The world of investment has many opportunities.  The countries and exchanges where investments have been placed by foreign investors for at least a few years are listed in our Stock Exchange Directory.  There may be countries and or exchanges not listed.  We believe we have many of them.  Check back often as we will be adding to the list frequently.

ARE THERE WAYS TO PLAY THE GLOBAL MARKETS, WITHOUT VENTURING INTO STOCKS TRADED ON FOREIGN EXCHANGES?

GDR’s (Global Depository Receipts) and ADR's (American Depository Receipts) are available if you want to invest in large foreign companies.  Many professionals will tell you that they are the best way to play foreign markets.  In some cases this is true.  In most cases, we believe it is not true.  These are our opinions:

• It is true if you are very conservative, and you only want to buy the biggest, and thus probably the slowest growing companies.
• It is true if you are a small investor at a brokerage firm that doesn’t want to give you access to the faster growing foreign stocks.
• It is not true if you are an investor with over $100,000 to invest.
• It is not true if you want the lower price to earnings ratios, better values, and faster growing stocks, and are willing to tolerate some additional risk.

WHAT ABOUT ETF'S AND CLOSED END FUNDS?
 
ETF's (exchange traded funds) and other foreign funds are derivative instruments which are meant to duplicate the performance of and index or group of stocks in a country or industry.  They also exist for a number of commodities and currencies, and can be a good vehicle for investors to gain exposure to countries, markets, or sectors.

Many of these vehicles are available on the major U.S. and London exchanges, and they are becoming more common in other countries as well.  These derivative instruments are proliferating rapidly, and some are better than others.  They differ in structure, fees, liquidity, leverage, and in how well they track their respective index.

For a listing of exchange traded funds, there are web sites devoted to the topic.  The major world stock exchanges especially the U.S. exchanges and the London stock exchanges will list the ETF's traded there.

Do your homework  or make sure your money manager has done their homework.  New derivatives are constantly being created, and they are not created equal.  Some do a good job of tracking their index or commodity, others do not.  Some are funds that buy the individual components of an index, and some are notes that promise to pay the investor the performance of the underlying index.  There are differences, and it pays to know exactly what you are buying.

ONCE YOU HAVE DECIDED TO PURSUE INVESTING IN FOREIGN MARKETS DIRECTLY, SELECTING THE RIGHT BROKER OR BANK TO FACILITATE YOUR INVESTING IS THE NEXT STEP.  THESE ARE OUR SUGGESTIONS:

If you are a substantial client most of the major banks and brokerage houses have international investment options.  Major banks and investment firms have memberships on foreign stock exchanges, or relationships with local firms, and thus can transact business in several countries around the world.

It is getting easier for investors to gain access to overseas markets.  Opening accounts, and buying and selling stocks directly (even smaller companies) is no longer only for the very wealthy.  Many of the major online brokers have begun to, or are planning to, offer direct international trading to their clients.  In addition, there are new online brokers overseas that are willing to take investors accounts.  Some need only a copy of your passport, and proof of residence, others are more restrictive.  Some require that the investor have a bank account in that country, while others are more flexible.  Some of the brokers are well regulated, and others are not.  Do your homework and make sure your money manager has done theirs.  Remember, you can contact a country's stock exchange and get a list of approved brokers.  Click here to view the Stock Exchange Directory.

To get the best service, you will probably want to make sure your money manager or you has developed relationships with brokers in each of the major markets in which you wish to invest. We at Guild Investment Management have developed relationships over many years.  For an individual getting started, it can be more difficult.  These brokers should be checked out with their home country's SEC equivalent if one exists, make sure you or your money manager can vouch for them as a reputable organizations before sending them money.  Checking them out with the legal authorities in their home country is a good idea also.  Click here for our list of many of the International Regulatory Agencies.

IMPORTANT ISSUES OF WHICH INVESTORS MUST BE AWARE

Fees and commissions: Remember, negotiated commissions and discount commissions exist primarily in North America, not in Europe, Asia and other parts of the world.  Be sure to research, and if possible negotiate and establish the cost of each order with your broker before trading.  The fees can be a flat rate, or a percentage of the trade value.

Online trading may seem instantaneous, but does not guarantee a good execution.  In foreign markets where the SEC or its equivalent may not exist, and there may be little or no protection for foreign individual investors.
 
Execution Quality: USE LIMIT ORDERS or make sure your money manager uses limit orders.  Place limits on all orders in the local currency.  Never place orders without limits until you or your money manager is experienced in global investing.  You can note volume and price action for the last several months in the stock before investing in it.  Try to avoid stocks where liquidity is suspect.  If the stock needs to be sold quickly, liquidity will be an important consideration.  Will you be able to sell your whole position near the market price, or will you have to take a big mark down to get out?

Currency Pricing: An easy and free way to check the currency quotes and executions is to go to International section of Yahoo! Finance and click on the currency translator to determine the fair price of the currency in which the stock or bond you are transacting is denominated.

Many banks and brokers make a good deal of their money on the high mark up, or spread, on their currency transactions for their customers.  While the global currency markets are very liquid, and trade at a very low spread between buying and selling prices, banks and brokers often try to use their currency desks as profit centers.  You or your money manager should negotiate this spread.