To trade foreign stocks, you need a broker that allows international trading, as not all brokers offer this service. Trading foreign stocks can help diversify your portfolio and provide access to a wider range of companies. Here are some key things to consider when trading foreign stocks:
Most American investors can access some foreign stocks through American depositary receipts (ADRs) on US exchanges. However, to buy foreign stocks directly from their home exchanges, you need a broker that supports international trading. This allows you to purchase stocks on the local exchange, giving you the same opportunities as local investors.
When trading foreign stocks, you should be aware of currency and regulatory risks. Currency risk arises from fluctuations in the foreign country’s currency, impacting the value of your investment. Regulatory risk involves the governance policies of the country where the company is based, which can differ significantly from US regulations.
Despite the risks, investing in foreign stocks can offer opportunities to discover new and potentially lucrative investments. Here are some of the best brokers for international trading in 2024:
Interactive Brokers: Provides access to markets in 34 countries and territories, with a reputation for trade execution, trading platforms, and low margin rates.
TradeStation: Offers access to global markets through its TradeStation Global account, powered by Interactive Brokers’ platform. You can trade foreign stocks listed in the US as well.
Fidelity Investments: Allows access to 25 markets, including major European markets, with the option to settle trades in local currency.
Charles Schwab: Lets you trade ADRs and foreign stocks on OTC markets in over 30 countries. You can also trade directly in local currency in 12 markets with a Schwab Global account.
Moomoo: Specializes in Chinese stocks, offering access to Hong Kong stocks and China A-shares listed on Chinese exchanges. It also provides competitive rates for margin loans.
If you’re seeking undiscovered stocks for potential high returns, exploring foreign markets could be a viable option. However, it’s essential to understand and mitigate the unique risks associated with investing in foreign stocks.