How to Buy Overseas Shares
An investor who buys overseas shares takes ownership of part of the company in which he is investing, just as they would if they bought shares in a U.S. company. When buying overseas shares from the U.S., you have two main options. Either buy the shares directly or purchase a financial asset called an American Depository Receipt.
Find the Right Broker
Several large U.S. brokerage firms offer investors the ability to buy and sell international shares. Type "international stock broker" into your favorite search engine, and you will be presented with a number of brokers that deal in international securities. You should browse through these brokers, looking for one that best suits your requirements. Factors to consider include fee structure, margin requirements, minimum account size and the level of service you require.
Open an Account
To open an account, you will need to fill out an application, send some proof of identification and address documents to the broker, and deposit at least enough funds to meet the minimum account size requirement.
Investing in overseas shares can be risky, so before you invest your money, you need to analyze the stocks you are considering. This can involve fundamental analysis, which is the analysis of a company's macro and micro economics health, or technical analysis, which is the analysis of the historic share price of a company.
Purchase the Shares Directly
Once you have found a reason to include an overseas stock in your portfolio, you can use your brokerage account to buy the shares. This is normally done in one of two ways. First, if your broker offers online stock trades, you can buy the shares through the online software it provides. Choose how many shares you want to buy, ensure you have enough capital to either fund the purchase or meet the margin requirement and execute your order. Alternatively, if your broker does not offer online international stock trades, call the offices and instruct them to execute the order on your behalf.
American Depository Receipts
If you do not want to purchase the shares directly, you can purchase an American Depository Receipt, or ADR. An ADR is a type of security that represents the stock of an overseas company, but trades on a U.S. exchange. Banks buy large amounts of overseas stock, then issue ADRs to U.S.-based investors. Be aware that the tax implications of owning ADRs differ from those of owning a company's shares outright, depending on the company in question and the issuing bank.
Samuel Rae is an experienced finance journalist whose work has been published across a range of different sites and publications in the financial space including but not limited to Seeking Alpha, Benzinga, iNewp, Trefis and Small Cap Network. He holds a BSc degree in economics.