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ADRs and HOLDRs
An American Depository Receipt or ADR is a way to invest in a foreign investment while still trading on a US stock exchange. An ADR is a certain amount of stock bought in an investment made in a non United States company. While the foreign company trades its shares on another market, the ADR shares are traded on an American exchange. There are two types of banks needed to issue and sell an ADR. The first is an investment bank that buys some portion of a foreign company. This is the company that then sells its shares in that investment to an American investor. The other bank is a depository bank, which is the bank that actually issues and then can cancel the ADRs. In contrast a Holding Company Depository Receipt (HOLDR) is a way of trying to measure what a certain group of stocks is doing without incurring a great deal of cost. HOLDRs are usually composed of about twenty stocks across a particular industry. HOLDRs are very cheap to buy and thus allow an investor to particpate in the market without serious risk. HOLDRs are not actively managed like mutual funds. HOLDRs aren't exactly stocks either. HOLDRs can only be purchased in large groups (usually a multiple of one hundred). HOLDRs are a relatively recent phenomenon and were developed by Merrill Lynch. As you can see, for almost any concerned investor it is important to know what an ADR and a HOLDR actually are. You need to know what an ADR is if you are interested in investing in foreign markets through a US exchange. This is very important because lots of US companies and financial institutions purchase stock in foreign markets. We don't like in a small world anymore. The economy is really a global economy and that is here to stay. What effects the markets in New York effects the markets in Japan. Knowing what a HOLDR is is actually also quite important. You can see that a HOLDR is a way for an investor to make a small investment without any real risk in order to find out how a particular stock is doing. This kind of investment could prevent you from loosing thousands of dollars. In such perilous economic times you should be cautious to make any investment without the help of a financial adviser. Realize that investing at this time is very dangerous and that you will need to be patient if you want to see a return.
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