An American who wants to own Nestlé, Toyota or a Canadian gold explorer has more options than most people realize. Every one of them, though, falls into one of four routes: an ADR on a U.S. exchange, a security quoted on the U.S. over-the-counter market, a direct purchase on the foreign exchange through a broker that offers it, or a fund that does the buying for you. The right route depends less on the company than on your order size, your holding period, and how much friction you are willing to tolerate.
Route 1: ADRs listed on a U.S. exchange
An American depositary receipt is a U.S. security that represents shares of a foreign company held by a depositary bank. When the ADR program is listed on the NYSE or Nasdaq, it trades in dollars during U.S. hours, settles like any domestic stock, and shows up in any brokerage account, including IRAs. Toyota's ADR, for example, trades on the NYSE under the ticker TM.
Exchange-listed programs are Level II or Level III under the SEC's framework, which means the company files an annual report with the SEC on Form 20-F (or Form 40-F for many Canadian issuers). You get English-language disclosure on EDGAR and the same trading protections that apply to U.S. listed stocks. For background on how these programs are built, see what an ADR is.
The costs to know about are small but real. Depositary banks charge custody fees, usually deducted from dividends. The SEC's investor bulletin gives a typical range of $20 to $50 per 1,000 ADRs per year; the exact charge is in the program's Form F-6 and on the depositary's website. Our guide to ADR fees walks through where to find them.
Route 2: OTC ADRs and foreign ordinary shares
Thousands of foreign companies have no U.S. listing but still trade here over the counter. Some do so through Level I ADR programs, many of them unsponsored; others trade as "foreign ordinaries," meaning the home-market share itself is quoted in the U.S. in dollars. By convention, a five-letter OTC ticker ending in Y usually signals an ADR and one ending in F a foreign ordinary share.
OTC trading is convenient because it happens in your regular account during U.S. hours. The tradeoffs are thinner volume, wider bid-ask spreads, and, at some brokers, extra commissions. Schwab, for one, states that its standard $0 online commission does not apply to OTC equities. Quotes for an OTC foreign ordinary often reflect a market maker's estimate of the home price, so spreads tend to widen when the home exchange is closed. Our guide to OTC foreign stocks covers market tiers, ticker conventions and broker restrictions in detail.
Route 3: Buying on the foreign exchange directly
Some U.S. brokers let customers place orders on overseas exchanges in the local currency. Offerings change, so treat the following as a snapshot to confirm with each firm as of 2026:
- Fidelity says its international trading service covers 25 countries and 16 currencies, with settlement in dollars or the local currency, and is available in non-retirement brokerage accounts. It notes that currency conversions are handled by an affiliate and may include a markup.
- Schwab offers a separate Global Account for U.S. residents with online local-currency trading in 12 foreign markets. Its published currency conversion fee runs on a sliding scale, from 1.00% on amounts under $100,000 down to 0.20% at $1 million and up.
- Interactive Brokers describes access to more than 150 market centers worldwide and accounts that can hold many currencies.
Direct access gets you the real home-market share, home-market liquidity and home-market prices. It also hands you new jobs: converting dollars, watching overseas trading hours (see our global market hours table), and keeping track of foreign tax withheld on dividends. Eligibility rules for retirement accounts vary by broker and by market.
Route 4: Mutual funds and ETFs
The SEC's international investing guide points out the obvious advantage of funds: the manager handles currency conversion, foreign taxes, custody and diversification. A broad international ETF can hold hundreds or thousands of companies for a single expense ratio. A country or regional fund lets you target one market without picking individual names.
What you give up is control. You cannot choose which companies you own, and you inherit the fund's currency policy, whether hedged or unhedged. The comparison is laid out in ADRs vs. international ETFs.
What each route costs
| Route | Trades in | Main costs | Disclosure |
|---|---|---|---|
| Exchange-listed ADR | USD, U.S. hours | Commission (often $0), spread, ADR custody fees | SEC filings on EDGAR |
| OTC ADR or ordinary | USD, U.S. hours | Possible OTC commission, wider spread, ADR fees if an ADR | Varies; often home-country filings only |
| Direct foreign purchase | Local currency, local hours | Commission, FX conversion fee or markup, possible local charges | Home-country filings |
| Fund or ETF | USD, U.S. hours | Expense ratio, spread; FX costs are inside the fund | Fund prospectus and holdings reports |
Worked example
Suppose you convert $20,000 to buy shares on a foreign exchange and pay a 1% conversion charge. That is $200 going in. If you later sell and convert back at the same rate, another 1% on roughly the same amount costs about $200 more. A $400 round trip is 2% of the position before commissions, which matters for a short holding period and fades over a long one. Use this arithmetic with your broker's actual schedule.
Currency itself is not a fee, but it moves your results on every route. Our page on currency risk explains how.
A decision checklist
- Does a U.S.-listed ADR exist? If so, it is usually the simplest route for an individual holding.
- If only an OTC line exists, how liquid is it? Check average daily volume and the bid-ask spread at different times of day before placing an order. Use limit orders.
- Which account will hold it? Some brokers restrict foreign-market trading in IRAs, and withholding works differently in tax-advantaged accounts. See foreign stocks in IRAs.
- What will the currency conversion cost? Get the broker's published FX fee or markup in writing.
- How much tax will be withheld on dividends? Start with foreign dividend withholding.
- Could the company be a PFIC? This matters mostly for funds, shells and resource explorers domiciled abroad. Our PFIC rules page explains the test.
- Would a fund do the job? If you want exposure to a country rather than a specific company, a fund may be cheaper and simpler.
Translate a home-market price into an ADR price with the ADR Price Converter.
Common questions
Can I buy a stock listed only in Tokyo or Frankfurt through my regular U.S. account?
Sometimes. Many large foreign companies have an ADR or an OTC line in the U.S. that any broker can trade. For shares that trade only on their home exchange, you need a broker that offers direct foreign market access, and that service is usually limited to certain account types.
Is an ADR the same investment as the home-market share?
Economically it is close: an ADR represents a fixed number of underlying shares held by a depositary bank, and its dollar price tracks the home price times the exchange rate. The differences are fees, voting mechanics, dividend timing and, for OTC programs, liquidity.
Which route is cheapest?
It depends on trade size, how long you hold, and the specific security. Exchange-listed ADRs usually have the lowest trading friction; funds spread costs across many holdings; direct foreign trades often carry currency conversion charges and sometimes higher commissions. Compare total cost for your own order size.
Sources
Educational content only, not investment, tax or legal advice. The Stateside Report does not recommend buying or selling any security. Tax rules depend on your situation; confirm with a qualified tax professional. Full disclosures.