Want to jump straight to the best? Most of our users prefer Interactive Brokers for stock trading.
A number of different options exist for buying foreign stocks versus domestic stocks if you’re based in the United States. Perhaps the easiest way to purchase foreign stocks is through American depositary receipts (ADRs), which basically give you access to certain foreign stocks held on deposit for U.S. investors.
ADRs are traded on major U.S. exchanges like the New York Stock Exchange (NYSE) and the NASDAQ.
Another lesser-known method of investing in foreign stocks are through global depositary receipts (GDRs), which are like ADRs but are instead deposited with foreign banks and available to investors worldwide. GDRs are mostly used by Europeans and the stocks on deposit are usually located in Brussels or Luxembourg.
You can also buy exchange-traded funds (ETFs) or mutual funds whose managers specialize in foreign stocks or purchase foreign stocks directly through your broker if they have an affiliate in the stock’s country of origin.
In the case of a stock that’s only available on a foreign stock exchange, you would generally need to open an account with a broker in that country to purchase the stock.
How You Can Buy Foreign Stocks:
- Determine whether you’ll buy the foreign stocks through an international broker or online stock broker.
- Pick a stockbroker that fits your needs and open an account.
- Practice trading and develop a strategy through a simulator or demo account.
- Start live trading the stocks of your choice.
Buying Foreign Stocks: What to Know Before You Buy
It’s a good idea to have a thorough understanding of the risks involved with foreign investments before you invest in foreign stocks. For starters, each country has its own regulations pertaining to both stock issuance and foreign investors, which can affect your investments and your foreign accounts.
Other considerations, such as getting timely and accurate information on the value of your investments, may not be as readily available in foreign countries as in the U.S. Foreign tax laws and the U.S. taxation of your trading profits should also be taken into consideration before you plunge into foreign stocks.
Furthermore, the economic condition and geopolitical events that affect the country where you plan to buy stocks could significantly impact such foreign investments. Last, but certainly not least, the foreign nation’s currency and the level of its exchange rate versus the U.S. dollar will directly affect the value of your investments in that country.
How to Buy Foreign Stocks
- Determine How You’ll Buy Foreign Stocks
As mentioned above, you can invest in foreign stocks through a variety of methods. Mutual funds, exchange traded funds (ETFs), American depositary receipts (ADRs) and global depositary receipts (GDRs) are options, as is buying the stock of transnational corporations like Coca-Cola, for example.
Depending on your choice of broker, you can also sometimes invest directly in foreign stocks. Each method of investing has its own risk profile and commission structure, so pick the method that suits your needs.
- Pick a Broker
Knowing how to buy foreign stocks is just as important as selecting the right broker, so once you’ve decided on the method you plan to use to buy foreign stocks, pick a reputable broker and open an account to facilitate your stock purchases.
Many good stockbrokers have access to foreign stock exchanges and can execute orders for ADRs, GDRs, ETFs and mutual funds.
- Practice Trading and Develop a Strategy
The broker you choose will ideally offer a demo or simulator account to let you try out its platform and to test services before funding an account. This can be very helpful in figuring out whether you chose the right broker or not.
You may probably also benefit from taking some time to try out your trading strategy or strategies in a demo account ahead of jumping right into trading foreign stock markets.
A demo account can also be used to backtest a strategy, which could save you time and money in the long run and give you a sense of what sort of returns to expect from that strategy.
- Start Live Trading
Once you’ve decided on a broker and have favorably tested a strategy, open your live trading account. Use your preferred trading strategy to buy foreign stocks, either directly from the country where the stock trades, or through an ADR, GDR, ETF or mutual fund.
Do some initial research to choose a stock and some technical analysis to identify entry and exit levels in the stocks you plan to trade to improve your chances of success.
All brokers mentioned in this article provide clients with an excellent trading platform and considerable research resources, which will give you an edge once you start live trading.
ADRs and GDRs
This method of buying foreign stocks can be done through your existing stock brokerage account. Foreign stocks trading as ADRs and GDRs are generally sponsored in whole or in part by the listing company.
They are typically listed on major U.S. stock exchanges or in the over-the-counter (OTC) market. The 3 levels of ADRs are listed below.
The level I listing is for sponsored ADRs that require the least regulatory oversight and compliance. The only requirement for listing ADRs at this level is an F-6 Securities and Exchange (SEC) form with all the pertinent information on the foreign company.
Since this is the lowest level of ADR permitted to trade in the United States, stocks listed at this level can only trade in the OTC market.
In addition to the SEC F-6 Form, the second ADR level requires SEC Form 20-F to be filed, along with annual financial reports using either international financial reporting standards or the generally accepted accounting principles (GAAP) standard.
Level II ADRs can be listed on major U.S. exchanges, such as the New York Stock Exchange or the NASDAQ exchange without having to issue a new public offering.
This ADR level has all of the requirements of the first 2 levels, but companies listed at this level can also raise money in the U.S. through a public stock offering. The extra step requires that the company file SEC Form F-1.
Mutual Funds and ETFs
You can also indirectly buy foreign stocks through mutual funds and ETFs that specialize in investing in foreign stocks from all over the world. The advantage of buying foreign stocks through ETFs and mutual funds is that you can invest through your normal stockbroker without the need to open new accounts or obtain the stock through international brokers.
Another major advantage of ETFs is that the fund’s expert stock picker(s) will research and choose what to buy and diversify the portfolio to maximize returns so you don’t have to.
Foreign Brokerage Account
A more complicated method of acquiring foreign stocks requires opening an account with a foreign broker and purchasing the stock you are interested in directly in the country of origin. Find a broker in the country where you want to buy stocks, open your account(s), place your order and receive your stock in your foreign account.
While this may sound simple enough, take into account any restrictions on foreign investments in the country you plan to buy stock. You should also factor in any additional costs of doing business abroad.
Be sure to understand the tax implications both abroad and domestically of this investment plan, in addition to how you can pay for stock and receive funds from your foreign account.
Another important issue is the country’s currency and the exchange rate versus your home currency. This could either favor your foreign stock transactions or cost you money, depending on how that exchange rate moves.
Best Online Stock Brokers
You’ll be able to find some of the top brokers for buying foreign stocks listed below.
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
- Active traders
- Intermediate traders
- Advanced traders
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Intuitive trading platform with technical and fundamental analysis tools
- Does not support trading in mutual funds, bonds or OTC stocks
Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
Get started right away by downloading Moomoo to your phone, tablet or another mobile device.
- Cost-conscious traders
- Active and Advanced traders
- Over 8,000 different stocks that can be sold short
- Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
- No minimum deposit to open an account.
- No chat support
It seems like new digital investment management platforms are sprouting up left and right, and for good reason — there’s a great need for easy, straightforward investment management that doesn’t cost an arm and a leg in fees or to get started. If you’re new to investing or an old hat who wants to make the switch to a virtual manager, deciding which features you need can be confusing if not overwhelming.
If you want a no-frills financial management platform, Axos Invest (formerly WiseBanyan) takes a traditional but sophisticated approach to automated online investing.
- Traditional investors trying out an automated investor for the first time
- New investors that want to take a hands-off approach to portfolio management
- Straightforward automated investing
- Relatively low account minimum and automated investing fee
- A solid roster of available investment account types
- Not a stand-out from other services if you’re someone who likes all the bells and whistles with your digital financial platform
- No direct relationship with a human financial advisor
This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.
Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.
Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.
- Price earnings growth valuations
- Easily evaluate investment opportunities
eToro is a broker that offers access to over 25 of the world’s most popular cryptocurrencies, forex and over 1600 stocks. They have a few unique education and useability tools. Traders can begin buying and selling in as little as 10 minutes.
eToro’s unique CopyTrader feature allows new investors to “copy” the buy and sell orders of professional investors, while the company’s eToro Club feature provides investors with a range of additional education tools and resources.
- Traders looking for an easy-to-use platform
- Traders who want to practice their trades using a virtual account before entering the market
- Simple platform that is easy to master
- CopyTrader feature that allows new traders to copy the same strategies used by professionals
- Virtual dummy account that gives you $100,000 to practice trades
- High non-trading fees
Are Foreign Stocks for You?
Thanks to the international access provided by the online brokers mentioned above like Interactive Brokers, you can now trade in multiple foreign markets using a number of different currencies without having to open an account abroad.
Trading international stocks involves familiarity with the local market, and the more informed you are about the particular market, the more profitable you’re likely to be. Furthermore, in addition to paying higher commission costs for foreign stock trades, you might also have to pay additional taxes in the country where you trade if you’ve opened an account with a local broker.
Trading foreign stocks may not be for everyone, but if you are willing to do the research, trading international stocks could be lucrative and provide a vast array of additional opportunities.
Frequently Asked Questions
What are some of the avenues for investing in foreign stock?
You can buy ADRs, GDRs, mutual funds, ETFs, or use a broker to access particular markets.
What are some excellent brokers to buy foreign stock?
Some of the best brokers include Interactive Brokers, Webull and TD Ameritrade.
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