One of the easiest and most profitable ways to earn in stock trading today is to Purchase American depository receipts or ADR’s. ADR’s are stocks from an overseas corporation but are traded on a local exchange. U.S. brokers sell these stocks and can be bought and traded just like any U.S. stock. There are three kinds of ADR’s which will be discussed in this article.
The first kind of American depository receipts is the Level 1 stock, the basic ADR. These stocks represent a smaller company and are not sold on large exchanges. You can usually purchase Level 1 stocks on over the counter bulletin boards. The second kind of ADR is the Level 2 stock. These require higher SEC’s and are traded in a higher volume. The last kind of ADR is the Level 3 stock, the highest kind of ADR. The companies these stocks represent are actually one of the initial offerings on the American Exchange.
Choosing to opt to buy American depository receipts stocks has many advantages and disadvantages. Some of the advantages include the ability to purchase shares from foreign companies, the reduction of the cost of administration and not having to worry about foreign taxes and you’re also helping other companies get exposure in the American market. The risks of purchasing an ADR are the political risks, the fluctuations in the exchange rate and inflationary risks. This all depends on the country which the company comes from. Before opting to buy ADR stocks you have to do your research on the company you are investing in and the country it comes from. If the country where the company you are investing in is located seems to be unstable at the moment it may be a good idea to buy your stocks elsewhere. Choosing the right company and the right country to invest in will determine your profit in investing in ADR stocks.