About American Depository Receipts

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Physician Investing Basics

[By Julia O’Neal; MA, CPA]


American Depository Receipts [ADRs] are shares of foreign stocks held by U.S. banks abroad that are sold on exchanges in the United States.

Often, foreign governments do not allow stocks to be sold to non-citizens, and ADRs allow U.S. investors to purchase foreign securities.  

ADRs usually exist on only the largest foreign publicly held companies, but their numbers are rapidly growing. They are traded in dollars, and dividends are paid in dollars. (Morningstar, Inc., in Chicago, publishes regular research reports on ADRs.) 


Do you own ADRs, and why or why not? 


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2 Responses

  1. On Foreign Stocks

    Investing in companies located anywhere outside of its investors’ country of residence is known as foreign investing.

    In theory, foreign stocks offer considerable diversification benefits because they tend to be affected by dissimilar economic factors than the U.S. markets.

    Thus, the zigs and zags in return of foreign stocks do not always correspond with those of U.S. stocks. This occurs despite the reality that the world’s economies are becoming more interdependent.

    The fact is the U.S. no longer makes up even half of the world market capitalization of all equities. According to Professor Jeremy J. Siegel (CFA Institute Conference Pro¬ceedings Quarterly (09/07)), by 2050 the United States will account for only 17% of the world’s market capitalization.



  2. Using ADRs for International Exposure

    Should an investment plan include American Depository Receipts (ADRs) for international exposure?


    Any thoughts?



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