What is the difference between buying stocks in foreign markets, versus buying ADRs and OTCs in the United States?

I am interested in diversifying my portfolio. I've come across some companies that have their primary listings in foreign markets. I'm curious about the viability of investing in their American Depository Reciepts (ADRs) - some are on the OTC market - versus buying on the foreign exchanges. What is the risk involved in doing this?

Investing, Asset Allocation, Stocks
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You are much better off buying ADRs.  The ADRs trade in this country, pay their dividends in dollars, and you can execute orders in your time zone.  Granted, ADRs tend to be more illiquid than the underlying ordinaries but unless the dollar size of your portfolio holdings run into the hundreds of thousands you should be able to get in and out with no issues.  It's also true that brokerage houses deal only in ceratin foreign markets and might charge a currency-conversion fee.  The return to an ADR investment will be identical to the US dollar return of the foreign share.

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