What Is an ADR?
An ADR, or American depositary receipt, lets you buy shares of a foreign company on a US stock exchange, in US dollars, just like a normal stock.
How an ADR works
A US bank buys shares of a foreign company in its home market and holds them. It then issues receipts in the US that stand for those shares. You trade the receipts under a US ticker.
Why ADRs exist
They make it easy to invest abroad. No foreign broker, no foreign currency account. Dividends are paid to you in dollars.
Risks to know
- Currency. If the company's home currency falls against the dollar, your ADR falls too.
- Fees. Banks charge small yearly custody fees.
- Foreign taxes may be taken from dividends.
- Ratio. One ADR may stand for several shares, or a part of one share.
See it in real companies
Open a company to see what it sells and how it makes money.