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Companies from around the world are made available on the US stock market by means of American Depository Receipts (ADRs), which are traded just like regular stocks. ADRs are negotiable certificates that represent shares of foreign companies.
American Depository Receipts give US investors access to geographical diversification* and also benefit foreign firms by providing an alternative to the hassle and expense of listing themselves on US stock exchanges.
“To offer ADRs a U.S. bank will purchase shares on a foreign exchange. The bank will hold the stock as inventory and issue an ADR for domestic trading. ADRs list on either the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), or the Nasdaq, but they are also sold over-the-counter (OTC)” - Investopedia
*Diversification does not guarantee investors will not lose money and this kind of investment strategy doesn’t make portfolios immune to risk - especially when it comes to systemic risk (which affects a market in its entirety). Moreover, although diversification can reduce risk, it can also reduce reward. By reducing your exposure to any single investment and protecting you on the downside, diversification limits you on the upside as well. Always consider your own investment preferences and objectives.
Many ADRs are sold in the OTC market (over-the-counter), which implies some level of counterparty risk. The issue with OTC stocks is that they are typically subject to less regulation and are traded without the intermediation of a central exchange or broker.
In addition, dividend payments from ADRs are converted to U.S. dollars, net of conversion expenses and foreign taxes. In general, the bank that issued the ADR automatically withholds the necessary amount to cover the expenses and foreign taxes.
*Like any other investment, you should learn as much as you can about a company before you invest. Research the political, economic, and social conditions in the company’s home country so you will understand better the factors that affect the company’s financial results and stock price. You should understand that non-U.S. companies are subject to financial and other disclosure requirements that differ from those required of U.S. public companies. Except for the annual report on Form 20-F, non-U.S. companies are generally only required to disclose what is required in their home country. Any disclosure may also not be as extensive or comparable to that of U.S. public companies.
According to The Balance, some of the most popular ADRs are Teva Pharmaceutical Industries Ltd. (TEVJF), Alibaba Group Holdings Ltd. (BABA), and Vale SA (VALE):
Teva Pharmaceutical Industries Ltd. (TEVJF) - Israel-based pharmaceutical company focused on generic drugs and specialty medicines that are sold on a global scale.
Alibaba Group Holdings Ltd. (BABA) - Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology.
Vale SA (VALE) - Brazilian multinational corporation engaged in metals and mining and one of the largest logistics operators in Brazil.
With Passfolio Securities, you can start investing in US stock with as little as $1 - all with no commission fees¹². We make investing in US assets accessible and even accept local deposit methods such as TEDs.
¹ Please see our fractional shares disclosure.
² Securities less than $5 cost $0.02/share. Please see our disclosures on other charges.
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Passfolio is a San Francisco fintech company democratizing investment opportunities by creating a unified, global, and borderless investment market starting with the United States Stock Market.
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Securities less than $5 cost $0.02/share. Please see our disclosures on other charges.
Please see the terms of our referral program.
Please see our fractional shares disclosure.
Please read important legal disclosures that apply to your relationship with Passfolio.
Investing involves risk, including possible loss of principal.
Securities and cryptocurrencies are very different types of assets.
Cryptocurrencies are not securities.
Purchasing cryptocurrencies comes with a number of risks. Please read Passfolio Financial Cryptocurrency Risk Disclosure.
Currency and cryptocurrency exchange services provided by Passfolio Financial LLC (“Passfolio Crypto”), a US Money Services Business registered with FinCEN. Passfolio Financial LLC is not a broker dealer. Cryptocurrencies are not protected by either FDIC or SIPC. Securities products and services offered to self-directed investors through Passfolio Securities LLC Member FINRA / SIPC. Passfolio Securities, LLC does not provide cryptocurrency-related services. Passfolio Securities LLC is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org.
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To purchase securities using cryptocurrencies, you must first convert it into U.S. Dollars using Passfolio Financial LLC. You must then move the U.S. Dollar proceeds to your brokerage account at Passfolio Securities LLC where you can use it to buy securities.
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All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. Consider the investment objectives, risks, charges, and expenses of a fund before investing. Contact us for a prospectus containing this information.
Please remember that diversification is not an investment strategy without risk, and in certain circumstances, it may not fit your investment objectives. Past performance is no guarantee of future results.
Certain services (“Services”) offered through our mobile app are offered only in jurisdictions where it is legal to do so. The availability of the Services over the Internet is not a solicitation for or offering of the Services to any person in any jurisdiction where such solicitation or offering is illegal. We reserve the right to limit the availability of the Services to any person, geographic area, or jurisdiction, at any time and in our sole discretion. We make no representation that the Services are appropriate or available for use in locations outside of United States, or that accessing our mobile app is legally permitted in countries or territories where the Services may be illegal. If you access the Services from other locations, you do so at your own risk and are responsible for compliance with local laws. In particular, we are not authorized by the Brazilian Securities and Exchange Commission (CVM) to offer securities distribution services to investors who reside, are domiciled or incorporated in the Federative Republic of Brazil. The Services are not specifically directed to investors who reside, are domiciled or incorporated in the Federative Republic of Brazil and should not be understood as an offer of services directed to such investors.
According to CVM's Legal Opinion No. 33, dated September 30, 2005, Passfolio contracted RB Capital Investimentos Distribuidora de Títulos e Valores Mobiliários Ltda. ("RB Investimentos"), a Brazilian securities distributor duly authorized by the Central Bank of Brazil and the CVM, through which RB Investimentos makes Passfolio's services available to investors resident, domiciled or incorporated in the Federative Republic of Brazil. The services provided by RB Investimentos should not be understood as an offering of securities directed to such investors. Although RB Investimentos has been hired to provide Passfolio's services, Passfolio offers its services exclusively in the United States and under the rules and regulations applicable in that country. As these services are investments made directly in the United States through Passfolio, they are not registered with or subject to the supervision of the CVM or any other Brazilian regulatory agency, so the investor must have knowledge of the language and local regulation. Investors resident, domiciled or incorporated in the Federative Republic of Brazil who have become or will become clients of Passfolio through RB Investimentos may contact the following e-mail addresses: email@example.com / firstname.lastname@example.org
Investors should consider the investment objectives, risks, and charges and expenses of an Exchange Traded Fund ("ETF") carefully before investing. Before investing in any ETF, you should consider its investment objective, risks, charges and expenses. Contact us at email@example.com for a prospectus containing this information. Read it carefully. ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund. Investment returns will fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. ETFs are subject to risks similar to those of stocks. Some specialized exchange-traded funds can be subject to additional market risks. Leveraged and inverse exchange-traded products are not designed for buy and hold investors or investors who do not intend to manage their investment on a daily basis. These products are for sophisticated investors who understand their risks (including the effect of daily compounding of leveraged investment results), and who intend to actively monitor and manage their investments on a daily basis.
Be sure to consider your own financial situation, perform thorough research, and consult with a qualified tax professional before making any investment decisions concerning REITs. Investments in REITs and other real estate securities are subject to similar risks as direct investments in real estate. The real estate industry is particularly sensitive to economic downturns.
Where an investment is denominated in a currency other than the investor’s currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment.
Securities products are: Not FDIC insured · Not bank guaranteed · May lose value
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