Is owning ADR share for a good idea for long term investor
Usually the ADR fee comes out of dividend payments and is modest. The ADR that I am most familiar with (Vodafone - VOD) pays dividends twice a year and deducts either $0.02 or $0.01 per share. IMO, the ADR fee is not really a material factor. ADRs do have some disadvantages though:
"This is such a common question here and elsewhere that I will attempt   to write the world's most canonical answer to this question. Hopefully   in the future when someone on answers.onstartups asks how to split up   the ownership of their new company, you can simply point to this   answer. The most important principle: Fairness, and the perception of   fairness, is much more valuable than owning a large stake. Almost   everything that can go wrong in a startup will go wrong, and one of   the biggest things that can go wrong is huge, angry, shouting matches   between the founders as to who worked harder, who owns more, whose   idea was it anyway, etc. That is why I would always rather split a new   company 50-50 with a friend than insist on owning 60% because ""it was   my idea,"" or because ""I was more experienced"" or anything else. Why?   Because if I split the company 60-40, the company is going to fail   when we argue ourselves to death. And if you just say, ""to heck with   it, we can NEVER figure out what the correct split is, so let's just   be pals and go 50-50,"" you'll stay friends and the company will   survive. Thus, I present you with Joel's Totally Fair Method to Divide Up The   Ownership of Any Startup. For simplicity sake, I'm going to start by assuming that you are not   going to raise venture capital and you are not going to have outside   investors. Later, I'll explain how to deal with venture capital, but   for now assume no investors. Also for simplicity sake, let's temporarily assume that the founders   all quit their jobs and start working on the new company full time at   the same time. Later, I'll explain how to deal with founders who do   not start at the same time. Here's the principle. As your company grows, you tend to add people in   ""layers"". The top layer is the first founder or founders. There may be 1, 2, 3,   or more of you, but you all start working about the same time, and you   all take the same risk... quitting your jobs to go work for a new and   unproven company. The second layer is the first real employees. By the time you hire   this layer, you've got cash coming in from somewhere (investors or   customers--doesn't matter). These people didn't take as much risk   because they got a salary from day one, and honestly, they didn't   start the company, they joined it as a job. The third layer are later employees. By the time they joined the   company, it was going pretty well. For many companies, each ""layer"" will be approximately one year long.   By the time your company is big enough to sell to Google or go public   or whatever, you probably have about 6 layers: the founders and   roughly five layers of employees. Each successive layer is larger.   There might be two founders, five early employees in layer 2, 25   employees in layer 3, and 200 employees in layer 4. The later layers   took less risk. OK, now here's how you use that information: The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the   company, split equally among everyone in the layer. Example: Two founders start the company. They each take 2500 shares. There are   5000 shares outstanding, so each founder owns half. They hire four employees in year one. These four employees each take   250 shares. There are 6000 shares outstanding. They hire another 20 employees in year two. Each one takes 50 shares.   They get fewer shares because they took less risk, and they get 50   shares because we're giving each layer 1000 shares to divide up. By the time the company has six layers, you have given out 10,000   shares. Each founder ends up owning 25%. Each employee layer owns 10%   collectively. The earliest employees who took the most risk own the   most shares. Make sense? You don't have to follow this exact formula but the basic   idea is that you set up ""stripes"" of seniority, where the top stripe   took the most risk and the bottom stripe took the least, and each   ""stripe"" shares an equal number of shares, which magically gives   employees more shares for joining early. A slightly different way to use the stripes is for seniority. Your top   stripe is the founders, below that you reserve a whole stripe for the   fancy CEO that you recruited who insisted on owning 10%, the stripe   below that is for the early employees and also the top managers, etc.   However you organize the stripes, it should be simple and clear and   easy to understand and not prone to arguments. Now that we have a fair system set out, there is one important   principle. You must have vesting. Preferably 4 or 5 years. Nobody   earns their shares until they've stayed with the company for a year. A   good vesting schedule is 25% in the first year, 2% each additional   month. Otherwise your co-founder is going to quit after three weeks   and show up, 7 years later, claiming he owns 25% of the company. It   never makes sense to give anyone equity without vesting. This is an   extremely common mistake and it's terrible when it happens. You have   these companies where 3 cofounders have been working day and night for   five years, and then you discover there's some jerk that quit after   two weeks and he still thinks he owns 25% of the company for his two   weeks of work. Now, let me clear up some little things that often complicate the   picture. What happens if you raise an investment? The investment can come from anywhere... an angel, a VC, or someone's dad. Basically, the   answer is simple: the investment just dilutes everyone. Using the example from above... we're two founders, we gave ourselves   2500 shares each, so we each own 50%, and now we go to a VC and he   offers to give us a million dollars in exchange for 1/3rd of the   company. 1/3rd of the company is 2500 shares. So you make another 2500 shares   and give them to the VC. He owns 1/3rd and you each own 1/3rd. That's   all there is to it. What happens if not all the early employees need to take a salary? A lot of times you have one founder who has a little bit of money   saved up, so she decides to go without a salary for a while, while the   other founder, who needs the money, takes a salary. It is tempting   just to give the founder who went without pay more shares to make up   for it. The trouble is that you can never figure out the right amount   of shares to give. This is just going to cause conflicts. Don't   resolve these problems with shares. Instead, just keep a ledger of how   much you paid each of the founders, and if someone goes without   salary, give them an IOU. Later, when you have money, you'll pay them   back in cash. In a few years when the money comes rolling in, or even   after the first VC investment, you can pay back each founder so that   each founder has taken exactly the same amount of salary from the   company. Shouldn't I get more equity because it was my idea? No. Ideas are pretty much worthless. It is not worth the arguments it would cause to   pay someone in equity for an idea. If one of you had the idea but you   both quit your jobs and started working at the same time, you should   both get the same amount of equity. Working on the company is what   causes value, not thinking up some crazy invention in the shower. What if one of the founders doesn't work full time on the company? Then they're not a founder. In my book nobody who is not working full   time counts as a founder. Anyone who holds on to their day job gets a   salary or IOUs, but not equity. If they hang onto that day job until   the VC puts in funding and then comes to work for the company full   time, they didn't take nearly as much risk and they deserve to receive   equity along with the first layer of employees. What if someone contributes equipment or other valuable goods (patents, domain names, etc) to the company? Great. Pay for that in   cash or IOUs, not shares. Figure out the right price for that computer   they brought with them, or their clever word-processing patent, and   give them an IOU to be paid off when you're doing well. Trying to buy   things with equity at this early stage just creates inequality,   arguments, and unfairness. How much should the investors own vs. the founders and employees? That depends on market conditions. Realistically, if the investors end   up owning more than 50%, the founders are going to feel like   sharecroppers and lose motivation, so good investors don't get greedy   that way. If the company can bootstrap without investors, the founders   and employees might end up owning 100% of the company. Interestingly   enough, the pressure is pretty strong to keep things balanced between   investors and founders/employees; an old rule of thumb was that at IPO   time (when you had hired all the employees and raised as much money as   you were going to raise) the investors would have 50% and the   founders/employees would have 50%, but with hot Internet companies in   2011, investors may end up owning a lot less than 50%. Conclusion There is no one-size-fits-all solution to this problem, but anything   you can do to make it simple, transparent, straightforward, and,   above-all, fair, will make your company much more likely to be   successful. The above awesome answer came from the Stack Exchange beta site for startups, which has now closed. I expect that this equity distribution question (which is strongly tied to personal finance) will come up more times in the future so I have copied the content originally posted.  All credit for this excellent answer is due to Joel Spolsky, a moderator for the Startups SE beta site, and co-founder of Stack Exchange." I strongly suggest you go to www.investor.gov as it has excellent information regarding these types of questions. A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates. When you buy shares of a mutual fund you're buying it at NAV, or net asset value.  The NAV is the value of the fund’s assets minus its liabilities. SEC rules require funds to calculate the NAV at least once daily. Different funds may own thousands of different stocks.  In order to calculate the NAV, the fund company must value every security it owns.  Since each security's valuation is changing throughout the day it's difficult to determine the valuation of the mutual fund except for when the market is closed.  Once the market has closed (4pm eastern) and securities are no longer trading, the company must get accurate valuations for every security and perform the valuation calculations and distribute the results to the pricing vendors.  This has to be done by 6pm eastern.  This is a difficult and, more importantly, a time consuming process to get it done right once per day.  Having worked for several fund companies I can tell you there are many days where companies are getting this done at the very last minute. When you place a buy or sell order for a mutual fund it doesn't matter what time you placed it as long as you entered it before 4pm ET.  Cutoff times may be earlier depending on who you're placing the order with.  If companies had to price their funds more frequently, they would undoubtedly raise their fees. There are a few reason why share prices increase or decrease, the foremost is expectation of the investors that the company/economy will do well/not well, that is expectation of profit/intrinsic value growth over some time frame (1-4 qtrs.)there is also demand & supply mismatch over (usually) short time. If you really see, the actual 'value' of a company is it's net-worth (cash+asset+stock in trade+brand value+other intangibles+other incomes)/no of shares outstanding, which (in a way) is the book value, then all shares should trade at their book value, the actual number but it does not, the expectation of investors that a share would be purchased by another investor at a higher price because the outlook of the company over a long time is good. The quotes on JSE are for 100 share lots.  The quotes on NYSE are for single shares.  That still leaves some price difference, but much less than you calculated. (EDIT: Equivalently, the price is quoted in 1/100th of a Rand.  The Reuter's listing makes this explicit since the price is listed as ZAc rather than ZAR.  http://www.reuters.com/finance/stocks/overview?symbol=HARJ.J) As noted in the other answer currently up, NYSE is quoting American Depositary Receipts (ADRs) for this company, which is not directly its stock.  The ADR in this case, if you check the prospectus, is currently 1 share of the ADR = 1 share of the stock on its home market.  A US institution (in this case it looks like BNY Mellon) is holding shares of stock to back each ADR. Arbitrage is possible and does happen.  It's not perfect though, because there are a variety of other cost and risk factors that need to be considered.  There's a good review here: Report by JP Morgan Some summary points: "Once again I offer some sage advice - ""Don't let the tax tail wag the investing dog."" Michael offers an excellent method to decide what to do. Note, he doesn't base the decision on the tax implication.  If you are truly indifferent to holding the stock, taxwise, you might consider selling just the profitable shares if that's enough cash. Then sell shares at a loss each year if you have no other gains. That will let you pay the long term gain rate on the shares sold this year, but offset regular income in years to come. But. I'm hard pressed to believe you are indifferent, and I'd use Michel's approach to decide.  Updated - The New Law is simply a rule requiring brokers to track basis. Your situation doesn't change at all. When you sell the shares, you need to identify which shares you want to sell. For older shares, the tracking is your responsibility, that's all." "No, 90% of investors do not lose money. 90% or even larger percentage of ""traders"" lose money. Staying invested in stock market over the long term will almost always be profitable if you spread your investments across different companies or even the index but the key here is long term which is 10+ years in any emerging market and even longer in developed economies where yields will be a lot lower but their currencies will compensate over time if you are an international investor." Rules appear to be changing (21NOV2014) Aviva Plc. AV on NYSE pass thru fee is 0.02 cents per ADR but that equals 11% deduction from ADR dividend. For utility or insurance stock that is significant ongoing fee. Registrar in US is Citibank, could be specific to them. This is the first for me except some modest fees on indonesian ADR. Information very difficult to find. Buy and hold OZ investor. Yes. You incur income tax on the RSU on they date they vest. At this point you own the actual shares and you can decide to sell them or to hold them. If you hold them for the required period, and sell them later, the difference between your price at vesting and the sales price would be taxed as long term capital gains. Caution: if you decide to hold, you are still liable to pay income tax in the year they vest. You have to pay taxes on income that you haven't made yet. This is fairly dangerous: if the stock goes down, you may lose a lot of this tax payment. Technically you could recover some of this through claiming capital losses, but that this is severely restricted: the IRS makes it much easier to increase taxes through gains than reducing taxes through losses.