American depositary receipt (ADR).
In plain English
An American depositary receipt, or ADR, lets you own a foreign company's stock through a certificate that trades on a U.S. exchange in dollars. A bank holds the actual foreign shares and issues ADRs against them, so you get foreign exposure without dealing with a foreign brokerage or currency conversion. ADRs still carry currency risk, since the underlying shares are priced in another currency, and some involve fees or thinner trading. They are the most common way U.S. investors buy big foreign names directly, though a broad international fund is simpler for diversification.
01Why it matters
ADRs are how most Americans buy individual foreign stocks in dollars, so understanding they still carry currency risk keeps the foreign exposure from being a hidden surprise.
02The math, step by step
You buy an ADR of a European carmaker on a U.S. exchange, paying in dollars. A bank holds the underlying foreign shares, but if that currency weakens against the dollar, your ADR loses value even if the stock is flat abroad.
03What this is NOT
An ADR does NOT remove currency risk. It represents foreign shares, so exchange-rate moves still affect its value, even though it trades in dollars on a U.S. exchange.
04Receipts
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