Please ensure Javascript is enabled for purposes of website accessibility

Can Foreign Investors Buy U.S. Mutual Funds?

By Motley Fool Staff – Updated Nov 1, 2016 at 12:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Just because something is legal doesn't mean financial institutions will let you do it.

U.S. securities laws don't put prohibitions on investments by foreign investors, according the same protections that U.S. citizens get. However, from a practical standpoint, many companies that sell proprietary mutual funds to investors have internal restrictions preventing investors who can't provide a U.S. address from investing. In order to buy funds and other investments, foreign investors can use some alternatives to direct investment if they're available.

(By the way -- if you're interested in beginning your investing journey, hop on over for some great deals on brokerage accounts.)

Securities laws and foreign investors
The primary issue with foreign investors and mutual funds involves the interplay of securities laws in different countries. For investors who reside in the U.S., mutual fund companies feel comfortable relying on U.S. securities laws regardless of the nationality of the investor. For foreign investors who have U.S. addresses and want to buy mutual funds, many fund companies will require only that the investor also supply IRS Form W-8BEN, which certifies the foreign status of the beneficial owner of the mutual fund account.

When an investor resides abroad, however, mutual fund companies are less comfortable with the potential application of foreign securities laws. In fact, major fund companies restrict sales even to investors who are U.S. citizens but whose only address is abroad, citing concerns about whether the foreign jurisdiction would deem them to be doing business in that country and potentially raise compliance issues.

Alternatives for foreign investors
Fortunately, there are some other ways for foreign investors to invest in mutual funds. Often, mutual funds are available through brokerage accounts. If the broker is comfortable working with a foreign investor, then purchases through the account won't trigger issues with the mutual fund company.

The other alternative is that foreign investors can work with financial institutions in their home countries to gain access to mutual fund investments. Especially in countries that have close economic ties with the U.S., you can generally find financial institutions that can facilitate foreign investment.

The financial industry is full of rules and regulations that lead institutions not to allow customers to do things that are technically legal. Inviting foreign investors to buy U.S. mutual funds is one of those areas in which competing regulation leads to cautious behavior from mutual fund companies. If you're diligent, though, you can usually find ways to invest in the funds you want.

This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at [email protected]. Thanks -- and Fool on!

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now


Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.