Global investors have a wide range of opportunities worldwide, spanning from Australia to Zambia. You can easily buy and sell foreign securities using exchange-traded funds (ETFs) and American Depository Receipts (ADRs). These investment options include many well-known companies and countries globally.
Explore the top 10 favorite foreign ADRs and understand key considerations before investing in them.
ADRs are like American versions of foreign stocks, allowing U.S. investors to easily invest in companies from other countries. Here's how it works: U.S. banks buy a bunch of shares from a foreign company, group them together, and then sell them on a U.S. stock exchange. The bank manages the balance between U.S. ADRs and the original foreign shares to keep the ADRs accurately priced in the U.S.
However, using ADRs comes with some risks. Firstly, there might be political uncertainties in the country where the foreign stock belongs. Secondly, changes in the value of the foreign currency compared to the U.S. dollar can pose a risk. Lastly, it's essential to consider any risks related to inflation or deflation in the foreign country.
If you're keen on adding foreign stocks to your investment mix but feel uneasy about understanding risks in other countries, you might think about going for a global ETF. These funds spread your investments across various countries, offering a way to diversify your portfolio without delving too deeply into assessing individual country risks.
Here are the top 10 foreign companies trading on U.S. exchanges, based on their trading value as of October 24, 2021, according to J.P. Morgan's ADR Directory. Including these companies in your investment portfolio can be a smart way to diversify, offering exposure to different countries and industries. Check out these giants for potential investment opportunities and broaden your investment horizon!
Before investing in any of these stocks, make sure to conduct your own research. Consider how they align with your overall investment goals. Take the time to explore and understand these stocks to make informed decisions that suit your financial strategy.
Alibaba Group Holdings Ltd. is a Chinese company that focuses on online and mobile commerce worldwide. They provide various products, services, and technology in China and globally. According to J.P. Morgan, its trading value is ₹ 3720000000. You can find its ADR listed on the New York Stock Exchange (NYSE).
NIO is a Chinese carmaker known for creating innovative electric vehicles. Established in 2014, the company went public in 2018. With a trading value of ₹1110000000, NIO's stocks are available for trading on the New York Stock Exchange (NYSE) in the United States.
This company, based in Taiwan, is a semiconductor manufacturer. Established in 1987, it produces a wide range of products for numerous customers. With a trading value of ₹725450000, this stock is also listed on the New York Stock Exchange (NYSE), just like the previous two mentioned.
Similar to Alibaba, JD.Com is a Chinese e-commerce company and a direct competitor. It focuses on online direct sales of electronics, home appliances, and general merchandise. Unlike Alibaba, JD.com is traded on the Nasdaq, not the NYSE. Its current trading value is ₹490790000 million.
Baidu, a pioneer in AI technology, is China's top search engine and actively ventures into new AI businesses. It is traded on the Nasdaq with a current trading value of 547970000
Nokia, a tech company from Finland, is a worldwide supplier of network equipment, software, services, and licensing opportunities. It is traded on the NYSE as an ADR, with a trading value of ₹ 112400000
This ADR represents another Chinese e-commerce company that links local farmers with their communities through a mobile marketplace. It is traded on the Nasdaq, and its current trading value is ₹ 1040000000
Traded on the NYSE, this ADR provides an opportunity for Americans to invest in the British-Swedish biopharmaceutical company AstraZeneca. The company focuses on discovering, developing, and selling prescription medicines, including vaccines. Its current trading value is ₹ 247260000
Targeting the youth in China, Bilibili is a diverse video community covering lifestyle, games, entertainment, anime, tech, and knowledge. Traded on the Nasdaq, this ADR currently has a trading value of ₹ 209330000.
Completing the top 10 list of popular ADRs is a Dutch semiconductor manufacturer. Established in 1984, the company boasts a presence in over 60 countries, expanding its customer base. Trading on the Nasdaq, ASML has a current trading value of ₹ 1040000000
Most financial advisors suggest not putting too much of your money into stocks from other countries. A good starting point is to allocate around 20% of your overall stock investments to international stocks. However, it's crucial to think about your own goals, how much risk you're comfortable with, and your financial situation. Instead of strictly following a general rule, tailor your investment decisions based on what makes sense for you.
Investing in stocks from other countries can offer some diversification benefits, but it's important to understand that this doesn't mean they always move in the opposite direction of local stocks. International stocks often follow similar trends to domestic stocks, but the degree of movement might be different, adding value to diversification. While foreign stocks aren't a perfect hedge against domestic stock movements, they can still contribute to a well-rounded investment strategy.
If you have foreign stocks through a U.S. broker, they will provide you with a 1099-B form, and you can use this information when filling out your tax return on Form 1040. However, if you hold foreign stocks with a financial institution outside the U.S., you'll need to report those holdings on Form 8938. Make sure to keep track of this information for your tax reporting.
Certain foreign stocks pay dividends, but not all of them do. Similar to U.S. stocks, foreign stocks are not required to give out dividends. Typically, stocks that focus on growing their value without distributing dividends are called growth stocks. On the other hand, more stable stocks provide dividends as a way to compensate investors for the slower growth in their business. Understanding whether a foreign stock pays dividends or not can help you choose investments that align with your financial goals.