Your guide to investment in foreign stocks for good returns and better financial security
New Delhi | Jagran Business Desk: While investment in stocks is subject to market risks, and decisions should be made after reading all the necessary terms and conditions, experts consider international investment more financially secure and a reliable form of investment. Those looking for investment options can consider investing in foreign stocks while keeping in mind all the risk factors.
There are six ways for investors to invest in foreign growth - American depository receipts (ADR), global depository receipts (GDR), direct investing, mutual funds, exchange-traded funds (ETF) and multinational corporations (MNC).
American Depository Receipts (ADR): ADRs are among the more convenient ways to buy foreign stocks. Several global firms use ADRs to raise capital and establish US presence. For example, Alibaba Group Holding Limited raised capital via initial public offering known as IPO and trading in US using ADRs. Each ADR represents underlying shares in a particular ratio to balance out the price in the home country and issuing country. For example, one Vodafone Group plc ADR is equal to 10 ordinary shares.
Global Depository Receipts (GDR): GDRs are another type of depository receipts. GDRs are shares of foreign companies issued by a depository bank to investors in international markets and make them available to them both, within and outside the United States.
Direct Investing: This is more like trading in local stocks. You can buy foreign stocks directly. For direct investing, you need to open either a global account in your home country or a local account in the target country. There are several brokers like Boom’s Trading Platform in Hong Kong or OCBC Securities in Singapore that offer direct investing services to investors.
Global Mutual Funds: This is among the easiest way to invest in international markets. Global Mutual Funds provide investors a hassle-free way to invest in the global market. GMFs are like normal mutual funds in terms of the benefits. The only difference is that they hold a portfolio of foreign stocks.
Exchange-Traded Funds: ETFs are another convenient way for investment in foreign markets and its easier than building a portfolio of foreign stocks. ETFs offer more focused bets on a particular country. The ETFs are available in several categories such as market capitalization, geographical region, investment style, and sectors.
Multinational Corporations: This option is for those investors who are not comfortable in constructing a portfolio of foreign stocks or buying ADRs, GDRs or mutuals funds. Investors can buy shares of domestic companies that generate most of their revenue from international operations. For an Indian investor, it could be buying shares in Hindustan Unilever Limited or Infosys and for a US investor, buying Coca Cola or McDonalds shares.
Posted By: Shashikant Sharma