Good time to buy US shares

Brokerage costs are falling; you can buy into sectors that are non-existent here; tax, legal and accounting regimes are synchronising; and information is easy to access.

So how should you go about it?

In part one of this survival guide, we'll outline some basic principles. Then, in part two, we'll lay out your investment options.

1. Choose a broker

Commonwealth Bank's Pershing service, E*Trade and Interactive Brokers all offer access to international markets. Aside from trading costs, consider the markets in which you wish to invest, whether you need to make foreign-currency deposits before placing an order, whether cash deposits receive interest and the broker's financial position. Choosing brokers that are members of the US Securities Investor Protection Corporation helps protect your investment if the broker goes broke.

Also, be wary of glossy brochures from brokers flogging financial products. A foreign margin-loan application was included with my brokerage account approval pack.

A quick phone call revealed US dollar loans were available at 9 per cent interest, while the country's official interest rate is virtually zero. The Intelligent Investor doesn't recommend employing leverage, especially when dealing in foreign currencies and especially not at those rates.

2. Local rules

Opening a foreign brokerage account is like having an overseas driver's licence. Local road rules might mean you need to tweak your approach.

Frequently, overseas dividends don't carry franking credits, so foreign companies often favour share buybacks over dividends. If you're an income investor, the lower dividends need to be taken into account. Perhaps foreign stocks aren't right for you. Even if you do find stocks that pay decent dividends, your income will swing with fluctuations in exchange rates.

3. Stock ideas

To help unearth good stock ideas, consider newsletter services such as Value Investor Insight (valueinvestorinsight.com) and free websites such as gurufocus.com. Most stocks will be US-based but don't let that fool you. Unlike the ASX, the Nasdaq and New York Stock Exchange list plenty of foreign companies. Many Chinese companies that want to raise capital are improving their disclosure in order to obtain a US listing. That makes it easier to invest in Chinese companies, bypassing the Shanghai Stock Exchange, which is off limits to most foreign investors.

Combing through stocks owned by successful fund managers and investors is another good place to look for ideas. Fund managers such as Platinum Asset Management (www.platinum.com.au) publish quarterly newsletters that disclose their (largest) stockholdings. And each quarter, gurufocus.com publishes and discusses the portfolio changes of popular US value investors.

However, you'll get more bang for your buck from smaller stocks that fly under the radar of institutions (unlike Australia, US companies valued at more than $1 billion are considered "small caps").

4. Exchange rates

Exchange rates fluctuate, often wildly. If periods of high volatility, such as the Aussie dollar plunging from US98? to US60? in late 2008, might lead you to sell in panic, foreign investing probably isn't for you. Having a long-term view provides your first layer of protection to such movements but you need the mental discipline to see out the difficult periods.

Also, watch out for inflationist central banks. If you're concerned about a weak US dollar, consider stocks with internationally diversified revenues such as US-listed Yum! Brands (which owns KFC and Pizza Hut), McDonald's and Walmart, for example. If the US dollar were to fall further - and that seems to be the plan of Fed chairman Ben Bernanke - any company with predominantly non-US earnings would benefit.

The philosophy of legendary investor John Templeton was to "search among many markets for the companies selling for the smallest fraction of their true worth".

That makes it sound easier than it is - which is why most investors tend not to diversify internationally - but if you're attracted to the principle but are put off by the practical obstacles, watch out for part two of our survival guide on April 30.