How to Buy Stock on the International Stock Exchange

Choose your investment channel. If you're considering investing in the international stock market, most likely you already have a brokerage account in place. With international investments, it's best to have a knowledgeable adviser in your corner. If you've been going it alone up to this point, you might want to consider a full-service brokerage firm or a fee-based service to help you navigate this new terrain. Understanding currency exchange procedures, regulatory requirements and overall portfolio management advice is much needed when investing in the international stock market.
Research the global stock market. Two types of markets dominate the global stock exchange: Mature markets--These include the United States, London and Europe. These are markets in which growth potential is small. The corporate market momentum has pretty much stabilized.Developing markets--These markets are called BRIC economies and include the countries of Brazil, India, China and Russia. These are developing countries, and so their corporate market growth potential is large.You would think the developing markets would be the wise investment choice; however, developing countries are prone to frequent economic and political change. Changes like these impact the corporate structure of a country’s market system and can drastically improve or depreciate the value of a stock investment.Mature markets offer stability but little opportunity for growth. The potential for technological advancement within a mature market system is, however, a possible growth opportunity. Take some time to get a feel for the economic and political climates of the countries you’re looking to invest in. Changes in a country’s leadership, talk of intercontinental alliances or the potential of war or upheaval are things to look for when considering how stable an investment will be.
Match portfolio needs with international stock type. There are several different investment packages to consider when choosing international stocks. You can invest in a specific oversees company, or you can invest in a group of companies or even a group of countries.The main types of investment options offered by brokerages are:American depositary receipts (ADR)--These allow investors to invest in international stocks without buying into a foreign exchange.Exchange-traded funds (ETF)--These are, in essence, mutual funds that can be traded just like individual stocks.International funds--These are similar to exchange-traded funds. The only difference is they’re handled by a portfolio manager, and all decisions are made by the portfolio manager.Foreign securities--This is when an investor purchases international stock directly from his broker’s international trading desk.
Choose your broker carefully. More oftentimes than not, U.S. brokers who trade on the international market are trading through domestic market makers. The market maker is the middleman, and he’s the one who’s actually carrying out the trade exchange. As such, market makers make a profit off your investment monies. This is an extra cost that can best be put toward the investment stock itself.Instead, look for brokers who deal directly with oversees traders. Of course, they’ll charge a trading commission, but this charge is substantially lower than what goes to a domestic market maker.
Track currency exchange rates. Investing in oversees stock means your U.S. dollar will be converted to whatever a country’s currency is. The drawback here is not all currencies are created equal.Translating your U.S. dollar into a foreign currency rate means price quote amounts, dividends and fees will be altered to reflect the difference of value in the currencies in play. Make it a point to understand the currency exchange rates that apply to your portfolio makeup and incorporate them into your investment budget planning process.

How to Find a Stock Broker

Determine your investment objectives. If you're only using a small fraction of your assets to invest every now and then, you should make cost control your main priority. Use financial publications such as Kiplinger's and Barron's to compare one brokerage against the other, and see who offers the lowest commissions and fee structures. If you're investing larger sums that constitute the majority of your assets, you might want to choose your broker based on capabilities rather than price. Be aware that price and capability are not mutually exclusive, however, since some of the lowest-cost brokerages such as TradeStation and Interactive Brokers have consistently received the highest customer satisfaction rankings.
Decide whether you want to trade or invest. Trading involves frequent buying and selling of stocks in hopes of making small, recurrent profits. Investing, on the other hand, involves deploying your capital in one or more companies for at least a year. Typically, larger full-service stock brokers are better equipped to assist longer-term investors looking for help with analyzing the financial statements and business prospects of the companies they want to invest in, while discount brokers are essential for people who are self-directed, actively trade and seek to keep the cost of their commissions down.
Figure out how much active help and advice you want from your broker. If you're relatively new to investing or trading, you might want the assistance of a full-service broker, who can give you some advice on investing methods and procedures, such as how to buy a stock with a stop-limit order or how to set a trailing stop loss. If you're more independent-minded and already checked out the basics of investing and trading, you should set up an account with a discount broker. Be aware that even if you use a full-service broker, the advice you get will not necessarily improve your stock market returns.
Determine which types of stocks you want to invest in or trade. Some brokerages are only equipped to buy and sell shares of mainstream American companies that have minimum market capitalizations of tens of millions of dollars. If you intend to purchase shares in low-market capitalization companies, illiquid penny stocks, foreign entities, or other irregular securities, be sure that your broker can accommodate.
Make sure that the broker you're considering opening an account with is registered with the Securities Investor Protection Corporation (SIPC), which insures your account for up to $250,000. If you have a larger account, consider looking for brokers that carry extra insurance from private providers such as Lloyd's of London.