2. Should ADRs be added to your portfolio ?

Should Investors Avoid ADRs?

Should You Avoid ADRs

Because the world of foreign equities is so massive, it’s impossible to give a one size fits all answer. While you may have been spooked by the previous section about China, almost every major economy has ADRs. In fact, the UK was the first company to list an ADR with its famous retail store Selfridges.

Much of the developed world has stringent accounting and financial regulation that matches the United States. Areas such as the UK, the Eurozone, and Australia are all much less likely to house fraud than smaller, developing nations. They are also more stable jurisdictions in general, leading to less volatility due to geopolitics.

Investing outside of the American market is a great way to diversify. Those who are willing to take on more risk can find it in ADRs from developing nations, which may offer higher growth rates.

China is also going to become an increasingly important part of the global economy as it grows and develops. Investors may benefit from having exposure to the largest economy in the world, but like any investment, it’s worth doing your due diligence and research before you invest.

Another alternative to Chinese exposure is to invest in China-focused exchange-traded funds (ETFs), which buys a basket of Chinese equities while avoiding currency issues. With ETFs, you get the benefit of wide diversification while still gaining exposure to this exciting market.

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