You’ve found a company whose stock looks like a really good investment. There’s just one snag: the company is based in Japan, Italy, or some other country. However, that may not be a problem; the stock of many foreign firms is traded on the New York Stock Exchange in the form of American Depository Receipts, or ADRS. An ADR is a certificate issued by a U.S. bank for a few shares -- usually no more than five -- of a foreign company’s stock. The bank acts as a depository for the shares, eliminating many of the complications of buying foreign stock. For example, you don’t have to cope with currency exchange since ADRs are traded in U.S. dollars.
Open an account with a full-service or discount broker. You can often do this online. You’ll need to provide your Social Security number and employment information. For some types of accounts, you must include a statement of your income and assets. Be prepared to make an initial deposit of around $1,000. There are some online brokers, like ING DIRECT ShareBuilder.com, which allow you to open accounts with a low or no minimum investment.
Look for foreign company ADRs on the online listing directory provided by the New York Stock Exchange (see References). The directory lists all ADR securities traded on the NYSE. You can sort by region and by country. The directory lists the stock symbol, most recent price and daily trading volume.
Go online to your brokerage account, or call your broker. Place an order to buy the number of foreign stock ADRs you want in the company you’ve chosen. Once your order is executed, the broker will credit the ADRs to your account.
- Not all foreign company ADRs trade on the NYSE. Many are traded OTC, or over-the- counter, or on NASDAQ. You can find listings of these ADRs on the websites of banks that issue ADRs. Two examples are J.P. Morgan and Bank of New York Mellon. Both make their ADR lists available online.