A Guide to International Investing

Three Ways to Go Global

Here are three effective ways to invest internationally from within the United States.

1. Country-specific or regional funds: Through Internet-based "long distance" research, it is far easier to gauge how the broad market will fare in (for example) South Korea or Italy than to do so for individual companies like South Korea-based Samsung or Italy-based UniCredito Italiano.

Most countries have a benchmark index like the Nikkei 225 in Japan or the DAX in Germany. In addition, many international investors will use the MSCI (MXB - Cramer's Take - Stockpickr) set of international indices as guideposts for foreign investing.

Once you decide on a country or region to invest in, there are two effective ways to play country funds: exchange-traded funds (ETFs ) or closed-end mutual funds . This strategy of understanding and investing in an entire country's or region's economy, market or foreign exchange is a less complex and less risky endeavor than taking a more precise position in an individual foreign company.

Markets I like, and why: I like Hong Kong and China due to the emergence of capitalism and expansion of infrastructure; Israel as a hotbed for technology and biotechnology; Australia for its overall strong growth, currency and mining industry; South Korea for its tech growth; and Mexico and Brazil for their key roles in expanding Latin American economies.

To get exposure to a few of these countries, I own country-specific funds such as First Israel Fund (ISL - Cramer's Take - Stockpickr), iShares Brazil (EWZ - Cramer's Take - Stockpickr) and iShares South Korea (EWY - Cramer's Take - Stockpickr).

When you identify the country or region that you find investment-worthy, remember to research (as always) a few fund "product names" before picking one. As "Busting the Mutual Fund Myth" shows, not all funds are alike.

2. Foreign-based companies: Given the earlier list of considerations, if you are comfortable investing in individual foreign-based companies, you need to understand how the markets for international stocks work.

Foreign stocks are traded on the home-country exchange and referred to as ordinary shares. Ordinary shares are denominated in the home-country currency. Many foreign companies will list their stocks in the United States in securities called American Depository Receipts (ADRs ).

Here is the catch: there is a formula that to convert the price of ordinary shares into that of ADRs. Here it is:

ADR Share Price = Ordinary Share Price x Conversion Ratio of Ordinary Share Price to ADR Shares x Foreign Currency Exchange Rate