capital which results in an increase in volatility and the company doesn’t shoulder the additional cost. Investors can trade shares both on the domestic exchange and other foreign stock exchange.
American depositary receipts
Let’s assume that your analysis states that investing in Chinese companies is a good opportunity. In recent years we observed a long bull market in China. Then in 2015 prices fell nearly 50% and they are still relatively cheap. Check my report about best investment occasion in 2017 (Download here)
You as an investor can wonder how take advantage of unevaluated Chinese stocks if you have a brokerage account with no access to Shanghai Stock Exchange. To do this, you need to know what are ADRs. The stocks of most foreign companies that trade in the U.S. markets are traded as American Depositary Receipts (ADRs).
If you are interested in investing in China you should focus on Chinese ADRs. If you see a good occasion to invest in Chile than check Chilean ADRs list, etc.
Exchange Trade Fund
An ETF is a type of fund which owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.). It trades like a stock and it can represent the value of companies in a specific branch, country or region. Investing in ETFs lets me see the bigger picture.
The same way as for ADRs: if you are interested in investing in China you should focus on Chinese ETFs. If you see a good occasion to invest in Chile than check Chilean ETF list, etc.
Some investors prefer using ETFs for their investments instead of selecting specific shares. Sometimes I also belong to this group. In certain cases, it is easier and more safe to find unevaluated branches or markets than to put your money in one specific company. In this way, if a single company is confronted by an issues, your investment doesn’t get wiped out. ETFs are a smart way to diversify your risk just like a professional money manager.
If you want to be a global investor I recommend having a brokerage account where you can trade in foreign markets’ ADRs and ETFs. Investing overseas can be very lucrative and it doesn’t have to entail additional risks. Investing, most of the time, means finding assets with strong fundamentals and in a good price.