Why might it be very simple for an investor desiring to diversify his portfolio internationally to buy depository receipts as compared to the actual shares of the company?
Answer: A depository receipt can be obtained on the investor's domestic exchange. It denotes a package of the underlying foreign security which is priced in the investor's local currency and in a trading range that is common for the investor's marketplace. The investor can purchase a depository receipt in a straight line from his domestic broker, rather than having to deal along with an overseas broker and the requirement of obtaining foreign funds to make the foreign stock purchase. In addition, dividends are received in the local currency rather than in foreign funds which would need to be converted into the local currency.