Investing Internationally - ADRs, VIEs, and Everything Else You Should Know About Foreign Stocks

[@ThePlainBagel]

Happy Friday everyone! The first 1,000 people to use this link will get a 1 month free trial of Skillshare: skl.sh/theplainbagel10211

[@ThePlainBagel]

@Odis Vernita wat

[@IIIlllIIllIlIl]

What?

[@raulkaap]

Was there a deleted comment somewhere? Because my other comment on this video had a scammer comment that disappeared.

[@csanton3946]

Can you create a video on the data analytics tool and th metrics you usually use for macro economic understanding down to asset prices valuations impact. from fed rates which moves asset prices across risk spectrum, to the yield curve signaling more weight into bonds for downside protection etc etc

[@Quickonomics]

I invested in Heinz Company a while ago... still waiting for the Ketchup effect. Ok, I'll show myself out.

[@AlexanderTheGoodEnough]

Not enough day drinkers on youtube, you'd have the top comment if there were.

[@txshtkckr]

8:15 Many securities on the LSE are quoted in pence (GBX) rather than pounds (GBP). This can come as a bit of a shock if you aren’t aware of it. 11:05 You ain’t just whistlin’ Dixie. Possible differences in capital gains handling, W-9 vs. W-8BEN dealing with the US, varying withholding rates on dividends, estate tax considerations... withholding tax is only the beginning. My accountant earns his keep.

[@gammaray152]

One very important note I feel needs to be highlight, domestic investment has one massive benefit, by living in the country you have intimate knowledge of whats going on aswell as any news and developments allowing investors to make better informed decisions. so its not like that bias is bad.

[@lepidopodus]

Investing in 4-5 countries. Winning in American stocks and suffering by domestic stocks. Developing markets have been… suck these days. Anyway international investing has many practical challenges and I have lots of things to say about that. Great video by the way.

[@hl3641]

International market sucks… for long term.. look at the pass 20 yrs performance .. Yeap.. ppl. Say it’s ab to turn.. lol.. that’s gamble

[@Bobventk]

You guys don’t get it

[@therapturedmichelle]

International investing is a topic I'm really interested in. Looking forward to more videos on this topic!!

[@rhythmandacoustics]

100% of my portfolio is based on Antarctica. Growing population of penguins there. Lots of fish also.

[@tgymartin]

stonKs!

[@abdullah7502]

Cringe

[@MaryamMaqdisi]

Unix-like economics

[@homelessguy4395]

@@abdullah7502 Cringe

[@meltedsnowman9637]

Ah, a developing market. Nice choice. Lots of potential for growth there.

[@JosephDickson]

VT or VTWAX and chill. (Vanguard Total World Stock Index: weighted by market capitalization) 😉

[@OopsFailedArt]

Lol fair enough but that’s still gonna be primarily the US then just due to the massive size of their market cap. Current top ten of VT United States60.52% Japan5.87% United Kingdom3.91% Hong Kong3.35% Canada3.06% France2.38% Switzerland2.37% Australia2.15% Not a bad thing but kinda shocking how big the US is

[@mikel5929]

@@OopsFailedArt It's supposed to match the global market proportionally, that's how the percentages are allocated

[@pongop]

This is a super helpful overview! Thanks for this!

[@RyanArchibaldSmith]

This is a great video! I'm only a year into stock investing and use a commission free brokerage app. They've just listed CDRs through the NEO exchange and I wish I had seen a video like this when I was trying to figure out what the heck they were! Exchange rates and conversion fees always turned me off of investing in foreign entities but since learning of this vehicle I feel like I've got so many more options for my capital.

[@grashuriza1235]

I own 85% of my portfolio in a weapons company, targeted in arming tardigrades. Their long life span and surviviabilty has transferred to the stock, with good long term growth

[@PGproductionsHD]

Stonks

[@therapturedmichelle]

lol

[@andreimircea2254]

As a Romanian, I can say international investing is my bread and butter, because our stock market is too irrelevant to bother and the other places (in my case the US) has such a broad amount of stocks that fit like a glove, I honestly couldn’t care less about domestic investing.

[@thandokwenda7083]

It's exactly the same for me

[@monsterboomer8051]

Same for the Czech republic. Our stock exchange is a joke.

[@samsonsoturian6013]

According to Google there are 83 publicly traded companies in Romania.

[@andreimircea2254]

@@samsonsoturian6013 Thanks for the fun fact.

[@therapturedmichelle]

Could you talk about developing/ emerging markets and specific countries like Vietnam?

[@aaronloh321]

Hi Richard! is it safe to invest in foreign companies through ADRs? What are the pitfalls or risk in doing so as compared to investing directly through its shares?

[@IpOsTcOmMeNtS1000]

Here in the US, you can also trade OTC “F” shares,. It’s basically the share of the foreign company that just trades directly on the US OTC exchange, from what I know is when there is investor interest, a company or bank just has to file with finra to get a 5 letter symbol ending with an F. These shares usually are pretty illiquid because you don’t have access to all the shares, just wha pt shares have come to the US, but it is a way to invest in foreign companies with avoiding currency risk and some others.

[@therapturedmichelle]

So it's probably best to invest in foreign stocks through domestic tickers, right?

[@paulking5199]

One more thing. Some exchanges like Tokyo have a minimum number of shares that you must purchase, which can price out a lot of retail investors. For TSE, it's 100 and when some shares can be $SU50, that can be a big commitment.

[@Traestaree]

Earlier I held an emerging market fund to try to get exposure to foreign markets... until I realized the stocks I hold mostly do business in these countries anyway, and their tickers were moving in sync with the emerging market fund and not the S&P 500, despite them being US Companies and one of them being in the S&P 500. One question I had about ADRs involves special dividends - the company GSK, a London-traded pharma conglomerate, is planning a spinoff with shares of each being distributed (probably). Would ADRs spinoff shares as well? The bank that issues the ADRs didn't give me a straight answer. Personally, I'm starting to look into the metal-materials sector, so I'm going to be doing research on South African and South American stocks and the country risks there. It'll probably take several months, but I'm looking forward to it.

[@realruppert351]

Great videos ! Thanks!

[@Sumit-in5ji]

I'm from India, and I currently hold about 10% of my portfolio in a fund that invests in the US S&P 500 Index, while the remaining is in my domestic equities. I was going to increase my allocation to other global markets, but it seems that my home country's market is reaching newer highs, therefore I am staying majorly domestic for a while now.

[@nickdoyle-achievefinancial2464]

I like VT and VXUS. I believe in matching the global market cap. I don’t see a reason to take risk of a single country’s currency, political, and other risks.

[@UmTheMuse]

The title was on investing internationally, but only mentioned equities. Are you planning a follow-up for other forms of foreign investments?

[@MrEo89]

Investing outside the US, or simply betting against the USA, has been a suckers bet. Since becoming a country (probably) returns made investing at home (us/world citizen aka us citizen, hah) have far outpaced those you could make dollar for dollar in other countries.. atleast up until the 80s vs Japan & 2000’s in China.

[@Djappyd]

As someone living in the UK, pretty much if you want to do well in stocks you need to be outside the UK, my pension (SIPP) goes through Fidelity Index World, something like 67% US, I believe 5% is invested in the UK 😂 I’m the exact opposite of home country bias, I tell everyone invest as little as possible in UK stocks.

[@BotanixB]

Actually there is quite a few foreign companies listed companies listed on LSE and that makes is attractive for me. For example I bought in London an ADR for Kazakhstan Uranium miner. Also fact that United Kingdom have no withholding tax on dividend is very convenient.

[@ASK-ko9qx]

@@BotanixB No. The FTSE 100 hasn't moved an a&& since the crash of 2007

[@BotanixB]

@@ASK-ko9qx And what exactly investing in IOB in foreign GDR have to do with it?

[@michaelcarter266]

I originally had 95% American 5% international. Recently decided to invest more in international but ran into an issue of whether or not I want to be investing in China and Russia. The fund with a small % of China has an expense ratio of 0.480% only 375 stocks 11 other. The fund with over 4 thousand international stocks includes China and Russia also has smaller expense ratio. Only investing 10% international. People leave those places and come here for a reason. They are also limited by their government.

[@thatguyshaq7053]

Heading in to my SIE exam in a couple hours. A little plain bagel is never a bad way to wind down.

[@77magicbus]

I was hoping to get an example of the cost of buying these ADR's. For ex if the ADR is a low USA price, say 1$ and the cost per share is .03. If the investor buys 60K worth he now has 60k shares. At .03/share that cost is high per year at $1800? Is that accurate? If the share price was $30, the 2000 shares x .03, then only $60.

[@norbertcondoros6803]

Can you make a video about investing using the Revolut app/bank? Thank you. Great video, as always.

[@yeis0n8]

Great video 👏

[@Randommusingsvideos]

Thank you for answering the question I had regarding ADRs!

[@Potatoes85858]

Besides the US market, I also invest in my country's stock exchange, the Bucharest Stock Exchange. I am happy with the results.

[@armenstaubach9276]

Easier way: I have Canadian mutual funds that own foreign companies…

[@JohnSmith-zr4tn]

Thank you for great video. Do you think, it is possible technically to open discount brokerage account in foreign country (let's say, Switzerland) and to invest directly in Swiss francs (I leave aside for now exchange rate risk; withholding dividends etc.)?

[@dolevmazker736]

Thank you so much for the in depth explanation. I also have investments outside the U.S and this has been helpful, thanks in advance for the future of your videos.

[@jemiez9383]

Hope many more people will invest in my country,Malaysia stocks. We got quite many very capable companies with worldwide operation but many people just knows about Singapore😂

[@DekarNL]

Global diversification is easy. Just buy a few Global market cap weighted index funds

[@EatSomeAcorns]

Mutual funds/etfs are th4e easiest method imo.

[@endurorama]

Hi Richard, really like the content on your channel. Could you make a video explaining Basel 3? Thanks!

[@garcia4062]

Gracias Master!

[@JDWilliamsPD]

Bravo!

[@understandingart9961]

Big fan keep it up Richard

[@bad_writer]

Hey Richard, FYI you're missing the word "know" in the title. Keep it up, big fan 👍

[@Je.rone_]

International investing is fascinating

[@umangprakumar1730]

Half of my portfolio is based on sensex(India) and the other half is divided between USA and Germany, where I generally commute for work.

[@the_noble_lefty]

what do you think of funds like XEQT?

[@CocolinoFan]

Hey Richard! Personal question but, do you think all is going well or there is something big coming soon (revolution, etc)?

[@goldjoinery]

I would hope so. Supply chains worldwide are facing significant strain: labour shortages, poor conditions & overworking, etc. This could be a breaking point for capitalism if workers realise they have so much bargaining power, and are able to take concrete steps to build new forms of production & community.

[@anonymousanonymous4690]

This is just the beginning the bubble will get bigger

[@009a2]

Viva la revolucion!

[@poisonpotato1]

Found the commies

[@lt8833]

Sadly, most small poor countries cannot invest abroad

[@MountainFinance]

A lot of people wall in their investments when there are lots of great opportunities in the American market and other markets overseas.

[@zippyzipster6863]

Fantastic high quality contents as always, thanks.Most insightful and informative.👍.

[@sandropereira888]

IMHO.. indexing investment and International indexing are keys for portfolio management

[@SherlockMahomes99]

Hey Richard could you make a video on CDR & The Neo exchange

[@jamesfox1143]

Can you share your perspective on ESG investing??

[@tuoppi301]

There is already a plain bagel video on the topic. Here it is kzbin.info/www/bejne/pWHNlZ2fqNmnr9U

[@jamesfox1143]

@@tuoppi301 thank you!

[@JackDuffley]

As someone who went to law school, it's hard enough to try and understand just one country's rules... 😅

[@Thebreakdownshow1]

As a small KZbinr, I have over the years learned a lot from your channel about filmmaking. That being said I still stay in the local market for my investments.

[@andriashausiku2339]

Not for beginner 🤔

[@JDWilliamsPD]

Great point! I'm in my last term of a Masters in Finance and still re-studying this to gain deeper understanding.

[@ciaoatutti11111111]

Geographical diversification would be the last to be considered.. If not to avoid. Company fundamental first, sector diversification second. Prove of it is Alibaba a very robust business with undermining politics issues. If you are Charlie munger knock yourself down but if you want to sleep at night avoid what is not a stable market.

[@samsonsoturian6013]

Dude, if you're American it doesn't matter since all the US giants are global firms.

[@brainstormer2520]

13:05 Don't ADR's charge some fees for holding them? Besides, don't ADR's lack real stock ownership, while cross listing provides real ownership of the stock? If that's accurate, won't that make ADR's and cross listing a little different, especially when held for the long run?

[@theondono]

I don’t suffer from home bias! +70% of my portfolio is US based, but I’m outside of the US 😂😂

[@samsonsoturian6013]

That actually happens a lot. Especially investors from old and established nations that don't have as much growth room.

[@mik4567]

Please expand on dividend withholding taxes.

[@user-Aa310]

I think I am well-diversified geographically- across Australasia, Europe and North America. Also across asset classes - equities, debt, property, infrastructure, venture capital and cash. And a 3rd dimension - across time, due to exposure to time-accessible assets (best way of putting it). The world is becoming increasingly uncertain and markets, more volatile. I am set (fingers crossed), and will hang on for the wild ride to come.

[@consecuencias.imprevistas]

Some exchanges support multiple currencies. For example, there's USD denominated stocks on LSE, like many UCITS ETFs: LSE:IWDA, LSE:VWRA, LSE:EIMI, etc.

[@midimusicforever]

For the US, history is in their favor. A company here in Sweden that helps with pension plans based on scientific data actually recommends being heavy on US stocks.

[@moho472]

I'm very grateful to find your channel, I've thought about investing for the long term and your explanations help a newbie like me, a lot. Thank you for the video!

[@SkLLzDaTkLLs]

Interesting. So you can do all of that or just buy Bitcoin. Got it.

[@JDWilliamsPD]

I buy bitcoin, but buying it alone is russian roulette. If it tanks and does not recover, all your eggs are in one basket. If you have some bitcoin, some domestic securities, and some foreign securities it is possible but not likely that they will all tank. Now, an investor who is risk-seeking is fine with all bitcoin, but risk-neutral and risk-averse investors will not be comfy risking it all on one financial instrument. Thoughts?

[@jakeshlong]

hi bagel, great video! i'm just a little confused with BABA - is it an ADR or VIE or both?

[@nickmultikill]

this home bias thing is a reality. I'm Brazilian and 50% of my portfolio is BR stocks and 30% is BR bonds, just 20% is US stocks. It just seems too risky to an American and is just too common here.

[@Larry82ch]

Currency hedged funds are usually more expansive and can eat a significantly big chunk away from your profits.

[@iulianfd]

To whom do you owe taxes, if an adr pays you dividends? Is it the cayman islands where adr is founded, is it china the og, or us like where the stock is exchanged

[@kevmitchify]

You only ever "owe" taxes to your own government. You need to keep track of your dividends and report as income on your yearly income tax return. The withholding is done automatically by the foreign government so you don't really need to interact with them beyond that. Typically, you can use the foreign taxes withheld to reduce the amount you owe to your home country.

[@iulianfd]

@@kevmitchify indeed you’re right Kevin, thanks for the feedback, my confusion comes from the fact that I have to declare locally from which country I received the dividends ( for them to know if they need to tax me extra ) and for adr-s I’m confused about the country I should use

[@emersonpan]

Bagel's map of China always includes Outer Mongolia, which is kinda interesting. 🤔😂

[@AmrXcellent]

Yes and No... on one hand, Yes diversification over the globe is good in theory but there are soooo many risks (as highlighted in the video). I am lucky enough to be based in the US and yes most of my investments are in the US stock exchanges, I did try international stocks & ETFs a while back and it was just not worth it. So much work to keep up with market performance overseas, currency exchange rates, TAX laws, ... And at the end of the day, all markets follow the US stock exchange, so you are not really diversified. I decided to just focus on the US market and that have been going well for me so far.

[@samsonsoturian6013]

The best diversification is a short position as it destroys your correlation to all markets. The trouble is finding trash to short.

[@Aequalis-r6h]

I’m buying Sega stock so I can force them to make Sonic adventure 3 battle with a chao garden.

[@monsterboomer8051]

European markets are just horrible mess. Many exchanges = different fees, multiple currencies, every country has different taxes, etc. This is why I love USA markets.

[@samsonsoturian6013]

Patrick Boyle said as much. He went to a European exchange and at first he thought "Europe" was ahead because of all these creative contracts. Then he realized each one was tailored to one country's laws/needs and realized the market was just complicated and less iliquid. Compare this to CBOE trading over 4 million options a day all with the same standard call and put contract. Economies of scale are so ridiculous that exchange fees are almost negligible.

[@yami8842]

Hello my friend, can you help me make and publish the video?

[@geeta59]

Can you please share your opinion on one-decision ETFs like XEQT or VGRO

[@Everest314]

I find it so weird that in the US (and apparently Canada as well), you "can't" buy international stocks, whereas over here (Germany) we can just buy American (and lots of other foreign) stocks on our domestic exchanges, with no forex, expensive brokerages or foreign stock exchanges required. Sure, liquidity and spreads aren't great for smaller / less popular foreign stocks, but it's just as easy to do. Only foreign withholding taxes are as much red tape as everywhere despite double tax treaties (for US dividends, most of our domestic banks/brokers automatically reduce the domestic tax paid by the same amount so that effectively there is no US withholding tax for us).

[@kevmitchify]

This really comes down to the services that brokers offer. Because the US exchanges are already available, there is less interest in trading on global exchanges with smaller market cap. That said, it seems that Interactive Brokers is a good way to cheaply access global exchanges from Canada.

[@rhythmandacoustics]

Brokers need foreign exchanges.

[@Everest314]

@@kevmitchify Well, I do understand the why. The entire German stock market has exactly the same market cap as Microsoft (and not because German companies aren't international) and and comprises 510 stocks (compare that to the S&P 500 alone), whereas our lead index only just went from 30 to 40 stocks. So the different level of motivation to go beyond the domestic market is totally obvious. I still find the limitation very strange. That said, we of course also have brokerages that allow trading on foreing stock exchanges (afaik Interactive Brokers is also popular here), but e.g. for US stocks it is (imo) only worth it when you regularly trade larger orders where the spreads hurt you more than the forex and brokerage fees. Plus you then have to deal with taxes all by yourself instead of letting your domestic bank/broker do it for you.

[@Donkeyearsa]

I live in the USA and only invest in a S&P 500 index mutual fund. Since I don't know anything about investing and I am told you can't really go wrong with a S&P index fund that's what I invest in. I have plenty of exposure to the international market since a good amount of the companies in the S&P 500 them selfs have things going on internationally. I will let the people that know what they are doing do all the work and I will sit back and let them.

[@rottenproten142]

It's just my opinion but when I hear "I can't go wrong with a S&P500 index fund" It scares me, cos back in 2008 everybody thought that the housing market can't go down. When everybody thinks that an investment option is 100% risk free, It's time to worry

[@luisduron2722]

Update

[@KylePandapatan]

There’s lots of red tape and extra fees/taxes in investing internationally, right? I imagine one needs extra motivation and discipline to overcome home country bias.

[@ericliddell6579]

You can hold an etf like VXUS (Total non-US stock market) with a really low expense ratio (0.08%) for an easy international diversifier. I would say at least 15% of any portfolio should hold international diversification. If anything, the US market is the most overvalued in the world right now based on PE ratio. Do some research so YOUR comfortable with the investment. Let me know if any other questions on this 👍

[@andreimircea2254]

For me it’s the opposite, I couldn’t care less about investing in my home country’s stocks, when the US has stocks who fit my needs like a glove.

[@gigihikhsani9487]

if you are stock picker, home country bias MIGHT BE great heuristic. but every model will work untill it won't.

[@3rkid]

VTWAX baby! Own the entire world of business and get your cut of the profits.

[@pranshuanand4560]

India is the best place to invest right now. And I am saying this without any home bias at all :D

[@nitsuanew]

Unfortunately ISIN can be ambiguous too. A dual listed stock usually have the same ISIN. My company uses SEDOL to solve this problem.

[@KeinNiemand]

Just buy 70% MSCI World and 30% MSCI Emerging Markets ETFs

[@scott6572]

Great video. I'd love to see a video explaining how pre-market/after-hours trading works

[@Kemanial]

So far as I understand there is a foreign tax credit that functionally offsets any tax withheld on foreign dividends, at least between US and Canada. So the net impact of the withholding tax on a TFSA that has dividend-paying US stocks should be negligible come tax season.

[@kevmitchify]

The first sentence is true. However the Foreign Dividend Tax Credit is claimed against Canadian taxes on foreign dividends. Since you don't pay any Canadian taxes in the TFSA, you can't use the FDTC to offset the foreign tax withheld. It's just gone.

[@Kemanial]

@@kevmitchify you are correct, however they are two different credits. The foreign tax credit applies to both business and non-business income in order to avoid double taxation.

[@ishan6771]

Can you do ETN's?

[@LuizFernando-ee3ub]

Invest in Brazil🇧🇷

[@ppppp524]

I'm gonna be real with you Mr. Bagel, investing in foreign markets seems like a lot of work. I'm gonna stick with domestic stuff

[@michalzuk1705]

Great video. Was wondering if you could say something about the difference between sponsored and unsponsored ADRs, and to what degree there are additional risks or costs with unsponsored ADRs.

[@roxymax8917]

Foreign equity ? Nah nah Offshore investment ? Hell yeah

[@vancejoy3724]

Thanks as always for the great content Mr. Bagel! In your example of Enbridge being listed on both the TSX and the NYSE, if a Canadian were to invest in ENB on the NYSE, would any dividends received by subject to withholding tax? I understand this likely isn't a smart move, but I am trying to deepen my understanding here with a hypothetical. Thanks!

[@andreasasatya9188]

Encountered the term ADR for the first time when buying TSM and Maersk lol

[@raulkaap]

My first investments happened on crowdfunding sites: an Argentine company active in USA, a UK company active in Europe and a Swiss company active globally. But that's just the start. In general, my pension fund prefers Estonia so it makes sense for me to invest abroad. And since I am young, startups are naturally attractive to me. Everything kind of fell in place.

[@PradedaCech]

A UK company would be already "active in Europe" even if it stayed only on the domestic market. ;)

[@raulkaap]

@@PradedaCech Well, "Europe" has a lot of meanings. As a European , I'd say that UK is drifting away.

[@raulkaap]

@@PradedaCech Also, UK uses the pound and the rest of Europe uses the euro.

[@Allen-L-Canada]

Richard, what about OTC? How does it relate to ADRs? I am looking at a UK OTC ASOMY. thanks.

[@trevinbeattie4888]

4:08 “You bet your sweet bippy”! I appreciate the Laugh-In.

[@neal2049]

Great video. Being as annoying as I am, I'd just like to point out that you used swedish crown ticker as KR when it's in fact SEK. That's because kr could also be a Norways' crown which is different from swedish one. Answering your question where I invest - 50% of my holdings are in Sweden (home market), 5% are in France (LVMH, Hermes and Kering) and the rest is USA. France has an annoying 3% tax whenever you buy or sell stock on their exchange, if the companies value is above 1b EUR. Was trying to by pass that by buying LVMH stocks that are listed on NYSE, but my broker didn't allowed me to do that.

[@tsialikis1]

What are considered good fx rates?

[@Hyperpandas]

The initial downsides you mentioned are exactly why I've limited exposure to emerging markets. I get why they have wonderful growth potential, but the risk of political shenanigans adds too much risk, imo. That being said, I do have maybe 70% exposure to international markets... just not much in the emerging ones.

[@mrslcom]

What are the tax implications of trading foreign stocks in foreign exchanges? How about foreign dividends?

[@politicscommentator]

I invest international stocks through index funds. That is the easiest way to do that and avoid the hassle of picking and choosing international stocks.

[@jamu8060]

Out of curiosity, whats it like to invest in a country like India? I ask because with the very high population I imagine there is a lot of economic action going on. Is their regulatory body like China's?

[@mvemjsunp8]

just buy VT lol