Lagoonboy --
The IRS has discussed where IRA funds can be invested and hasn't
specifically ruled out foreign stocks. This from an IRA page at the
Internal Revenue Service site:
"Are there any restrictions on the things I can invest my IRA in?
The law does not permit IRA funds to be invested in collectibles such as:
? Artwork
? Stamps
? Rugs
? Antiques
The law also does not permit IRA funds to be invested in life
insurance contracts. See Code section 408(m) for additional investment
restrictions.
Finally, IRA trustees are permitted to impose additional restrictions
on investments. For example, because of administrative burdens, many
IRA trustees do not permit IRA owners to invest IRA funds in real
estate. IRA law does not prohibit investing in real estate but
trustees are not required to offer real estate as an option."
IRS
"FAQs Concerning IRAs"
http://www.irs.gov/retirement/article/0,,id=111413,00.html
However, Robert Preston, writing in the Journal of Accountancy almost
3 years ago, provides reasoning for avoiding foreign stocks, saying
that "With the exception of American Depository Receipts (ADRs) and
domestically sponsored mutual funds that make overseas investments,
IRA owners should restrict investments to the continental United
States. An IRA can't be used to transfer funds overseas."
Looksmart
"The Do's and Don'ts of IRA Investing" (Preston, April, 2000)
http://www.findarticles.com/cf_dls/m6280/4_189/61793826/p1/article.jhtml
This still leaves the two categories mentioned by Preston -- mutual
funds investing in foreign stocks and foreign companies that are ALSO
traded on American exchanges in the form of ADRs.
Morningstar, the investment service that tracks the performance of
mutual funds, refers to this category as "international funds" and has
criteria for the funds:
Yahoo Finance
"Morningstar Category" (undated)
http://help.yahoo.com/help/fin/funds/funds-24.html
The Morningstar site has a number of articles on international funds,
including this one that describes the range of investment targets for
various mutual funds:
Morningstar
"Improving Your International Portfolio" (Hughes, Feb. 12, 2003)
http://news.morningstar.com/doc/news/0,2,86710,00.html
ADRs are available for many foreign stocks that you'd be familiar
with, including BP (formerly British Petroleum), Honda, Shell and
DaimlerChrysler. ADRs for foreign companies trade on all of the three
major American exchanges -- NYSE, AMEX and NASDAQ.
Luckily, the New York Stock Exchange has a list of all 476 them,
including 78 major Canadian companies:
NYSE
"Complete List of Non-U.S. Listed Companies" (2004)
http://www.nyse.com/pdfs/forlist040115.pdf
Investor Stewart Hinsley provides some interesting links on various
ADRs, including to the J.P. Morgan ADR.com site, which tracks them:
Stewart Hinsley Home Page
"Investment Research Links" (Hinsley, undated)
http://www.meden.demon.co.uk/Links/Financial/f_invest.html
On the NASDAQ, a mutual fund product called an "Exchange Traded Fund,"
which is country fund intended to be a portfolio of the country's
stocks:
NASDAQ
"What Are International Exchange-Traded Funds?" (undated)
http://quotes.nasdaq.com/asp/etfsinternational.asp
Google search strategy:
IRA + "investment restrictions"
"mutual funds" + "foreign stocks"
To find out what companies trade as ADRs, the following search is helpful:
ADRs + "New York Stock Exchange"
You can also go to the Hoover's information service, type in a company
name, and it will tell you whether or not it trades in the U.S. as an
ADR:
Hoover's Online
Home Page
http://www.hoovers.com/free/
Hopefully this covers the waterfront on investing in foreign stocks
for an IRA. However, if any part of this is unclear, please request a
clarification before rating this Google Answer.
Best regards,
Omnivorous-GA |
