American Depositary Receipts: What They Are and How to Invest in Foreign Stocks

When you buy a stock like American Depositary Receipts, receipts that represent shares of a foreign company traded on U.S. exchanges. Also known as ADRs, they let you own parts of global giants like Alibaba, Siemens, or Nestlé without opening a foreign brokerage account. Instead of dealing with foreign currencies, time zones, or complex regulations, you trade ADRs just like any U.S. stock—on the NYSE or Nasdaq, in dollars, with the same settlement rules.

ADRs are created by U.S. banks that hold the actual foreign shares in trust. Each ADR can represent one share, ten shares, or even a fraction of a share. The bank handles dividends, taxes, and voting rights (if any), then passes them along to you. This makes international investing simple, but it doesn’t remove risk. Currency swings, political instability, or foreign tax rules can still hit your returns. That’s why ADRs aren’t magic—they’re a bridge. They connect you to global growth without forcing you to cross the border.

Some ADRs are sponsored by the foreign company itself, meaning they follow strict U.S. reporting rules. These are the safest and most transparent. Others are unsponsored, with less oversight and higher risk. You’ll also find ADRs in different levels: Level I (over-the-counter, low reporting), Level II (listed on major exchanges), and Level III (used to raise capital in the U.S.). Most retail investors stick with Level II or III ADRs because they’re easier to track and trade.

ADRs tie directly into broader themes you’ll see in the posts below: international investing, portfolio diversification, and currency risk. They’re not just a way to buy foreign stocks—they’re a tool for balancing your portfolio. If you’re wondering how much of your money should go overseas, or whether you’re overexposed to U.S. tech, ADRs give you a practical path to adjust. You’ll also find them linked to ETFs that bundle dozens of ADRs together, making it even easier to spread your risk.

What you’ll find in this collection aren’t theory-heavy guides. These are real, actionable posts about how ADRs fit into your portfolio, how they compare to direct foreign investing, and why some investors avoid them altogether. You’ll see how currency risk plays out in bond funds, how rebalancing affects global holdings, and why some high-yield ADRs turn out to be traps. No jargon. No fluff. Just what works—and what doesn’t—when you’re trying to build a global portfolio without getting lost in the details.