Buying stocks that trade only on foreign exchanges can be a hassle. Usually you have to call your broker, who will charge as much as $100 for the trade, plus a fee to convert your dollars to euros, yen, or whatever currency you need. That's why many people wind up investing in foreign companies that have American depositary receipts (ADRs), shares that trade on Wall Street in U.S. dollars. But that limits your choices to about 500 companies. Some world-class outfits, including Samsung and BMW Group, don't even have ADRs.
Well, get ready to broaden your investment horizons. On Feb. 20, E*Trade Financial launched its Global Trading account, which allows investors to trade about 14,000 foreign stocks online cheaply and easily. The Web-based broker is one of the first to offer direct, real-time access to exchanges in Canada, France, Germany, Hong Kong, Japan, and Britain. Commissions are in local currencies and work out to about $20 per trade. The program is being offered to select customers now and will be open to all in April.
Getting started is simple. If you're already an E*Trade customer, you can open a Global Trading account with a few clicks. It will pop up under the "Accounts" tab on the same page as all of your other assets. A few clicks later, you fund it by transferring dollars from your main account and converting them to the currency of your choice via the "Currency Exchange" tab. You're then ready to trade stocks in that currency.
THE E*TRADE SITE offers some overseas information resources, including Reuters news on global markets and individual companies. There's also a daily market- summary page for each bourse. The info on individual stocks is bare-bones, such as price and volume data and the price-earnings ratio. E*Trade officials plan to add more research tools and services.
while the global account is less costly than many others, it's not the cheapest. Interactive Brokers, which offers trades in 10 markets, has generally lower commissions. Interactive also has significantly lower costs for currency exchanges. E*Trade's fee for buying $10,000 worth of euros is 1.25%, or $125, but you wouldn't see it on your statement. The fee, which declines as the trades get larger, is rolled into the cost. At Interactive, the same euro purchase would cost just $2.50, and it's indicated on the statement.
Still, Interactive lacks E*Trade's ease of use and breadth of products and services. For the investor looking to expand overseas, E*Trade's new account holds a particular allure.
By Lewis Braham