How Do I Invest Overseas?

Here are some investment avenues to consider:

International Mutual Funds and ETFs. There are loads of domestically available mutual funds and exchange-traded funds (ETFs ) that offer investors a whole portfolio of international stocks and bonds . (Check out TheStreet.com Ratings' list of the top international ETFs.) These are by far the simplest choice for an individual investor. Why? The portfolio manager handles the picks, and since the fund is based here in the U.S., buying it is no different than buying any other mutual fund. Naturally, the main limitation with investing in a fund of this type is a lack of portfolio customization.

American Depositary Receipts. One way around a fund's lack of personalization is to invest in American depositary receipts (ADRs ). ADRs are certificates that essentially entitle you to shares of a specific foreign stock. They are listed and traded on major American exchanges (most report to the SEC and file statements that comply with GAAP), and are denominated in U.S. dollars.

ADRs provide a way for investors to own a foreign security without having to deal with the issues relating to actually holding the security in a brokerage account . There are literally thousands of ADRs out there, mainly from major foreign companies, so it's not hard to find a nice addition for your portfolio in an ADR.

Holding Foreign Securities in Your Account. If investing in foreign stocks through domestic alternatives like mutual funds and ADRs doesn't suit your needs, another way to invest abroad is by directly buying foreign stocks on the foreign exchanges they trade on. This can be done in two different ways: either by holding the stocks in your American brokerage account or by opening up a new account with a foreign broker .