If an investor wants diversification and growth potential, a part of the portfolio should potentially include foreign investments. Some brokerage firms allow the buying and selling of stock in a foreign exchange. However, investing options differ at each brokerage, so an investor needs to contact his brokerage firm and ask if direct access to foreign exchanges is offered and what fees will be associated with trading internationally.

Most experts agree that investing in foreign stocks is risky but conclude that a less risky way to invest in foreign stocks is to invest in mutual funds. The funds usually contain the words “international,” “global,” or “worldwide.” Most brokerage firms have mutual funds that invest in foreign markets.

Another foreign investing option is through American Depositary Receipts (ADRs) or Exchange Traded Funds (ETFs). These are considered the easiest way to invest because the currency conversions are included in the service. Disadvantages include lower volume and less liquidity than if stocks were purchased and traded on the foreign exchange. In addition, buying securities directly from a foreign exchange may help an investor avoid currency risk, or the decline in the U.S. Dollar. For additional information, visit the Securities and Exchange Commission (SEC) Web site.

An investor's ability to invest in a foreign market may be dependent upon the rules of the particular exchange. In China, for example, a foreign investor is only able to buy what are known as B-Shares on the Shanghai Stock Exchange, since B-Shares are traded in U.S. Dollars. An investor always has the option of setting up a brokerage account in a foreign country and wiring money to fund this account. This may be appropriate if an investor has researched and is familiar with the company or sector he wants to invest in.