How To Invest In Global Markets With $1,000 Or Less

Every time you wear a suit, drink a soda or drive a car, you contribute to the global market place. It’s not so much whether you will be a global investor it’s whether you’ll do so consciously, and with a plan of action.

It’s surprisingly easy to invest in companies all over the world with small (or large) amounts of money.

Many large companies like Hoffman La Roche (Swiss), Daimler Benz (German), British Petroleum (GB) are listed on the US exchanges and can be bought through any broker. These companies are not different from Coca Cola or Motorola, they are international mega corporation that happen to based in other countries.

But many companies refuse to spend the money and time it takes to be listed on a US exchange. If you find those, like Elf, the French fuel company, or Teva Pharmaceuticals, the Israeli drug, company, you can buy an ADR, American Depository Receipt.

iShares

If you’d rather invest in one country than one company, a convenient way is iShares. These are units of an entire countries stock index sold on stock exchanges as if they were one stock. You may select from many different countries. The fate of your investment will change in lock step with the stock index you choose. The following stock exchanges list iShares funds: London Stock Exchange, American Stock Exchange, New York Stock Exchange, Hong Kong Stock Exchange, Toronto Stock Exchange, Australian Securities Exchange and several European and Asian stock exchanges.

Funds

Then of course there are mutual funds. If you were a mogul you could open up a foreign bank account and buy shares in any of the 1000 or so foreign mutual funds. But there are hundreds right here at home. Janus International, T. Rowe Price and many more diversify your dollar into many companies in Europe, Asia, Latin America. Africa has thirteen different exchanges and a US mutual fund. There is something for every taste.

A closed end fund trades on the US stock exchange, but is like a mutual fund with diversified holdings. It is called “closed end” because, like a corporation, it has only a finite amount of shares outstanding. It often sells at a discount below its net asset value. As the discount below NAV decreases, the value of the investment increases.

ADRs

ADRs, American Depository Receipts, are traded on NYSE, NASDAQ, and OTC. Over 1200 companies trade this way. ADRs are certificates that represent ownership in foreign companies that have not registered to trade their stocks with the SEC. ADRs perform like overseas shares traded in dollars. Many companies will send you annual reports and proxies, all in English. Other will send material in their language, and some send very little information to investors. Many companies register their “rights” offering (the right to buy their shares at a discount) with the SEC. Rights offerings are common practice abroad. We use options and warrants. Ask if the company offers the rights.

With so many choices which should you buy?

Sophisticated thinking takes a “top down” or “bottom up” approach to global investing. Top down does not refer to an Italian convertible. It means that the economy in a country is advancing so rapidly that’s it’s wise to invest in as many stocks as possible because the are all likely to be in for the rise. These are called emerging growth countries. You can spot them by watching their GNP, housing starts and strength of currency against the dollar. In those cases the mutual fund or closed end country fund does best.

In a “bottom up” approach, it’s a particular industry or company that strikes your fancy. In these days of excitement over the European Union foreign banking and telecommunications are hot. Those mutual funds give you a lot of play for low minimums. Or invest in iShares to participate in the growth across the board.

If you are traveling and notice that every Mexican is drinking a certain brand of soft drink, beer or tequila you’ll want to target that company and buy the ADR.

Whichever you choose you must strike a balance between adding safety through diversification, and not taking undue risk. In any case global investing can be part of any portfolio.