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 The
Smart Way to Buy Foreign Stocks
You've finally found it.
As an income investor, you are always looking for that perfect investment. You know the type -- the company with a strong competitive advantage, a long-term growth story that would put Microsoft to shame, and best of all, a 15% yield that will put you on easy street for life.
Of course, the security doesn't trade in the United States -- this perfect combination is almost unheard of in the low-yielding U.S. And with millions of investors here, an opportunity like this would have already been exploited.
But if you think you have to wave goodbye to your dream stock because it only trades abroad, you're happily wrong. Today, it is easy to buy many of the hundreds of high-yielding stocks that trade outside the United States. In today's report, we'll let you know how you can easily add these foreign income machines to your dynamic portfolio.
(1.)
Why U.S. Investors
Need Overseas Exposure
In the past, only rich people and institutions could invest abroad. But small investors hungry for overseas stocks are having it easier every day. Democracy has come to Wall Street, and formerly unattainable markets can now be easily and cheaply traded by everyone.
The most recent big news is that the SEC is now allowing foreign brokers to sell directly to U.S. investors. This marks the first time since the Wall Street crash of 1929 that the SEC has allowed that. Conversely, many more U.S. brokerages are now starting to offer direct access to the markets in Toronto, Tokyo, Paris, Hong Kong, Australia and London, among others.
Now, most of your regular online discount brokerages can't give you access to the lucrative international markets just yet. But many well-known brokers are working toward this goal. For now, you shouldn't let this be a hindrance. If you're looking to access overseas markets, you simply need to start an account with a brokerage that offers international trading (we profile several later on in this report.)
In fact, investors who will take only a few minutes today to open an account with one of the brokerages we list later can be trading on the foreign markets tomorrow.
But for those who are still on the fence about starting a new account to invest internationally, you may not know exactly what you are missing out on... until now.
Higher Yields Overseas
It's a cash-flow desert here in America for anyone who needs to bank comfortable income off their portfolio. While you can find the occasional high-yielding stock, odds are that anything paying above say, 12%, is a basket case.
In fact, once you weed out the money losers, only 17 U.S. stocks pay more than 12%. Just 17 lonely survivors. But guess what? Expand your horizon a bit and it's completely different story.
Right now, there are actually 214 profitable companies yielding more than 12% -- they just don't happen to be in the U.S.
17 here versus 214 abroad -- where do you think the best hunting ground is for yield-hungry investors?
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Just take a look at our chart. With average yields abroad simply beating the pants off of those in the United States, it's a mistake not to look internationally for a solid income stream.
Now you may be a little cautious about investing internationally because you think foreign stocks are a gamble -- and they'll crash with even the hint of an economic slowdown in the United States. In fact, you may have heard the old adage "When the U.S. sneezes, the entire world catches a cold." But with the reemergence of a stable Europe and the rise of thriving economies like Brazil, Russia and India, this is not the case anymore.
Even in light of the recent turmoil in U.S. markets, many international indices have continued to plow ahead, enriching savvy U.S. investors who have smartly diversified their portfolios into overseas markets. For example, from September 2002 to September 2007, the S&P 500 delivered average gains of about +12% per year. While that return is certainly respectable, it lagged most foreign benchmarks -- stocks jumped nearly +20% per year in Europe, +25% in Pacific Asia, and +40% in Latin America over the same time frame. Obviously, with the U.S. market looking rockier by the day, investing abroad gains even more appeal. With a credit crunch, a sagging housing market and uncomfortable inflation hurting the U.S. economy, the real gamble is not investing internationally.
The Falling Dollar
If you have traveled abroad recently, then you probably understand the impact of a weaker dollar when it comes to purchasing power.
In early 2002, it took about $0.83 to buy one euro -- now it will cost you about $1.45. In other words, the same 200 euro-per-night Paris hotel room that cost $166 several years ago will now set you back about $290.
Fortunately, what's bad news for the U.S. traveler can be great news for the U.S. investor. And the best way for you to make money off the tumbling dollar? Buying foreign securities.
Suppose you invested 10,000 euros ($8,300) in a European stock in 2002. Even if the share price went nowhere, thanks to a falling dollar you could sell the shares, and those same 10,000 euros would now be worth $14,500. That's a +75% gain from the currency fluctuation alone -- with no share price appreciation. Of course, most foreign stocks have been surging lately, which would make the gains even more dramatic.
Likewise, dividends paid in foreign currencies are worth more when converted to U.S. dollars. Suppose you invested in a European stock that paid an annual dividend of 5 euros per share. Similar to the scenario above, this dividend would have been worth only $4.15 annually in 2002. But thanks to the falling dollar, the same 5 euro dividend is now worth $7.25 -- an increase of +75%. How many U.S. stocks have you run across that have raised their dividends +75% in the past five years?
(2.) How Can You Purchase Shares of International
Companies?
As you can see, all the reasons for investing internationally are culminating into a "perfect storm" of sorts. Which brings us the meat and potatoes of today's report -- how can you get a piece of these lucrative international markets?
As you likely know, some foreign firms trade on U.S. exchanges in the form of American Depository Receipts (ADRs). ADRs represent ownership positions in the foreign company's shares, which trade back in the home country, but ADRs trade on U.S. exchanges and pay dividends in U.S. dollars. These shares are as easy to buy as any common stock, and can be bought in any brokerage account.
While we profile some ADRs in High-Yield International, they aren't the thriving marketplace for international trading they once were. For years, ADRs played a crucial role on Wall Street -- then came the post-Enron Sarbanes-Oxley Act.
Sarbanes-Oxley imposed onerous new requirements on listed companies. It even said corporations must have international auditors review and sign off on their computer systems, a job costing at least $3 million. It's no surprise that new ADR issues are almost non-existent.
Why should international companies go to all that trouble when legions of eager new investors are cropping up around the world, especially in the emerging economies of Asia? Unfortunately, the pool of ADRs that U.S investors can dip their toes into is drying up fast.
Even some of the world's premier companies -- including Taiwan's Hon Hai Precision Industries, the world's largest contract-maker of electronics -- are off-limits to U.S. investors. These companies haven't bothered to register with the SEC, and don't even have ADRs.
The point is, if you want the best foreign stocks, you can't just sit back and buy ADRs. Instead, by expanding your brokerage choices just slightly, you can buy practically any security in the world.
What to Look for in a Broker
Later on in this report, we profile several brokers that offer easy trading on foreign stock exchanges. But before you just go down the list and pick an international broker at random, there are a few points you will want to consider...
 Does the trade actually take place on a foreign exchange, or on the U.S. "Pink Sheets"? Pink Sheets transactions usually have wide "spreads" between the bid and ask prices for a stock. These spreads create a hidden cost that many investors aren't even aware of. Buying or selling directly on a foreign exchange resolves this problem.
What are the specifics of dealing with the exchange rates on trades and dividends? Currency exchange should only cost a few tenths of a percent on a trade, but unwitting investors can be hit with much higher costs if they don't do their homework.
What is the commission/fee structure for trading overseas? Are there minimum transaction amounts, special fees, hidden costs or any other miscellaneous fees? Most brokers should be able to provide a list of all charges for an overseas trade before you invest.
Are you allowed to place limit orders on your overseas trades? Just as on thinly traded U.S. securities, there may be a large spread between the bid and ask prices for a foreign security. By using a limit order, you can ensure you buy or sell a security for a certain price or the order is cancelled.
These few points will help you to find the best brokers for trading internationally. Below, we give you the names of several brokers specializing in international trading. In addition, we list the appropriate contact information, as well as what international markets they give you access to. This list should provide a solid base of options to investigate for anyone looking to tap into a higher income stream overseas.
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Why You're Not Hearing About 93% of the
World's Highest-Yielding Stocks . . . and How We're
Fixing that Right Now
The
score of profitable companies yielding more than 12% is:
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Home
(U.S.) |
Away (Foreign) |
|
17 "High-Yielders" |
214 High-Yielders" |
17
here versus 214 abroad -- where do you think the best
hunting ground is for yield-hungry investors?
Fact is, any income investor who doesn't look overseas might as well be
playing golf with one club. You're giving up on 93% of your juiciest
yields before you even tee off.
In High-Yield International, I'll show
you how easy it is to capture safe double-digit income abroad . . .
and I'll introduce you to the highest-yielding stocks on the planet.
Get
the full story here. |
(3.) Brokers Offering Foreign Trading
Euro Pacific Capital
Based in the United States,
Euro Pacific Capital is a full-service broker specializing in foreign
markets and securities. The brokerage has direct relationships with a number
of foreign trading desks, which helps its clients avoid the large spreads
often imposed by U.S. market makers of foreign securities, thereby reducing
costs.
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Euro Pacific
Capital
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Address: 10 Corbin Drive,
Suite B
Darien, Ct. 06820
Phone: 1-800-727-7922
Website:
Click here |
Although the firm specializes
in foreign investments, it provides access to all U.S. equities. The
brokerage also offers a full array of services ranging from retirement and
trust accounts, complete financial planning, checking accounts, life
insurance, and annuities.
Markets Traded:
Argentina, Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Israel, Italy, Japan, Luxembourg, Mexico,
Netherlands, New Zealand, Norway, the Philippines, Poland, Singapore, South
Africa, Spain, Sweden, Switzerland, Thailand, the United Kingdom, and the
United States
E*Trade
A name familiar to many, discount online broker E*Trade is dipping its feet
into the international trading arena. The firm has opened up six of the
largest international markets to its clients, all of which are accessible
through its online trading platform. Just as you would enter an online trade
for a U.S. security, you can easily do the same for foreign securities with
E*Trade -- and even do it in the local currency.
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E*Trade
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Address: P.O. Box 1542
Merrifield, VA 22116-1542
Phone: 1-800-ETRADE-1
Website:
Click here |
Trading with the brokerage may
be a popular choice, especially since roughly 4 million investors already
have an E*Trade account. And while the brokerage offers direct access to only
six popular foreign markets, it gives you indirect access to stocks in
many more countries. That's because companies in smaller markets often list their
shares on a nearby larger market's stock exchange. So a stock may trade in
Poland, but it is likely to also have shares listed on a German exchange as
well.
E*Trade also offers a number of research and investing tools, as well as
options trading, retirement planning, and online banking.
Markets Traded: Canada, France, Germany, Hong Kong,
Japan, the United Kingdom, and the United States
Interactive Brokers
Interactive Brokers is a discount brokerage that mostly caters to
professional traders -- hedge funds, money managers, and other institutions
that trade tens of thousands of shares every day -- but it also accepts
individual investor accounts.
That's a huge boon for anyone looking to buy foreign securities, because in
addition to the U.S., Interactive Brokers provides investors access to
securities on 70 exchanges worldwide.
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Interactive
Brokers
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Address: 1 Pickwick Plaza
Greenwich, CT 06830
Phone: 1-877-442-2757
Website:
Click
here |
One caveat: Although its
individual-investor systems are user-friendly, Interactive Brokers tends to
cater to more-sophisticated investors -- as befitting its initial
incarnation as a trading service for professionals. In fact, it requires
individual investors to state that they have executed at least 100 trades
before opening an account. So if you're truly a novice investor, Interactive
Brokers might not be the best option.
Markets Traded: Australia, Belgium, Canada, France,
Germany, Hong Kong, Italy, Japan, Netherlands, Singapore, South Korea,
Spain, Sweden, Switzerland, the United Kingdom, and the United States
NobleTrading
NobleTrading is an online discount trading company based in New York.
Similar to Interactive Brokers, Noble is designed with the experienced
investor in mind. Investors can place trades through the firm's online
trading platform, or by speaking with a representative over the phone. The
company prides itself on customer service and promises the ability to speak
with a live representative immediately when calling, and also has online
chat available if you prefer. Either way, this focus on customer service is
a plus for those unfamiliar with international trading.
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NobleTrading
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Address: 50 Broad St. 4th
Floor
New York, N.Y. 10004
Phone: 1-877-TRADE-11
Website:
Click here |
Noble's reach extends to more
than 20 different markets, offering investors plenty of options. The
brokerage also offers plenty of tools for investors, and deals with options,
futures, and forex trading as well.
Markets Traded: Australia, Belgium, Canada, Denmark,
Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Mexico,
New Zealand, Norway, Portugal, Russia, Singapore, South Africa, Sweden,
Thailand, the United Kingdom, and the United States
Thanks for reading
today's special report -- The
Smart Way to Buy Foreign Stocks
Good investing!
-- Research Staff
StreetAuthority.com
http://www.StreetAuthority.com
StreetAuthority LLC
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614
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