An American Depositary Receipt, or ADR, is a U.S.-traded certificate representing shares of a foreign company. It lets you buy companies like global automakers or consumer brands in dollars, on a U.S. exchange, with U.S. trading hours.
ADRs come with extra considerations. Currency moves add another layer of volatility, and some foreign markets have different accounting, disclosure, and governance standards. Depository fees also apply in some cases.
For diversification-minded investors, ADRs are a convenient way to add international exposure. Just remember you are taking on currency risk and country risk alongside the company's own business risk.
Key takeaways
- ADRs let you buy foreign stocks in U.S. dollars
- Currency and country risk ride along with the stock
- Check depository fees and disclosure standards first
