Interactive Brokers – The gold standard for global investors
Interactive Brokers reliably comes up as Best in Class in many of our Stockbroker scoring categories. But if we’re focused on foreign stock investing, Interactive Brokers is simply in a class of its own. Clients can buy stocks in over 90 market centers and have access to a smorgasbord of analytical tools, including GlobalAnalyst, which screens stocks across the globe and allows comparisons in one currency. Nice.
The concerns we bring up about IBKR elsewhere on this site about its platforms being overly complicated fade when using IBKR how it’s best suited: You are well capitalized, trading different instruments across the world, and doing it often. Trading internationally at IBKR requires no change in your workflow and costs are very low. It only took a few bureaucratic clicks on a browser for our account to be approved to buy foreign stock.
Commissions vary by the country traded, but a test trade of buying one share of Air Canada in CAD would have cost a minimum ticket size of $1 and a foreign exchange spread of 20 basis points (one-fifth of a percent). That is – using a technical term – dirt cheap.
Though many of IBKR’s services and tools are designed to appeal to institutional investors, the broker’s Global Trader mobile app is a game-changer for beginning global investors. We found it easy to buy Canadian stock and see our Canadian dollar-denominated holdings right alongside our U.S. dollar holdings. It was seamless. We like Global Trader for beginning U.S.-focused investors, too.
If you are a U.S. citizen interested in opening an account outside the United States, you can apply for an account with your legal domicile and see if it is accepted. There isn’t a minimum deposit or monthly charge (other than the data feeds you select), so there’s no risk to trying.
IBKR Mobile app gallery
IBKR Mobile Global Trader app gallery
IBKR Client Portal platform gallery
IBKR Trader Workstation (TWS) gallery
Charles Schwab – Silver medalist
We generally like Charles Schwab’s long-term approach to investing and we expect that its continued integration of TD Ameritrade (bought in 2020) will augment Schwab’s capabilities even more over time. We appreciate Schwab’s ability to trade internationally, but it’s clearly a feature, not a priority.
Chuck charges less than Fidelity for trade commissions, which of course we like, and the same 1 percent currency spread as Fidelity. On the downside, it requires opening a separate Schwab Global Account via paper application (do you remember those?). Schwab facilitates trading in 12 countries.
If you have any questions about using Schwab for foreign trading or opening an account from a foreign country, we strongly recommend you bypass the U.S. helpline and call its international account specialists, who were better equipped to answer the questions we had.
Charles Schwab mobile gallery
Charles Schwab website gallery
Charles Schwab StreetSmart Edge gallery
Fidelity Investments – Bronze medalist
For those who don’t have global investing as the top priority of their broker search, we recommend Fidelity Investments. It took the top spot in our 2023 Annual Stockbroker Review and it has the ability to trade international equities.
Fidelity offers access to 25 countries and 16 currencies. The commission charged varies by country and currency conversion incurs a 1 percent spread for each side of the trade, which can get pricey. Our test trade of a share of Air Canada stock would cost $19 CAD plus a currency conversion spread of 1 percent each way. That is multiples of what IBKR charges.
Fidelity does not accept new relationships with clients who reside outside the United States. Existing clients who have moved outside the U.S. should contact Fidelity and discuss their situation.
Fidelity Investments Mobile gallery
Fidelity Bloom app gallery
Fidelity Active Trader Pro gallery
Fidelity website gallery
How to invest internationally
If you think your portfolio is diversified because you own an S&P 500 Index fund or 30 individual U.S. stocks, you’re partially right.
Though you’ve reduced the risk of one company tanking your entire portfolio, you are still invested solely in the U.S. economy. Even putting aside the risk of our economy slowing, there’s a world of opportunity outside of our borders. As of 2023, about 40% of the world’s stock market value trades outside the United States. It’d be a shame to leave so many investment opportunities on the table, wouldn’t it?
How to add international stock exposure to your portfolio
Five choices are available to U.S. investors who want to increase their international stock exposure:
- Stock of U.S. companies with large global footprints.
- American Depository Receipts.
- Foreign companies cross-listed on a U.S. exchange.
- International or global mutual funds.
- Foreign stock in your U.S. brokerage account.
U.S. multinational stocks: invest locally, diversify internationally
Many blue-chip domestic companies get most of their revenue outside the U.S. It’s usually easy to find that info in the financial reports; look for geographic segment data.
Two advantages to choosing U.S. multinationals are, first, their stocks are dollar-denominated – meaning they don’t require an international broker – and, second, securities regulation in the U.S. is more stringent than in many other countries.
American Depository Receipts: U.S. receipts for shares of foreign stocks
If you want to invest in a foreign company, look to see if there’s an American Depository Receipt (ADR) available for that company. ADRs are tradable interests in foreign shares. For example, one ADR of China-domiciled Alibaba stock represents eight ordinary shares of Alibaba. ADRs trade on exchanges and over the counter. ADRs aren’t stock; they are securities that represent ownership in other securities, namely, shares of foreign stock.
ADRs aren’t stock; they are securities that represent ownership in other securities, namely, shares of foreign stock.
You should evaluate an ADR on the strengths of the underlying company’s stock, the home country’s stock market, the attractiveness of the business sector, and the terms of the ADR itself. The United States regulates some ADRs differently from others. For example, a Level 1 ADR doesn’t require full SEC registration, unlike those that are Levels 2 and 3.
Buy cross-listed shares of a foreign company
Cross-listed stocks are simply shares of the same company listed on multiple exchanges. Companies cross-list to increase the liquidity of the shares and get access to new stock markets. The downside to cross-listing is more paperwork and higher costs.
Cross-listed shares can trade in different currencies. The U.S. listed shares are regulated by U.S. exchanges. Some examples of cross-listed stocks are Carnival Cruise Lines (United Kingdom) and Barrick Gold (Canada).
Leave it to professionals: international/global funds
Another option is to buy international funds managed by domestic fund managers. “Global” funds usually include U.S. stocks. “International” funds usually exclude or minimize investing in the U.S. They are also regulated in the United States and are denominated in greenbacks.
Professionally managed international funds tend to be costlier than domestic index funds because of the additional work and costs involved.
For the true do-it-yourselfer: buy foreign stock on a foreign exchange
The last investment option we’ll cover here is buying foreign stock where it’s listed. Investing directly in foreign stock is a bit more complicated than buying a mutual fund and letting a portfolio manager do all the work, but you’ll also have many more choices.
Unless you’re trading solely on chart action, there are additional considerations to buying foreign stock beyond what you’d ordinarily think about when analyzing a domestic stock.
Different markets have different valuations. What might be cheap in one country could be considered pricey in the United States. Taxation policies across borders will drive different business practices than what we’re accustomed to in the U.S. For example, stock buybacks are an efficient way for companies to distribute earnings to shareholders, but in another country, a company might serve its owners better by paying a dividend. Last but not least, regulation – both its scope and its enforcement – may be less reliable than here in the United States.
The local price of a foreign stock can go down but you may still make money if the dollar’s value declines against the stock’s native currency. The opposite can happen, too; the stock might go up in its home currency, but if that currency weakens, you could go in the red. If the foreign country floods its citizens with euros, yen, or whatever its citizens spend to buy toothpaste, that will push the value of the foreign currency in dollars lower.
euro Forex trading
Are you interested in trading foreign exchange instead of stock? Check out our sister site, ForexBrokers.com.
International investing comes with costs that might be new to you. Dollars may need to be exchanged for foreign currency when you buy and vice versa when you sell. Brokers can do that for you automatically, but they typically tack on a small (or sometimes not that small) spread that can drive up costs. If you routinely trade in a particular foreign market, you might want to leave the money in that foreign currency rather than converting after you close every position.
If you routinely trade in a particular foreign market, you might want to leave the money in that foreign currency rather than converting after you close every position.
What is an international broker?
Any brokerage firm that accepts clients from more than one country and offers trading access to global stock exchanges is considered an international broker.
How do you open an international trading account?
To open an international trading account, you need to find a broker that:
- Will accept clients from your country.
- Can trade in the countries you want to trade in.
- Is able to execute orders in the instruments you prefer to trade in.
- Has the features you want.
Then, follow the steps specified by the broker to open the account.
Can a non-U.S. citizen open a brokerage account?
In many cases, if you are a legal resident in the U.S. but not a U.S. citizen, then proper identification may be enough to open a U.S. brokerage account. Expect the broker to ask for a Social Security number. When in doubt, call the broker.
If you reside outside of the United States and are not a U.S. citizen, you may still be able to open a U.S. brokerage account. As long as the online broker accepts applications from your country of residence, you may proceed.
How do I buy stocks internationally?
To buy foreign stocks, you must first open a brokerage account with a broker that can trade in the country where you want to invest. Then, after funding your account, you may need to request access (including price data) for the exchange you want to trade.
Alternatively, simply search for the specific symbol to see if it is available to trade from within your account. A symbol that works for one broker may not work for another.
Example: A trader who wants to buy British Petroleum PLC (LSE: BP) would enter the symbol BP on the trading platform. If you enter this on the Interactive Brokers platform, BP will yield a few results, but the correct one if you want to buy it on the London Stock Exchange (LSE) is “BP PLC – LSE.”
Companies can have multiple results because one company may have several securities and/or symbols. A foreign stock may be dually listed or trade as an American Deposit Receipt (ADR). There may also be derivatives such as contracts for difference (CFD) or options. Bottom line: you should know the exchange and symbol to buy an international stock.
Which broker is best for international trading?
Interactive Brokers is the best U.S.-based international stockbroker because it provides you access to the most exchanges and supports clients from the widest variety of countries. Its Global Trader mobile app makes international investing easy for beginners, but its Trader Workstation is sophisticated enough to be an international trading platform for institutional investors.
StockBrokers.com 2023 Overall Ranking
Here are the Overall rankings for the 17 online brokers whose offerings we analyze and test, sorted by Overall ranking.
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Methodology
For the StockBrokers.com 13th Annual Review published in January 2023, a total of 3,332 data points were collected over three months and used to score 17 top brokers. This makes StockBrokers.com home to the largest independent database on the web covering the online broker industry.
As part of our annual review process, all brokers had the opportunity to provide updates and key milestones and complete an in-depth data profile, which we hand-checked for accuracy. Brokers also were offered the opportunity to provide executive time for an annual update meeting. All research, writing and data collection at StockBrokers.com is done by humans, for humans. Read our generative AI policy here.
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About the Editorial Team
Sam Levine, CFA, CMT
Sam Levine has over 30 years of experience in the investing field as a portfolio manager, financial consultant, investment strategist and writer. He also taught investing as an adjunct professor of finance at Wayne State University. Sam holds the Chartered Financial Analyst and the Chartered Market Technician designations and is pursuing a master's in personal financial planning at the College for Financial Planning. Previously, he was a contributing editor at BetterInvesting Magazine and a contributor to The Penny Hoarder and other media outlets.
Blain Reinkensmeyer
Blain Reinkensmeyer has 20 years of trading experience with over 2,500 trades placed during that time. He heads research for all U.S.-based brokerages on StockBrokers.com and is respected by executives as the leading expert covering the online broker industry. Blain’s insights have been featured in the New York Times, Wall Street Journal, Forbes, and the Chicago Tribune, among other media outlets.
Carolyn Kimball
Carolyn Kimball is managing editor for Reink Media and the lead editor for the StockBrokers.com Annual Review. Carolyn has more than 20 years of writing and editing experience at major media outlets including NerdWallet, the Los Angeles Times and the San Jose Mercury News. She specializes in coverage of personal financial products and services, wielding her editing skills to clarify complex (some might say befuddling) topics to help consumers make informed decisions about their money.
Steven Hatzakis
Steven Hatzakis is the Global Director of Research for ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. Steven is an active fintech and crypto industry researcher and advises blockchain companies at the board level. Over the past 20 years, Steven has held numerous positions within the international forex markets, from writing to consulting to serving as a registered commodity futures representative.
1 Fidelity Sell orders are subject to an activity assessment fee from $0.01 to $0.03 per $1,000 of principal. Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.
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