International Investing
Many international companies are listed as American Depositary Receipts (ADRs) on U.S. exchanges and trade in U.S. dollars. ADRs, which are issued by U.S. depositary banks, represent shares of companies' stock that the bank holds.
One way you can diversify your international holdings is by investing in mutual funds. Mutual funds are investment products that pool capital from a number of investors and invest in a diversified portfolio of investments.
An investment company whose objective is to match the performance of a particular index - in this case, an international one - is called an exchange-traded fund (ETF).
Investing in internationally based companies that are traded in U.S. markets is another way to get international exposure in your portfolio. While most companies trade as ADRs, some are listed directly as they are in their own local markets.
Some investors choose to invest directly in international markets. Because overseas companies do not have to register or file reports with the SEC, it is important to do enough due diligence so that you feel comfortable with your investment decision.
A few unique risks that accompany international investing tend to make investing overseas inherently more risky than investing domestically.
Globalization makes it difficult not to feel the effects of the international markets regardless of whether you invest internationally. Economies interact every day and rely on each other for goods and services through trade.