How to buy international stocks
There’s more to stock trading than just the US markets. Find out how to buy international stocks and diversify your portfolio.
How to buy international stocks in 4 steps
- Compare brokers with access to global stocks.
- Open your trading account by providing your personal information and proof of ID.
- Fund your account by transferring money from your bank account.
- Search for and select the stocks you want to invest in and start trading.
We’ll break down each of these steps in more detail below.
This guide explains what to look for in a global stock trading account and the costs and risks of buying international stocks.
What are the benefits of buying international stocks?
Some of the major benefits of buying foreign stocks include:
- Access more stocks. The US stock market represents about half of the world’s stock trading. International stock trading allows you to access the other half of the market that you wouldn’t have access to if you were only trading on the US markets, and it also lets you gain exposure to some of the world’s largest companies.
- Diversification. Investing in global stocks as well as local US stocks will ensure your portfolio is more diversified. An internationally diversified portfolio will help protect you from any major dips in the US markets, reducing volatility.
- Wide range of options. Buying international stocks doesn’t just provide access to companies in developed markets like the UK, Germany, Australia and Japan. You can also invest in emerging economies like Brazil, India and China where there is the potential for rapid growth.
- 24/7 trading. You can trade 24 hours a day rather than being restricted to trade within set hours.
How to buy foreign stocks
If you want to buy foreign stocks, there are a few options to choose from.
The first is to invest directly in stocks listed overseas through an online broker that offers access to international markets.
Alternatively, you can invest in a global-themed exchange-traded funds (ETFs) or mutual fund that provides access to a basket of foreign stocks.
Another option is to invest in an American depositary receipt (ADR), which is a US bank-issued certificate representing shares of a foreign stock.
But for this guide, let’s look at what you need to do to buy foreign stocks directly through an online broker.
Step 1: Compare options and choose a broker
If you want to buy international stocks, you’ll need to find a broker that provides access to foreign markets. When comparing international stock trading accounts, consider the following factors:
- Available markets. Where can you trade? Almost every provider can give you access to popular exchanges like the London Stock Exchange, but not all platforms let you trade in some areas of Asia and Europe.
- Brokerage fees. Compare brokerage fees across a range of trading platforms to find the best value. Don’t forget to consider whether the broker charges an ongoing subscription fee.
- Exchange rate margin. The account provider will often charge a bit extra on top of the real currency exchange rate to make a profit when converting USD to a foreign currency and vice versa.
- If you can trade options. Can you trade ETOs and ETFs as well as stocks, and in which markets? Only some international stock trading accounts let you trade options.
- Execution speed. Check how long it takes for funds to clear and to execute the trade. Timeliness can be important when buying international stocks.
- The buffer. How big is the buffer? Most international share trade orders will have a buffer applied to them by the share trading platform provider. The buffer is a percentage of the order value, which is added to the cost of the order to protect the provider from currency fluctuations while the trade clears, ensuring that they don’t lose money on routine trades.
- Limits. One of the main restrictions to look out for when choosing an account is the presence of minimum or maximum trade limits. You may not be able to make trades above or below a certain dollar value, so check the terms and conditions.
- Trading platform. Does the broker offer web-based trading only, or is there a dedicated mobile app available too? Either way, the trading platform should be easy to use. If you’re an experienced trader, you may want to look for a provider with a desktop trading platform. You should also be able to access account services such as tax, profit and loss and dividend reporting tools quickly and easily.
- Education and research tools. Check which market tools and resources you can access to educate yourself about different companies and foreign markets. Fundamental analysis and charting tools are key to making better trades.
- Customer support. If you need help with a trade, how can you get in touch with the broker’s customer support team? Will they be available during the times when you’ll be trading on foreign markets?
Compare brokerages to buy international stocks
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Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Step 2: Open your trading account
Once you’ve chosen a broker, you can open a trading account. If you’re opening an account through your bank, they’ll already have your details on file and you may be able to log in via your online banking portal. But if you’re a new customer, you’ll need to open a new account.
You can typically apply for an international stock trading account online in less than 15 minutes.
Application requirements can vary between different foreign share trading account providers. Generally, eligibility requirements for personal applicants will include:
- 18 or older
- US residential address
- Valid contact number
Documentation and ID needed
If you’re a new customer to the stock trading platform, you’ll need to verify your identity before you can begin to make trades. Have the following information on hand when you start your application for a stock trading account.
- Photographic identification such as your passport or driver’s license
- Your Social Security Number (optional)
Already have a share trading account?
Some brokers will require you to open one trading account for US stocks and a separate account for international trading. But because you’re already signed up to the broker, most of your information will be saved and buying international stocks should be simpler.
Step 3: Fund your account
Now it’s time to deposit money into your account to cover the cost of any trades you want to make plus brokerage fees. You can transfer funds directly from your bank account, but keep in mind that the broker will need to convert your USD into the currency you want to trade.
The broker will charge a currency conversion fee for this transaction, so remember to factor this additional cost into your calculations.
Step 4: Buy international stocks
Now you’re ready to start buying foreign stocks. When you log in to your online trading account, you’ll be taken to your dashboard, where you can check the latest prices, use filters to search for investment opportunities, and access market news and research.
You’ll also see the link you need to click to buy a particular stock. You can place a market order to buy the stock straight away at the best price available or a conditional order that lets you set specific criteria that must be met before you invest, such as the stock reaching a certain price.
Which global stock exchanges can I access?
The global markets available will vary between providers, so it’s best to check if a provider can access the particular stock exchange you’re looking for before you open an account. However, most international stock trading platforms will provide traders access to the following major global exchanges, plus more:
- Europe: Euronext
- Asia: Japan Exchange Group, Shanghai Stock Exchange, Hong Kong Stock Exchange
- United Kingdom: London Stock Exchange
- Australia: The Australian Securities Exchange (ASX)
What fees and charges apply when you buy foreign stocks?
There are a few essential costs to consider when you trade international stocks:
- Brokerage fee. The brokerage fee is a flat fee or a percentage of trade, whichever is greater. You may be able to find a deal on brokerage fees as a new customer.
- Foreign exchange commission. Your broker will take a margin when funds are exchanged from USD to a foreign currency.
- Market fees. This is a charge or fee for trading in a particular market. For example, sell trades in the UK attract a stamp duty charge. Local exchange fees can also apply.
- Administrative fee. Some providers charge a registration or ongoing membership/administrative fee to use their brokerage services.
International stock trading brokerage fees
Trading international stocks can incur different fees and commissions to what you would pay when trading American stocks. Here’s an idea of the fees you can expect to pay when trading stocks on the Tokyo Stock Exchange or the London Stock Exchange.
|Provider||Tokyo Stock Exchange brokerage fee||London Stock Exchange brokerage fee|
|Fidelity International Stock Trading||JPY¥3,000||GBP£9|
|Schwab Global Account||JPY¥2,000||GBP£9|
|Interactive Brokers||JPY¥80 or 0.050% of trade value, whichever is greater||GBP£1 or 0.050%, whichever is greater|
What are the risks of buying international stocks?
International stock exchanges give you access to many more investment options than those listed on the US markets. However, it can carry a few more risks than the domestic market. This includes foreign exchange rate risk, liquidity risk and risk from changes in foreign governments.
- Exchange rate volatility. You will need to convert USD into a foreign currency to buy stocks listed on an international stock exchange. When you convert the money back to US dollars, there’s a risk the exchange rate will be worse than when you purchased the foreign currency.
- Liquidity. Capital gains (or losses) are only realized once a sell order is settled. Overseas stock exchanges can have fewer participants and a lower trading volume. So if you’re trading on a small international stock exchange, there’s a chance you may not be able to find a buyer for your stocks and will have to sell at a significant discount.
- Unfamiliar markets. Another key risk when investing overseas is that you simply may not be familiar with foreign market conditions and companies. So if you’re going to diversify into global markets, you’ll need to do your research so you understand your investments.
- Foreign policy. Just as the US Government’s policies can impact your bottom line, overseas governments can introduce policies and restrictions that can reduce your return on international investment. Many companies also have operations running in politically unstable regions. Political turmoil such as a military coup or civil war can derail foreign investment, so staying up to date with foreign news is important.
- Tax legislation. The capital gains and other tax implications of trading international stocks are more complex than if you were only trading US shares, and you may need to pay for professional tax advice.
- Reporting requirements. Regulations that outline how, when and what publicly traded companies must communicate to investors differ worldwide. So while you may be familiar with the strict reporting requirements US companies have to meet, keep in mind that the rules may differ overseas.
- Different time zones. You’ll need to manage opposite time zones when buying or selling shares in major international markets such as Asia and Europe.
Other ways to gain exposure to international stocks
As we mentioned earlier, buying foreign stocks directly isn’t the only way to gain exposure to international markets. Other options you might like to consider include:
- ADRs. An American depositary receipt (ADR) is a US bank-issued certificate representing shares of a foreign stock. These are listed on American stock exchanges and traded like domestic stocks, making it easy for anyone to invest in foreign companies. And because ADRs are priced in dollars, you don’t need to take on the hassle of trading foreign currency on the forex market.
- ETFs. An ETF is a fund traded on an exchange the same way as a stock. ETFs are made up of many different types of assets, including international stocks. ETFs mirror the movements and returns of a particular market and there are many global market ETFs to choose from on US exchanges.
- Mutual funds. A mutual fund pools together investors’ money to buy stocks, bonds and other assets. There are actively and passively managed funds available, with many targeting stocks in developed and emerging markets around the world.
Some extra tips
Making big trades? Look for lower exchange rates, research tools that allow you to make more reliable investments and flat brokerage fees rather than percentage rates. Avoid low maximum limits, which might constrain your trading.
Making a lot of small trades? You may want to avoid flat fees that take a big chunk out of the potential profits of each trade and stick to percentage rates that will cost you less. Low maximums are less of an issue, but high minimums might be a problem.
- Buying international stocks allows you to diversify your portfolio and access a wide range of investment opportunities.
- But there are plenty of risks you need to understand before taking the plunge, from foreign exchange costs to the uncertainty of dealing with unfamiliar market conditions.
- Once you’re ready, you can compare brokers who offer access to international stocks and begin trading.
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