Domestic investors have historically been jealous of foreign stock markets because the indexes in some countries have led to double- to triple-digit returns.
In 2003, the SETI 100 in Bangkok rose over 100 percent. And in Russia, the RTS Index rose 72 percent in only nine months in 2005.
As a result of these high gains, many investors would like to invest in foreign stocks.
Investing in foreign stocks does take some knowledge. Overall, there are several ways you may go about doing this. The most simple or basic approach is to just go ahead and purchase stocks directly from brokers in those countries. But buying shares that trade on currency exchanges that are different than the American dollar can be pretty tricky and you could wind up losing money because of unfavorable exchange rates even if your stocks do go up..
This is why it's often best to call up your regular brokerage firm and ask them if they work with foreign markets. If it does, your company may contact an affiliate firm or market maker in the country or countries of choice where you wish to purchase some shares. Please realize though that even if your firm does this, it might not be able to get to whatever shares you wish to buy. If this is the case, you may want to consider just opening up a brokerage account with a company in the countries with which you wish to invest.
Once you find a way to do your foreign investments, realize too that there are inherent risks to doing business with other countries. For example, it can be hard to get correct and pertinent information about the companies with which you are investing. Another risk is that regulations and rules in other countries may impact both your foreign accounts as well as investments. As an example, you might not be able to transfer funds easily from your foreign account to your domestic account.
As an option, investors might use things like mutual funds or exchange traded funds (ETFs), because they have been shown to be typically less iffy ways to work with foreign markets.