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ADR

What are ADRs (American Depositary Receipts)?

ADRs or American Depositary Receipts represent shares of foreign companies traded in U.S. dollars on U.S. exchanges. They can be treated just like shares of domestic stock--you can buy or sell them through a broker, for example.

ADRs aren't actually shares of stock, however: They are tradable receipts for actual shares on deposit at a bank. The purpose of ADRs is to make investing in foreign companies both simpler and less costly for investors.

There are some special considerations with ADRs. For one, even though ADRs are priced in U.S. dollars, they do not eliminate exchange-rate risk: An ADR’s share price is still exposed to fluctuations in the value of its home country currency. Also, dividends paid by ADRs are sometimes subject to double taxation (both in the U.S. and abroad), though the IRS has a foreign tax credit that U.S. taxpayers can use to offset the taxes paid to a foreign government.

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