Do other countries have very low cost index funds?

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Do other countries have very low cost index funds?

Postby Bfwolf » Mon Jun 11, 2012 1:42 am

While I'm not sure, I get the sense from this board that many other developed countries don't have a plethora of low cost index fund options like the United States does. While I understand the US has more people and more wealth to invest than other countries, and this means more options and the ability to drive costs down by spreading them over a lot of assets, it still seems that a country like Japan for instance would have a respectable selection of low cost index funds. Does it? What about the UK, Germany, France, Italy, Canada, Australia?

And if the answer for any of those countries is no, then why not? Surely there is a market for it.
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Re: Do other countries have very low cost index funds?

Postby tfb » Mon Jun 11, 2012 1:52 am

While not specifically on low cost index funds, Morningstar tallied fees and expenses among several other aspects of mutual fund investing in 22 countries. USA gets an A. Canada get an F on fees and expenses.

Global Fund Investor Experience 2011
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Re: Do other countries have very low cost index funds?

Postby Stryker » Mon Jun 11, 2012 2:02 am

Canada

This link from Canadian Couch Potato will give an idea of the overall MER for various model portfolios available here in Canada.
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Re: Do other countries have very low cost index funds?

Postby TedSwippet » Mon Jun 11, 2012 4:17 am

The UK is behind the US in terms of cheap index funds, but is catching up. The situation is much better than it was three or four years ago.

Vanguard UK offers investors both mutual funds and ETFs. TERs are around 0.15% or so, so not quite a cheap as the cheapest US funds. Still quite respectable though.

HSBC also offers index funds with not-awful TERs, around 0.25%. And also one ultra-cheap S&P 500 ETF, with a 0.09% TER.
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Re: Do other countries have very low cost index funds?

Postby tiresias » Mon Jun 11, 2012 4:25 am

Stryker wrote:Canada

This link from Canadian Couch Potato will give an idea of the overall MER for various model portfolios available here in Canada.


it seems from these portfolios that canadians give preference to the canadian market (i.e., their domestic market) over the u.s. market. why? don't u.s. investors weight the u.s. market higher because of its superiority over other markets, i.e., candadian?
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Re: Do other countries have very low cost index funds?

Postby TedSwippet » Mon Jun 11, 2012 5:05 am

tiresias wrote:...it seems from these portfolios that canadians give preference to the canadian market (i.e., their domestic market) over the u.s. market. why? don't u.s. investors weight the u.s. market higher because of its superiority over other markets, i.e., candadian?

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Re: Do other countries have very low cost index funds?

Postby Charybdis » Mon Jun 11, 2012 7:20 am

tiresias wrote:
Stryker wrote:Canada

This link from Canadian Couch Potato will give an idea of the overall MER for various model portfolios available here in Canada.


it seems from these portfolios that canadians give preference to the canadian market (i.e., their domestic market) over the u.s. market. why? don't u.s. investors weight the u.s. market higher because of its superiority over other markets, i.e., candadian?


In theory, you shouldn't overweight your domestic market at all.

But theory doesn't take real world issues into account, like currency risk, dividend withholding tax, taxes in general, and cost.

Investing in home equities are usually cheaper, safer in terms of currency risk, and more tax efficient. So you should overweight your domestic market a little (not too much).
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Re: Do other countries have very low cost index funds?

Postby AndroAsc » Mon Jun 11, 2012 8:31 am

The lowest cost index funds are in the USA. Vanguard may have operation in other countries, but you'll need to be rich to access those funds (min $100k).
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Re: Do other countries have very low cost index funds?

Postby TedSwippet » Mon Jun 11, 2012 8:58 am

AndroAsc wrote:The lowest cost index funds are in the USA. Vanguard may have operation in other countries, but you'll need to be rich to access those funds (min $100k).

Not entirely true for the UK. To use Vanguard UK directly the minimum is £100k. But... investing through a broker or fund "supermarket" -- arguably the most common way for UK investors to hold funds because supermarkets provide SIPP and ISA wrappers -- brings the fund minimum down to perhaps £1,000, and as low as £50 for regular monthly investments. There's also the option of Vanguard ETFs to avoid issues with minimum investment amounts.
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Re: Do other countries have very low cost index funds?

Postby Peculiar_Investor » Mon Jun 11, 2012 9:52 am

AndroAsc wrote:The lowest cost index funds are in the USA. Vanguard may have operation in other countries, but you'll need to be rich to access those funds (min $100k).

Also not true for Canada, as Vanguard Canada has been operating here since December 2011 (see Vanguard Exchange-Traded Funds Begin Trading on Toronto Stock Exchange | Business Wire).

For Canadian investors you can find a discussion, Financial Webring Forum • View topic - Vanguard coming to Canada on the BH's sister forum.
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Re: Do other countries have very low cost index funds?

Postby HongKonger » Mon Jun 11, 2012 10:37 am

US is certainly lower than here in Hong Kong where I believe we have more indexing options than in other developed SE Asian countries such as Singapore. For physical ETFs it is mostly iShares at around 0.59 ER. There are other odd ones with lower ERs (HSI tracker, odd few by HSBC etc) but not a comprehensive offering. We have the DB-X trackers but they are not physical. We did also had Lyxor but they have pulled out recently.
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Re: Do other countries have very low cost index funds?

Postby Stryker » Mon Jun 11, 2012 11:15 am

Since there seems to be a bit of controversy over home bias and what an investor should have allocated to his/her portfolio when living in another country outside the U.S.

Back in 2005 David Swensen gave an interview with the National Post newspaper here in Canada. The article had the title "How David Swensen beats the market -- and why you can't". Unfortunately, that particular article in full, seems to have disappeared from the internet. The good news is someone on a blog posted a model allocation as recommended by Swensen for the average Canadian investor. Certainly the way I remember it.
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Re: Do other countries have very low cost index funds?

Postby Karamatsu » Mon Jun 11, 2012 7:26 pm

It still seems that a country like Japan for instance would have a respectable selection of low cost index funds. Does it?


No, not the last time I looked. The financial industry isn't as competitive as in the US, and mutual funds aren't nearly as popular to begin with (about 1/20 the assets under management as the US). But there may be a chicken-egg thing... if someone came in with low-cost funds and a customer-service orientation (looking at you, Vanguard Japan), they might become more popular, then competition could drive prices down. But investing is different here and the stock market doesn't play a very large role in most people's lives. I'm not sure it would be good if that changed.
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Re: Do other countries have very low cost index funds?

Postby gorion83 » Tue Jun 12, 2012 2:54 pm

Bfwolf wrote:While I'm not sure, I get the sense from this board that many other developed countries don't have a plethora of low cost index fund options like the United States does.
What about the UK, Germany, France, Italy, Canada, Australia?

And if the answer for any of those countries is no, then why not? Surely there is a market for it.


Speaking for Italy we have very few index funds and a reasonable selection of ETFs with Ter ranging from 0.07% to 0.65% depending on the asset class. ETFs become increasingly popular recently, but mostly for trading purposes (at least on the most visited web forums).
I guess that, specifically for Italy, one main problem is that most of investment is done either through bank and brokers (and they tend to push the in-house funds) or by themselves, mainly buying random bonds (the higher return, the better. Many just think that a bond WILL return principal, no matter what. We know that's not the case).
Add on top of that that many Italians are usually against stocks (seen like a "game", rather than investing) and they tend to jump in mass in the stock market only when it's sky-high. The stock market itself is somewhat undeveloped. Many of the best companies are privately held (i.e. Ferrero, the Nutella guys, or Barilla), and many of the listed companies have a free float of about 30% of total capital with really few public companies (I guess you can can count them on two hands).

That's why I think Italy will lag the other EU countries also on Index funds (lack of widespread financial culture).
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Re: Do other countries have very low cost index funds?

Postby Random Musings » Tue Jun 12, 2012 4:40 pm

tfb wrote:While not specifically on low cost index funds, Morningstar tallied fees and expenses among several other aspects of mutual fund investing in 22 countries. USA gets an A. Canada get an F on fees and expenses.

Global Fund Investor Experience 2011


However, they get a solid grade (B+) for disclosing the fact that they are hosing their investors. Plus, Canada get a big "A" for their sales and media grade. Essentially, style over substance.

It's a shame and a sham.

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Re: Do other countries have very low cost index funds?

Postby sleepingrust » Wed Jun 13, 2012 7:06 am

France has little in the way of low cost index investing. While one can find ETFs with expenses of 0.35%, you need to hold them in an insurance or brokerage account "wrapper" that charges anywhere from 0.75% to 1.5%. So there's no way even a simple index portfolio can come in at under 1% total expenses!

That's still better than traditional mutual funds, which charge 1-3%, so many investors have up to 4% annual expenses, and often loads of 1-3% to get into a fund.

Ever heard the expression, "fat and happy like a French banker..."??
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Re: Do other countries have very low cost index funds?

Postby AndroAsc » Wed Jun 13, 2012 8:30 am

TedSwippet wrote:
AndroAsc wrote:The lowest cost index funds are in the USA. Vanguard may have operation in other countries, but you'll need to be rich to access those funds (min $100k).

Not entirely true for the UK. To use Vanguard UK directly the minimum is £100k. But... investing through a broker or fund "supermarket" -- arguably the most common way for UK investors to hold funds because supermarkets provide SIPP and ISA wrappers -- brings the fund minimum down to perhaps £1,000, and as low as £50 for regular monthly investments. There's also the option of Vanguard ETFs to avoid issues with minimum investment amounts.


And do the fund supermarkets charge a wrap fee that increases the effective ER? I would be kind of pointless to hold a Vanguard fund with ER of 0.2% only to pay another 1% of wrap fee to the broker.

Vanguard ETFs are not a viable option for most non-Americans due to the high estate tax. I believe it's 50% off anything exceeding $50k.
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Re: Do other countries have very low cost index funds?

Postby AndroAsc » Wed Jun 13, 2012 8:32 am

HongKonger wrote:US is certainly lower than here in Hong Kong where I believe we have more indexing options than in other developed SE Asian countries such as Singapore. For physical ETFs it is mostly iShares at around 0.59 ER. There are other odd ones with lower ERs (HSI tracker, odd few by HSBC etc) but not a comprehensive offering. We have the DB-X trackers but they are not physical. We did also had Lyxor but they have pulled out recently.


Unfortunately iShares ETF have an ER at is on average 2X of that of Vanguard's funds or ETFs. In addition, major iShares index fund ETFs are known for their poor ability to track the index because they use partial replication, as opposed to Vanguard's full replication approach. An example would be EEM vs VWO about a few years ago, where the iShare version failed to track the index cause their replication strategy was poor.

I believe the other companies like Lyxor and DB-X trackers are swap-based (or some kind of weird financial creation), and the bottomline is that you don't actually hold any assets directly in the fund.
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Re: Do other countries have very low cost index funds?

Postby af895 » Wed Jun 13, 2012 8:45 am

tfb wrote:While not specifically on low cost index funds, Morningstar tallied fees and expenses among several other aspects of mutual fund investing in 22 countries. USA gets an A. Canada get an F on fees and expenses.

Global Fund Investor Experience 2011


From the linked Morningstar document:

Another issue is whether uniform presentation of fees exists such that each prospectus may be easily compared
with another.

...in Canada it is very easy to compare fees and expenses from one prospectus to another.


In the aggregate fees and expenses may be high here but there is no excuse for a Canadian investor to pay them when clear information is available.

Speaking as a Canadian with a great deal of world travel under his belt, Canadians as a whole are far too passive, trusting, and un-self-interested for their own good. I feel little sympathy for my countrymen who choose to pay high fees when there are clearly better, lower cost options.

The TD e-Series index funds described at Dan Bortolotti's "Canadian Couch Potato" model portfolio page have an average expense ratio of 0.44% (no commissions, no loads) and his other portfolio models have expenses as low as 0.29%. Details: http://canadiancouchpotato.com/model-portfolios/

Canadians have only their own indifference and inaction to blame for the continued existence of high-fee investment vehicles. Clearly, we're still collectively gullible enough to buy them in sufficient quantities the investment industry has no incentive to discontinue them.
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Re: Do other countries have very low cost index funds?

Postby wriggly » Wed Jun 13, 2012 11:10 am

AndroAsc wrote:And do the fund supermarkets charge a wrap fee that increases the effective ER? I would be kind of pointless to hold a Vanguard fund with ER of 0.2% only to pay another 1% of wrap fee to the broker.


There are additional fees, but you can manage the costs to keep them at a minimum. For smaller amounts, you use a provider that charges by percentage. For larger amounts, you use a provider that charges a fixed fee. My additional costs are about 0.2%.

AndroAsc wrote:Vanguard ETFs are not a viable option for most non-Americans due to the high estate tax. I believe it's 50% off anything exceeding $50k.


Vanguard has recently introduced ETFs in Europe, which are not subject to US taxation.
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Re: Do other countries have very low cost index funds?

Postby Stryker » Wed Jun 13, 2012 1:37 pm

gorion83 wrote:
Bfwolf wrote:While I'm not sure, I get the sense from this board that many other developed countries don't have a plethora of low cost index fund options like the United States does.
What about the UK, Germany, France, Italy, Canada, Australia?

And if the answer for any of those countries is no, then why not? Surely there is a market for it.


Speaking for Italy we have very few index funds and a reasonable selection of ETFs with Ter ranging from 0.07% to 0.65% depending on the asset class. ETFs become increasingly popular recently, but mostly for trading purposes (at least on the most visited web forums).
I guess that, specifically for Italy, one main problem is that most of investment is done either through bank and brokers (and they tend to push the in-house funds) or by themselves, mainly buying random bonds (the higher return, the better. Many just think that a bond WILL return principal, no matter what. We know that's not the case).
Add on top of that that many Italians are usually against stocks (seen like a "game", rather than investing) and they tend to jump in mass in the stock market only when it's sky-high. The stock market itself is somewhat undeveloped. Many of the best companies are privately held (i.e. Ferrero, the Nutella guys, or Barilla), and many of the listed companies have a free float of about 30% of total capital with really few public companies (I guess you can can count them on two hands).

That's why I think Italy will lag the other EU countries also on Index funds (lack of widespread financial culture).


Looking at page 17 of Credit Suisse Global Investment Returns Yearbook for 2011, I note that from 1900 to 2010 Italy had the second worst performance out of nineteen other stock markets in the world for "real dividend growth" of what looks to be from the chart in figure 4 of approximate returns of -1.5% per year. I wonder if that could be at least one factor in Italians reluctance to invest in their own stock market.
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Re: Do other countries have very low cost index funds?

Postby Bfwolf » Wed Jun 13, 2012 1:55 pm

Sleepingrust, I am shocked by your description of investing in France. It sounds like the bad old days in the US a few decades ago. Why hasn't somebody like Vanguard come in and destroyed the market with low cost funds and low cost wrappers? I looked up Vanguard France on the Internet and it looks like they're only for institutional investors? Germany too?
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Re: Do other countries have very low cost index funds?

Postby gorion83 » Wed Jun 13, 2012 3:07 pm

Stryker wrote:

Looking at page 17 of Credit Suisse Global Investment Returns Yearbook for 2011, I note that from 1900 to 2010 Italy had the second worst performance out of nineteen other stock markets in the world for "real dividend growth" of what looks to be from the chart in figure 4 of approximate returns of -1.5% per year. I wonder if that could be at least one factor in Italians reluctance to invest in their own stock market.


I don't know which came first, if it was the egg or the chicken... :D

I don't think that taking into account data from 1900 makes any sense for Italy, though. IIRC the stock exchange had up to 160 stocks in the 1913, but most of savings was in the form of saving deposits with "Poste Italiane", the mail entity which also offered financial services. Also Italy had a very long period of high interest rates on its bonds and when the 1 year bond gives you double digit yield you hardly look for stocks.

Also, if you follow this link: http://www.consob.it%2Fdocumenti%2FPubblicazioni%2FItaliaunita150%2F150borsa.pdf and go to page 16 you'll notice that you have three very big dips in the historical yield: after WWI, after WWII and in the inflationary shock of 1970-80. In 1977 market capitalization was just 2.5% of GDP and it rose to 20% of the GDP just in late 80s.

Banks and utilities were nationalized at various stages between 1930 and 1960s, so they quit the market as well. They would have come back just in the late 70s

More recently the economic growth was quite low, around 1%/year on average in the last 20 years... this surely impacted corporate earnings and the stock market itself.

Finally Italian mutual funds are maybe of the worst of entire Europe. I'm always amazed on how they can be so bad. There is a study from Mediobanca (the biggest local merchant bank) which every year shows how they tend to lose money compared to benchmarks and foreign funds. The fees are very high and only recently we had more brokering firms pushing lower ter actively managed funds.

In the end there are various reasons for the scarce love of Italians for stocks, but I keep thinking that a better financially educated people would still be more invested in the stock market than my countrymen.
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Re: Do other countries have very low cost index funds?

Postby M B » Fri Jun 15, 2012 2:50 am

sleepingrust wrote:France has little in the way of low cost index investing. While one can find ETFs with expenses of 0.35%, you need to hold them in an insurance or brokerage account "wrapper" that charges anywhere from 0.75% to 1.5%. So there's no way even a simple index portfolio can come in at under 1% total expenses!
While insurance wrappers are indeed expensive, a PEA need not have wrapper fees.

Yet, the choice of ETFs is limited (little is available in terms of genuinely broad indices, small caps, value, etc.). And there are barely any non-listed trackers (to the point that in French "tracker" means ETF).
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Re: Do other countries have very low cost index funds?

Postby fjsfjsfjs » Sat Jun 16, 2012 6:04 am

Bfwolf wrote: I looked up Vanguard France on the Internet and it looks like they're only for institutional investors? Germany too?


I am German. You can't (AFAIK) buy Vanguard funds through a broker here, only directly at Vanguard, and it looks like the products they offer here are mostly for institutional investors. I just read that they started trading ETFs on German stock exchanges (http://bit.ly/LE0bM7, in german). They don't play a role so far, at least for provate investors. There are other ETF/index fund issuers here, for example iShares, Lyxor, Comstage, Etflab.

sleepingrust wrote:France has little in the way of low cost index investing. While one can find ETFs with expenses of 0.35%, you need to hold them in an insurance or brokerage account "wrapper" that charges anywhere from 0.75% to 1.5%.

We can buy shares directly or via savings plan, and hold them in a brokerage account. There are government-sponsored programs for retirement savings where you can put money without paying taxes, plus you get a bonus on your payments from the government. For those, the situation is pretty much the same as sleepingrust described the situation in France: you either have to take an insurance wrapper or loaded funds.

Just to give you some examples regarding costs:
MSCI world index: LYXOR ETF MSCI WORLD : TER 0.45 %,
Euro Stoxx 600 index: DB X-TRACKERS STOXX 600 ETF 1C, TER: 0.2%
mixed basket of €-Bonds: ETFlab iBoxx EUR Liquid Sovereign Diversified 1-10: TER 0.15 %
commodities: COMSTAGE ETF COMMERZBANK COMMODITY EW INDEX TR: 0.3%
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Re: Do other countries have very low cost index funds?

Postby tiresias » Sat Jun 16, 2012 1:19 pm

what is TER?
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Re: Do other countries have very low cost index funds?

Postby M B » Sat Jun 16, 2012 1:51 pm

tiresias wrote:what is TER?
total expense ratio, i.e. annual fees.
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Re: Do other countries have very low cost index funds?

Postby Charybdis » Sat Jun 16, 2012 2:33 pm

All the EU-domiciled ETFs are here: http://www.etfinfo.com

Just enter keywords, for example REIT, or emerging markets, to compare all the suitable ETFs.
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Re: Do other countries have very low cost index funds?

Postby t0x1n » Sat May 18, 2013 4:29 pm

In Israel we don't have ETFs, only ETNs (Exchange-Traded Notes) and TFs (Tracking Funds - similar to mutual funds).
ETNs are the most popular around here, even though IMO they are a lousy product due to their credit risk (notes are basically bonds).
Tracking funds are much better but more rare. Some TER samples:

Tracking Funds
TA-100 (Tel Aviv 100) - 0.28%
Total Government Bonds - 0.29%
NASDAQ 100 / S&P 500 - 0.28% + dividends (yes, they take all the dividends)

There are no tracking funds for other international markets (emerging etc.) at this time.
ETNs have better TERs (sometimes zero, apparently the can profit by tracking the index via futures and investing most of the money in interest-bearing securities) but like I said I try to avoid them.
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Re: Do other countries have very low cost index funds?

Postby JuanZ » Sat May 18, 2013 6:06 pm

The Colombian stock market has an etf, iShares' iCOLCAP, tracking the COLCAP index that represents the top 20 companies by market cap. 0.65% expense rate -- plus whatever the broker charges, so it ends up being about 1.2%.

There is a couple of mutual funds that follow the COLCAP index -- as of today, the etf has a slight advantage cost-wise.

No indexed bond fund. No low-cost way to invest in international markets for a Colombia-based investor.

Chile also has etfs by iShares.

[...]
I just saw that some Brazilian etfs (some by iShares) can be traded in the Brazilian stock exchange. However, their underlying indexes (Ibovespa, Ibrx) do not seem to be pure market capitalization, but are weighted by volume of trade.

Mexican investors seem to have a much better array of etf choices, with decent expense rates (~ 0.3%).

Since these questions about investing boglehead style in a foreign country are often asked, would the wiki people consider having a page on this?
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Re: Do other countries have very low cost index funds?

Postby StormShadow » Sat May 18, 2013 6:34 pm

tfb wrote:While not specifically on low cost index funds, Morningstar tallied fees and expenses among several other aspects of mutual fund investing in 22 countries. USA gets an A. Canada get an F on fees and expenses.

Global Fund Investor Experience 2011

At present, there is only one Canadian fund I would consider investing in...
Central Fund of Canada (CEF) http://www.centralfund.com/

And again, I'd pursue this only if I ever decided to take the plunge into precious metal commodities. I've read that this is an attractive alternative to the GLD ETF.
http://seekingalpha.com/article/111157- ... and-silver
http://wallstreetwindow.com/node/6863
http://survivalus.blogspot.com/2010/12/ ... d-slv.html
http://www.fool.com/investing/etf/2011/ ... -gold.aspx
http://www.forbes.com/sites/investor/20 ... tax-break/
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Re: Do other countries have very low cost index funds?

Postby Hallman » Sat May 18, 2013 6:55 pm

Here in Norway we have 3 financial institutions offering good index funds. All offer funds that track MSCI World and the norwegian market, and two offer MSCI emerging markets index funds. ER between 0.2-0.4.

The funds were introduced after a law was passed that stated that employers must pay all costs associated with pension plans. Companies weren't willing to pay the high fees employees had been paying and got the financial institutions to make index funds for their plans.

We can also invest in the vanguard ETFs that are traded in the US. We need to pay 15% witholding taxes on dividends, but that doesn't really matter because we can deduct what we pay to the US from what we pay to Norway. The dividend tax is 28%, so we pay 15% to the US and 13% to Norway.
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Re: Do other countries have very low cost index funds?

Postby LadyGeek » Mon May 27, 2013 6:57 pm

(This thread was started in 2012.) The wiki contains a series of articles intended for investors outside the US. See: Category:International Domiciles. Refer to the sidebar on the right-hand side of the page.

Canadian investors are directed to our sister site: finiki, the Canadian financial Wiki (and to the Financial Webring Forum for investing advice).

The remaining articles have been developed from the experience of our members: European Union, Japan, Taiwan, and the United Kingdom. These articles contain details on how to do "Boglehead-style" investing, which includes not only low-cost funds, but the approach for low-cost investing - much like we do in the US. (The UK articles go a bit further.)

Would there be an interest to create an article for Norway? Hallman has contributed fund details in this thread: Vanguard and Norway
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Re: Do other countries have very low cost index funds?

Postby NOLA » Mon May 27, 2013 11:19 pm

In Sweden I'm pretty sure they have an index fund for the 30 biggest companies (OMX30) that has a 0% ER. The company is called Avanza and the fund is called Avanza Zero. The reason they have it is to attract a lot of new clients and they also offer many other fund with 1-3% ER. So they make their money anyway I guess. Who knows, maybe they will raise the ER in the future.
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