European, dutch investor here: Is investing in VTI and VXUS still a good choice?

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finrod_2002
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Joined: Fri Feb 15, 2019 6:04 am

European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Sat Feb 16, 2019 3:26 am

Hello all,

Thanks for this amazing forum with the endless information one can found. I'm reading it really a lot. Now I would like to ask advice over the following.

I've started investing 3 years ago and basically invest in the following:

Stocks

VTI (Vanguard Total US Stock ETF (50-60%)
VXUS (Vanguard Total International ex US Stock ETF) (40-50%)

VWRL (temporary storage, to keep doing dollar cost averaging, see below)

Fixed income
CDs

No bond fund yet, but considering:
- AGGH (iShares Core Global Aggregate Bond UCITS ETF), TER 0.1%
- VETY (EUR Eurozone Government Bond UCITS ETF), TER 0.12%
- DBZB (Xtrackers II Global Government Bond UCITS ETF 1C - EUR Hedged), TER 0.25%

With regard to the stock allocation like most people know, since one year it is no longer possible to invest in VTI and VXUS in European countries, because of new rules. For a Dutch investor VTI and VXUS are still better than Irish or other EU domiciled funds, because of the US - Netherland tax treaties.

Anyway, I've found a workaround for the new EU rules. It consists in buying VTI and VXUS via the option route. Basically, it is possible to either buy a call option or sell a put option to get the underlying VTI and VXUS. Buying via a call is a little more expensive, but you're sure to get what you want, the underlying shares. Buying via a put is less expensive overall, but has the risk that the counterpart doesn't exercise the option. You still get the option premium, but not the underlying VTI and VXUS you wanted to buy.

This way it is only possible to buy lots of 100 (1 option = 100 shares), so I do this periodically, when I've saved enough money. For the rest, to still be able to take advantage of dollar cost averaging I've decided to temporarily store my monthly investments in VWRL. Then, when I'm ready to buy more VTI and VXUS sell VWRL.

What do you guys think of this strategy? Anything I'm missing or flaws I'm not seeing?

Also regarding the Fixed income part, I think I prefer AGGH. I'm only concerned about the non government bonds that are in the index even if those are only around 30%. But what if the index decides to overweight non government bonds even more? On the other hand, for the coming years, because of the very low interest rate in Euro bonds I think I will keep a big part of my fixed income in CDs and I think that this way I can take the slight extra risk of non government bonds.
Last edited by finrod_2002 on Sat Feb 16, 2019 4:59 pm, edited 1 time in total.

Valuethinker
Posts: 39050
Joined: Fri May 11, 2007 11:07 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Valuethinker » Sat Feb 16, 2019 7:17 am

finrod_2002 wrote:
Sat Feb 16, 2019 3:26 am
Hello all,

Thanks for this amazing forum with the endless information one can found. I'm reading it really a lot. Now I would like to ask advice over the following.

I've started investing 3 years ago and basically invest in the following:

Stocks

VTI (50-60%)
VXUS (40-50%)

VWRL (temporary storage, to keep doing dollar cost averaging, see below)

Fixed income
CDs

No bond fund yet, but considering:
- AGGH (iShares Core Global Aggregate Bond UCITS ETF), TER 0.1%
- VETY (EUR Eurozone Government Bond UCITS ETF), TER 0.12%
- DBZB (Xtrackers II Global Government Bond UCITS ETF 1C - EUR Hedged), TER 0.25%

With regard to the stock allocation like most people know, since one year it is no longer possible to invest in VTI and VXUS in European countries, because of new rules. For a Dutch investor VTI and VXUS are still better than Irish or other EU domiciled funds, because of the US - Netherland tax treaties.

Anyway, I've found a workaround for the new EU rules. It consists in buying VTI and VXUS via the option route. Basically, it is possible to either buy a call option or sell a put option to get the underlying VTI and VXUS. Buying via a call is a little more expensive, but you're sure to get what you want, the underlying shares. Buying via a put is less expensive overall, but has the risk that the counterpart doesn't exercise the option. You still get the option premium, but not the underlying VTI and VXUS you wanted to buy.

This way it is only possible to buy lots of 100 (1 option = 100 shares), so I do this periodically, when I've saved enough money. For the rest, to still be able to take advantage of dollar cost averaging I've decided to temporarily store my monthly investments in VWRL. Then, when I'm ready to buy more VTI and VXUS sell VWRL.

What do you guys think of this strategy? Anything I'm missing or flaws I'm not seeing?
You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options.

It looks like a great way to burn money.

How about just buying the world ETF, of which both Vanguard and ishares offer Dublin registered funds?
Also regarding the Fixed income part, I think I prefer AGGH. I'm only concerned about the non government bonds that are in the index even if those are only around 30%. But what if the index decides to overweight non government bonds even more? On the other hand, for the coming years, because of the very low interest rate in Euro bonds I think I will keep a big part of my fixed income in CDs and I think that this way I can take the slight extra risk of non government bonds.
It won't matter much unless we have another financial crisis.

Topic Author
finrod_2002
Posts: 28
Joined: Fri Feb 15, 2019 6:04 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Sat Feb 16, 2019 4:57 pm

You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options.

It looks like a great way to burn money.

How about just buying the world ETF, of which both Vanguard and ishares offer Dublin registered funds?
Why shouldn't I get the dividends? I get the dividends over the VTI and VXUS shares I own as usual.

What to you mean exactly by volatility premium? If I buy the option the day before they expire or the the day of expiration the difference between option premium + strike price is minimal with respect to the underlying share price. Also, please note that I own the option for only a very short time (1 day maximum) and exercise it right after in case of a call.

Regarding the options spread, does it really matter for a buy and hold strategy? I'm only buying a call option without ever selling it again and exercise it right away. Also I'm searching for the smallest premium + strike price.

Regarding buying the Vanguard Irish world ETF (VWRL) I've considered this, but there a number of reasons to prefer VTI (Vanguard Total US stock market) and VXUS (Vanguard Total World ex US).
- VTI + VXUS are less expensive (total expense ratio is lower), VWRL has a TER of 0.25%, VTI 0.04%, VXUS 0,11%
- With VTI + VXUS I invest in more holdings increasing diversification
- With VTI + VXUS small caps are included
- For a Dutch investor VWRL has more dividend leakage compared to VTI + VXUS. For example VTI doesn't have to pay any dividend tax for its US holdings, so I'm getting the whole dividend. The Irish funds have to pay dividend taxes for its US holding to the US government. All this results to extra costs that should be added to the TER of VWRL in comparison to VTI.

Valuethinker
Posts: 39050
Joined: Fri May 11, 2007 11:07 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Valuethinker » Sat Feb 16, 2019 5:16 pm

finrod_2002 wrote:
Sat Feb 16, 2019 4:57 pm
You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options.

It looks like a great way to burn money.

How about just buying the world ETF, of which both Vanguard and ishares offer Dublin registered funds?
Why shouldn't I get the dividends? I get the dividends over the VTI and VXUS shares I own as usual.

What to you mean exactly by volatility premium? If I buy the option the day before they expire or the the day of expiration the difference between option premium + strike price is minimal with respect to the underlying share price. Also, please note that I own the option for only a very short time (1 day maximum) and exercise it right after in case of a call.

Regarding the options spread, does it really matter for a buy and hold strategy? I'm only buying a call option without ever selling it again and exercise it right away. Also I'm searching for the smallest premium + strike price.

Regarding buying the Vanguard Irish world ETF (VWRL) I've considered this, but there a number of reasons to prefer VTI (Vanguard Total US stock market) and VXUS (Vanguard Total World ex US).
- VTI + VXUS are less expensive (total expense ratio is lower), VWRL has a TER of 0.25%, VTI 0.04%, VXUS 0,11%
- With VTI + VXUS I invest in more holdings increasing diversification
- With VTI + VXUS small caps are included
- For a Dutch investor VWRL has more dividend leakage compared to VTI + VXUS. For example VTI doesn't have to pay any dividend tax for its US holdings, so I'm getting the whole dividend. The Irish funds have to pay dividend taxes for its US holding to the US government. All this results to extra costs that should be added to the TER of VWRL in comparison to VTI.
This reads to be that I did not properly understand your strategy.

I shall have a reread and see if I can make more sensible comments.

Topic Author
finrod_2002
Posts: 28
Joined: Fri Feb 15, 2019 6:04 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Sun Feb 17, 2019 4:53 am

This reads to be that I did not properly understand your strategy.

I shall have a reread and see if I can make more sensible comments.
Maybe I haven't explained it too well. :wink:

I'll try to illustrate it via the following example.

Let's assume that I have enough money to buy 100 VTI shares. Because of the new European regulations I cannot just go to my brokerage account and buy them directly.

What I can do is one of the following on the day before option expiration (third Friday of every month). For costs (lower option premium) it would probably be even better the day of expiration. But somehow the day before feels safer.

Either

Buy exactly 1 VTI call option contract

1) Search for the cheapest option premium + strike price combination. This way you have around 0.5, 0.6% additional transaction costs. Since this a one time thing I don't bother too much.

2) Buy the call option.

3) Exercise the call option. This results in me getting the 100 VTI shares, the same as if I would have bought them directly. At least with my broker (lynx, Dutch Interactive broker reseller) I have no extra transaction costs for this operation which is nice.

or

Sell exactly 1 VTI put option contract

1) Search for a reasonable priced premium + strike price combination, so that it is likely that a counterparty is going to exercise the option.

2) Sell the put option. This way you get the option premium.

3) If the option is exercised, you get the 100 VTI shares. If not you have to retry another time. In the meantime you've got the premium which is not too bad even if that wasn't the goal of the operation.

Valuethinker
Posts: 39050
Joined: Fri May 11, 2007 11:07 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Valuethinker » Sun Feb 17, 2019 8:52 am

I did not read you properly and got confused. There are several threads going about using 3x leveraged ETFs plus US Treasury bonds to duplicate stock market performance. There are some real problems w that strategy.

What I had not properly understood is that this is a way to take delivery. Assuming tax issues work this is quite clever. To actually get the physical.

Make sure the settlement in the contract is actually for the underlying. With some types of derivatives it is often a cash equivalent.

If this goes wrong it is because of some detail in the option contract.

And yes buy the low priced options.

Main thing is you will pay the bid ask spread on the options which can be!quite wide for less well traded stocks I believe.

Topic Author
finrod_2002
Posts: 28
Joined: Fri Feb 15, 2019 6:04 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Sun Feb 17, 2019 4:34 pm

What I had not properly understood is that this is a way to take delivery. Assuming tax issues work this is quite clever. To actually get the physical.
In the Netherlands the net wealth (assets-liabilities) is taxed at a fixed 1.2% rate for totals above €21,330 (above €42,660 for a couple). So it doesn't really matter what you own above that sum.

The only thing which troubles me a bit is the inheritance tax the US government may ask to non US persons.
Make sure the settlement in the contract is actually for the underlying. With some types of derivatives it is often a cash equivalent.
Luckily, for VTI and VXUS all the options I've seen are for the underlying (physical settled. So I get my shares... :wink:
Main thing is you will pay the bid ask spread on the options which can be!quite wide for less well traded stocks I believe.
I'm only doing this for VTI and VXUS which are both heavily traded, so I guess this is ok. Also, if I ever need to sell some of the shares I can do this the normal way without using options. The European regulations only forbid to buy American ETFs, but not to sell them.
Also regarding the Fixed income part, I think I prefer AGGH. I'm only concerned about the non government bonds that are in the index even if those are only around 30%. But what if the index decides to overweight non government bonds even more? On the other hand, for the coming years, because of the very low interest rate in Euro bonds I think I will keep a big part of my fixed income in CDs and I think that this way I can take the slight extra risk of non government bonds.
It won't matter much unless we have another financial crisis.
In case of a financial crisis, would a government only bond give much more protection than an aggregate one?

The main reason I prefer the aggregate bond over the government only ones is the lower duration ca. 6.5 vs ca. 7.5, giving me slightly less volatility in case the interest rate rises. Which I believe will happen soon. Since 2016 the base interest rate in europe is 0 and because Europe always follows America there is only one way the interest is going to go. I don't see the base interest rate going below 0.

cpumechanic
Posts: 143
Joined: Tue Dec 21, 2010 11:42 pm

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by cpumechanic » Sun Feb 17, 2019 4:48 pm

finrod_2002 wrote:
Sun Feb 17, 2019 4:34 pm
What I had not properly understood is that this is a way to take delivery. Assuming tax issues work this is quite clever. To actually get the physical.
In the Netherlands the net wealth (assets-liabilities) is taxed at a fixed 1.2% rate for totals above €21,330 (above €42,660 for a couple). So it doesn't really matter what you own above that sum.

The only thing which troubles me a bit is the inheritance tax the US government may ask to non US persons.
Make sure the settlement in the contract is actually for the underlying. With some types of derivatives it is often a cash equivalent.
Luckily, for VTI and VXUS all the options I've seen are for the underlying (physical settled. So I get my shares... :wink:
Main thing is you will pay the bid ask spread on the options which can be!quite wide for less well traded stocks I believe.
I'm only doing this for VTI and VXUS which are both heavily traded, so I guess this is ok. Also, if I ever need to sell some of the shares I can do this the normal way without using options. The European regulations only forbid to buy American ETFs, but not to sell them.
Also regarding the Fixed income part, I think I prefer AGGH. I'm only concerned about the non government bonds that are in the index even if those are only around 30%. But what if the index decides to overweight non government bonds even more? On the other hand, for the coming years, because of the very low interest rate in Euro bonds I think I will keep a big part of my fixed income in CDs and I think that this way I can take the slight extra risk of non government bonds.
It won't matter much unless we have another financial crisis.
In case of a financial crisis, would a government only bond give much more protection than an aggregate one?

The main reason I prefer the aggregate bond over the government only ones is the lower duration ca. 6.5 vs ca. 7.5, giving me slightly less volatility in case the interest rate rises. Which I believe will happen soon. Since 2016 the base interest rate in europe is 0 and because Europe always follows America there is only one way the interest is going to go. I don't see the base interest rate going below 0.
For this statement:

In the Netherlands the net wealth (assets-liabilities) is taxed at a fixed 1.2% rate for totals above €21,330 (above €42,660 for a couple). So it doesn't really matter what you own above that sum.

How do they determine assets what is included? Housing, Cars, Silverware, or just cash/stocks/bonds?

Is that yearly? or... at what frequency.

Second question for education.. do you understand why the EU would prevent you from purchasing any US ETF fund?

I find this curious and counter intuitive.

Thanks for the education.

CPU
Democracy is two wolves and a lamb voting on what to have for Lunch. | Liberty is a well-armed lamb contesting the vote.

TedSwippet
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Location: UK

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by TedSwippet » Mon Feb 18, 2019 3:50 am

cpumechanic wrote:
Sun Feb 17, 2019 4:48 pm
Second question for education.. do you understand why the EU would prevent you from purchasing any US ETF fund?
Described briefly here: EU investing - Bogleheads. EU investors are not directly prevented from buying US domiciled ETFs, but currently they are indirectly, as result of PRIIPs.

Topic Author
finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Mon Feb 18, 2019 3:55 am

How do they determine assets what is included? Housing, Cars, Silverware, or just cash/stocks/bonds?
The tax declaration is done once per year and with net wealth I was indeed meaning cash/stocks/bonds and real estate, which is not the first house. The car is taxed apart. About Silverware and such stuff I'm not sure, because I don't own anything like that. I guess you have to add it to other financial assets and put it in the declaration, if you want to be really precise. In any case here on boogleheads there is a wiki page (https://www.bogleheads.org/wiki/Investi ... etherlands) which explains it a little bit in more details.

Second question for education.. do you understand why the EU would prevent you from purchasing any US ETF fund?
It is because of the new (since January 2018) Mifid / Priips regulations. They require basically that mutual funds and ETFs come with a key information documents for PRIIPs written in the native language of the country (or for some countries English could be enough), which explain the product and the risks and are written in a way that meet the requirements according to the Mifid/Priips specification. This only applies to private retail investors, not to institutional. Unfortunately, Vanguard doesn't do this at this time for its US funds. Maybe they do it in the future, but at this moment there are no concrete plans for it.

For more details please see here: https://www.esma.europa.eu/policy-rule ... -and-mifir and here https://ec.europa.eu/info/business-econ ... -priips_en

Valuethinker
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Valuethinker » Mon Feb 18, 2019 4:15 am

finrod_2002 wrote:
Sun Feb 17, 2019 4:34 pm

Also regarding the Fixed income part, I think I prefer AGGH. I'm only concerned about the non government bonds that are in the index even if those are only around 30%. But what if the index decides to overweight non government bonds even more? On the other hand, for the coming years, because of the very low interest rate in Euro bonds I think I will keep a big part of my fixed income in CDs and I think that this way I can take the slight extra risk of non government bonds.
It won't matter much unless we have another financial crisis.
In case of a financial crisis, would a government only bond give much more protection than an aggregate one?
It is not known. There is the risk that some countries turn out like Ireland was in the crash (govt bonds yielding 8%) or Greece (2 defaults & counting).

However in the last crash, govt bonds rallied, corporate bonds sank.
The main reason I prefer the aggregate bond over the government only ones is the lower duration ca. 6.5 vs ca. 7.5, giving me slightly less volatility in case the interest rate rises. Which I believe will happen soon. Since 2016 the base interest rate in europe is 0 and because Europe always follows America there is only one way the interest is going to go. I don't see the base interest rate going below 0.
Timing interest rates is always tricky and the actual difference in yield is small.

If the corporate bonds included callable bonds (which an index would) if interest rates fall the duration will drop and if interest rates rise there will be an increase in duration. However total corporate bonds are only 30% so the impact *should* be small.

If things go really wrong you will corporate bond spreads blow out -- much bigger yield gap v. safe government bonds.

It's really very much as in the movie Dirty Harry (Clint Eastwood): "Do you feel lucky today, punk?" Taking on credit risk works until it does not, and we are between Scylla and Charybdis on this one. You have the serious possibility of another financial crisis (the Italian banking sector in particular) and you have the possibility of an Italian debt restructuring accompanying a political crisis.

On the other hand interest rates might rise in a normal cycle ;-).

I would not worry too much re bond fund duration of 1 year. A 2% rise in interest rates means one fund performs 2% worse (price terms) than the other.

As I say it should not make much difference but the fund will give you a wilder ride if there's a credit crisis again. On the other hand, I do believe th greater mistake is a Eurozone government bond fund - because then your highest exposure is to Italy.

Storamin
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Storamin » Sat Mar 02, 2019 3:32 am

finrod_2002 wrote:
Sat Feb 16, 2019 3:26 am
Stocks

VTI (Vanguard Total US Stock ETF (50-60%)
VXUS (Vanguard Total International ex US Stock ETF) (40-50%)

VWRL (temporary storage, to keep doing dollar cost averaging, see below)

Fixed income
CDs

No bond fund yet, but considering:
- AGGH (iShares Core Global Aggregate Bond UCITS ETF), TER 0.1%
- VETY (EUR Eurozone Government Bond UCITS ETF), TER 0.12%
- DBZB (Xtrackers II Global Government Bond UCITS ETF 1C - EUR Hedged), TER 0.25%
What's your allocation between Stocks & Bonds?

Your allocation to the US is pretty high for a NL based investor. Do you want to invest more towards EU or NL?

It seems like a lot of complicated and risky work purchasing these Options... I can't believe that the Ireland/NL tax treaty is so punitive in comparison to US/NL tax treaty. Why not keep it simple... just buy the Ireland or Lux ETF?

TedSwippet
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by TedSwippet » Sat Mar 02, 2019 4:28 am

Storamin wrote:
Sat Mar 02, 2019 3:32 am
Your allocation to the US is pretty high for a NL based investor. Do you want to invest more towards EU or NL?
A 50-60% VTI allocation to US stock and 40-50% VXUS non-US is nicely in line with global market cap, so in practice there is no US 'tilt' here. VWRL currently holds 53.5% US stocks.

Whether the OP should have an EU or NL 'tilt' is a separate question.
Storamin wrote:
Sat Mar 02, 2019 3:32 am
It seems like a lot of complicated and risky work purchasing these Options... I can't believe that the Ireland/NL tax treaty is so punitive in comparison to US/NL tax treaty. Why not keep it simple... just buy the Ireland or Lux ETF?
It certainly looks like a complicated process, but maybe not risky.

The issue it addresses isn't really treaties, but rather local tax regulation as applied to different types of ETF. In common with many countries, NL apparently allows investors a local tax credit for withholding taxes paid directly to other countries, but not for withholding taxes paid internally by an ETF or fund. If the OP holds Ireland domiciled ETFs, the 15% paid by the ETF to the US in dividend tax is not locally reclaimable. If they hold US domiciled ETF however, the 15% paid by them directly would be locally reclaimable.

Also, for what it's worth, the US/Luxembourg tax treaty is not as good for US withholding tax as is the US/Ireland one for funds and ETFs domiciled in these countries. Ireland domiciled ETFs can use the 15% treaty rate on US dividends, but Luxembourg domiciled ones cannot. So in this sense, Ireland domiciled funds are the better ones, and Luxembourg domiciled ones offer no real tax advantage (and potentially a US tax disadvantage for residents of countries with their own US treaty and a 15% rate, to the extent that they hold US stocks).

Topic Author
finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed Mar 06, 2019 8:52 am

TedSwippet wrote:
Sat Mar 02, 2019 4:28 am
Storamin wrote:
Sat Mar 02, 2019 3:32 am
Your allocation to the US is pretty high for a NL based investor. Do you want to invest more towards EU or NL?
A 50-60% VTI allocation to US stock and 40-50% VXUS non-US is nicely in line with global market cap, so in practice there is no US 'tilt' here. VWRL currently holds 53.5% US stocks.

Whether the OP should have an EU or NL 'tilt' is a separate question.
Indeed my goal is to invest inline with the global market cap roughly the same as the Vanguard Total World stock Etf (VT).

I don't think having an EU or NL 'tilt' is wise. What would be the advantages? European indexes didn't grow much in the past 30 years or so, if at all. Of course that doesn't say anything about the future, but I don't think that the European economy will grow more/faster than the US or the rest of the world.

Investing in the whole world is much safer I think, I don't want to have an opinion on which economies do best.

Storamin wrote:
Sat Mar 02, 2019 3:32 am
It seems like a lot of complicated and risky work purchasing these Options... I can't believe that the Ireland/NL tax treaty is so punitive in comparison to US/NL tax treaty. Why not keep it simple... just buy the Ireland or Lux ETF?
It certainly looks like a complicated process, but maybe not risky.
Well, it is a little bit less straightforward than buying the shares right away, but ok, since I do it only once per year or once every two years. I just get my nice VTI and VXUS shares, which is the most important thing. :)

The thing I find most annoying is that that way I cannot buy a fraction of 100 shares. Specially for VTI (Total market) priced at ~140-150, this is a bit of an issue. A stock split would be nice!! :mrgreen:

That's why I use Vanguard FTSE All-World ETF (VWRL) as a "temporary storage". That way I can still invest every month (dollar cost averaging) and when I have enough money I sell it and buy VTI (Total market) + VXUS ( Total International ex US) for the real long term. According to my plans this is once per year or every two years.
Last edited by finrod_2002 on Wed Mar 06, 2019 9:25 am, edited 4 times in total.

Topic Author
finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed Mar 06, 2019 8:52 am

TedSwippet wrote:
Sat Mar 02, 2019 4:28 am
Storamin wrote:
Sat Mar 02, 2019 3:32 am
Your allocation to the US is pretty high for a NL based investor. Do you want to invest more towards EU or NL?
A 50-60% VTI allocation to US stock and 40-50% VXUS non-US is nicely in line with global market cap, so in practice there is no US 'tilt' here. VWRL currently holds 53.5% US stocks.

Whether the OP should have an EU or NL 'tilt' is a separate question.
Indeed my goal is to invest inline with the global market cap roughly the same as the Vanguard Total World stock Etf (VT).

I don't think having an EU or NL 'tilt' is wise. What would be the advantages? European indexes didn't grow much in the past 30 years or so, if at all. Of course that doesn't say anything about the future, but I don't think that the European economy will grow more/faster than the US or the rest of the world.

Investing in the whole world is much safer I think, I don't want to have an opinion on which economies do best.

Storamin wrote:
Sat Mar 02, 2019 3:32 am
It seems like a lot of complicated and risky work purchasing these Options... I can't believe that the Ireland/NL tax treaty is so punitive in comparison to US/NL tax treaty. Why not keep it simple... just buy the Ireland or Lux ETF?
It certainly looks like a complicated process, but maybe not risky.
Well, it is a little bit less straightforward than buying the shares right away, but ok, since I do it only once per year or once every two years. I just get my nice VTI and VXUS shares, which is the most important thing. :)

The thing I find most annoying is that that way I cannot buy a fraction of 100 shares. Specially for VTI (Total market) priced at ~140-150, this is a bit of an issue. A stock split would be nice!! :mrgreen:

That's why I use Vanguard FTSE All-World ETF (VWRL) as a "temporary storage". That way I can still invest every month (dollar cost averaging) and when I have enough money I sell it and buy VTI (Total market) + VXUS ( Total International ex US) for the real long term. According to my plans this is once per year or every two years.

Storamin
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Storamin » Thu Mar 07, 2019 4:32 am

finrod_2002 wrote:
Wed Mar 06, 2019 8:52 am
TedSwippet wrote:
Sat Mar 02, 2019 4:28 am

Whether the OP should have an EU or NL 'tilt' is a separate question.
No - the question is the same. The question is how much should be allocated to different countries or regions.
finrod_2002 wrote:
Wed Mar 06, 2019 8:52 am
Indeed my goal is to invest inline with the global market cap roughly the same as the Vanguard Total World stock Etf (VT).

I don't think having an EU or NL 'tilt' is wise. What would be the advantages? European indexes didn't grow much in the past 30 years or so, if at all. Of course that doesn't say anything about the future, but I don't think that the European economy will grow more/faster than the US or the rest of the world.

Investing in the whole world is much safer I think, I don't want to have an opinion on which economies do best.
The reason to tilt to EU or NL is that you live and will always live in EU or NL. This way your future expenses are matched with the local area and currency where you earn and will spend.

Anyhow, it's just a question. As a EU resident I also have approximately a worldwide split similar to you - but I am also more fluid and may not stay in the EU. If I was from the EU and planning on staying in the EU, I would increase my share above the worldwide % allocation. Bogle himself only wanted some foreign stocks for diversification - he didn't match the worldwide %. Furthermore, EU stocks also have a signficant amount of exposure ex-EU. DAX companies have more revenues in the US than Germany.

DJN
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by DJN » Thu Mar 07, 2019 4:48 am

VT is a good alternative that includes global, EM and small cap. Keep it even simpler.
Yah shure

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by ivk5 » Thu Mar 07, 2019 5:10 am

Worth noting that while there appears to be an estate tax treaty between US & NL (assume OP is familiar with details, I am not) - holding US domiciled ETFs is still a risk if there is a material chance OP may move eventually to another country.

Whether OP is effectively "locked in" to these ETFs by potential capital gains taxes is a question of whether/how NL taxes capital gains, which I'm not familiar with.

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Thu Mar 07, 2019 11:57 am

finrod_2002 wrote: ↑Wed Mar 06, 2019 2:52 pm
TedSwippet wrote: ↑Sat Mar 02, 2019 10:28 am

Whether the OP should have an EU or NL 'tilt' is a separate question.
No - the question is the same. The question is how much should be allocated to different countries or regions.
finrod_2002 wrote: ↑Wed Mar 06, 2019 2:52 pm
Indeed my goal is to invest inline with the global market cap roughly the same as the Vanguard Total World stock Etf (VT).

I don't think having an EU or NL 'tilt' is wise. What would be the advantages? European indexes didn't grow much in the past 30 years or so, if at all. Of course that doesn't say anything about the future, but I don't think that the European economy will grow more/faster than the US or the rest of the world.

Investing in the whole world is much safer I think, I don't want to have an opinion on which economies do best.
The reason to tilt to EU or NL is that you live and will always live in EU or NL. This way your future expenses are matched with the local area and currency where you earn and will spend.

Anyhow, it's just a question. As a EU resident I also have approximately a worldwide split similar to you - but I am also more fluid and may not stay in the EU. If I was from the EU and planning on staying in the EU, I would increase my share above the worldwide % allocation. Bogle himself only wanted some foreign stocks for diversification - he didn't match the worldwide %. Furthermore, EU stocks also have a signficant amount of exposure ex-EU. DAX companies have more revenues in the US than Germany.
Well, it's easy for Bogle to not want international stocks, since his country is 50-60 % of the world stock index. In addition, like Bogle says himself the reason why he doesn't need international stocks is that US companies have an international diversified exposure themself.

But anyway, my philosophy is to own the whole world, so a world index is perfect, because I think that the world as a whole will grow. I don't know what happens with single countries, and I want my stock investments to grow at least 4% per year on average. With an EU tilt I don't see any chance to get that.
VT is a good alternative that includes global, EM and small cap. Keep it even simpler.
Indeed, only thing it is more expensive than VTI + VXUS combined and less diversified (less holdings).
Worth noting that while there appears to be an estate tax treaty between US & NL (assume OP is familiar with details, I am not) - holding US domiciled ETFs is still a risk if there is a material chance OP may move eventually to another country.

Whether OP is effectively "locked in" to these ETFs by potential capital gains taxes is a question of whether/how NL taxes capital gains, which I'm not familiar with.
Luckily most (western) EU countries have an estate tax treaty with US. Of course rules can change in time. Anyway, NL has no capital gain taxes, so in the worst case scenario I can sell my US domiciled funds and buy others.

andrew99999
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by andrew99999 » Thu Mar 07, 2019 9:19 pm

finrod_2002 wrote:
Thu Mar 07, 2019 11:57 am
But anyway, my philosophy is to own the whole world, so a world index is perfect, because I think that the world as a whole will grow. I don't know what happens with single countries, and I want my stock investments to grow at least 4% per year on average. With an EU tilt I don't see any chance to get that.
Even 30 year long periods do not tell a story of the future. When I was looking at Australia vs global, the last 30 years has Australia at over 2% annualised return above global which is astronomical, but over a 50 or 60 year period (I forget which) global was (marginally) ahead so that would mean anyone measuring the previous 20-30 years ending 30 years ago would have said that based on the recent past, investing in Australia was crap and would have gone global and their home country would have grown much more and the global-only investor would have been left very far behind.

What your comment is saying, is that you somehow know more than the entire market that has priced EU equities, and I doubt that is an argument that can be defended.

The USD has also increased the weighting of the US relative to the rest of the world over the past 10 years, and there is a fair chance will back off at some point creating a tailwind instead of a headwind for US valuations.

I am not saying that global cap weighting is necessarily bad. Just that your reasoning for it doesn't seem at all sound. Your arguments for not biasing EU is the same incorrect argument used by people for biasing their home country.
PassiveInvestingAustralia.com

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Fri Mar 08, 2019 2:14 am

I am not saying that global cap weighting is necessarily bad. Just that your reasoning for it doesn't seem at all sound. Your arguments for not biasing EU is the same incorrect argument used by people for biasing their home country.
You are absolutely right. So I have another argument for preferring the world, which probably I haven't emphasized enough, but I was always implying. Much more diversification, than tilting towards an economy of a specific country.

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by andrew99999 » Fri Mar 08, 2019 7:25 am

finrod_2002 wrote:
Fri Mar 08, 2019 2:14 am
I am not saying that global cap weighting is necessarily bad. Just that your reasoning for it doesn't seem at all sound. Your arguments for not biasing EU is the same incorrect argument used by people for biasing their home country.
You are absolutely right. So I have another argument for preferring the world, which probably I haven't emphasized enough, but I was always implying. Much more diversification, than tilting towards an economy of a specific country.
Can't argue against that :beer
PassiveInvestingAustralia.com

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by TVL » Sun May 05, 2019 5:44 am

Very interesting discussing going on here for dutch people!

As a dutch person myself im also looking for the lowest cost, best diversified and most tax efficient way to invest. With the regulations in force now we, unfortunately have less options and most are less tax efficient due to the irish holdings.

So im happy that creative people still do exist :D !

@finrod_2002... is the one time cost of 0,5/0,6% of getting the shares out of options is still less expensive than the X percentage loss on divident with the Irish counterpart (VWRL)? Ofcourse this also depends on how long you are planning to hold the shares, but still...

Which broker do you use in the Netherlands to execute the options? Im now registered at DeGiro.

Best regards and have a nice day everyone!

Thijs

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed May 08, 2019 7:25 am

TVL wrote:
Sun May 05, 2019 5:44 am
@finrod_2002... is the one time cost of 0,5/0,6% of getting the shares out of options is still less expensive than the X percentage loss on divident with the Irish counterpart (VWRL)? Ofcourse this also depends on how long you are planning to hold the shares, but still...
If you consider the dividend leakage VWRL has a total cost of ca. 0.45%. 0.25% TER + 0.2% dividend leakage (on average 10% leakage on 2% dividend).

TER of VTI + VXUS together (with a +/- 50-50 distribution) is: 0.5 * 0.04% + 0.5 * 0.11% = 0.075%. This has to be added with the dividend leakage of VXUS. For a Dutch investor which pays box 3 taxes there is no dividend leakage on VTI. Leakage of VXUS is more or less 6% on average 2% dividend (0.12%) per year.

So the total costs of VTI + VXUS with dividend leakage on VXUS are: 0.075% + 0.12% * 0.5 = 0.135%

So we can say that the total costs calculated with an average dividend of 2% are:

VWRL = 0.45 %
VTI + VXUS ~ 0.15%

If we consider the transaction costs things are getting more complicated. But keep in mind that the percentages above are on the total invested capital and you pay them every year, whereas the transaction costs are one time and only on the sum you're currently investing. Also, the 0.5/0.6% I calculated is kind of a worst case scenario, so you might get better off. Specially if you sell a PUT instead of buying a CALL.

Besides costs, there is another important thing to consider. VWRL is not completely equivalent to VTI + VXUS. In particular VWRL misses small caps. I'm not exactly sure how much small caps you need to add in % to mimic the whole world market. That's why I like VTI + VXUS so much, because that is automatically done. You could also only own VT (Total world) instead of VTI + VXUS, but I know that the combination VTI + VXUS is less expensive and gives you exposure to more stocks which results in even more diversification.

That said I plan to probably switch VTI + VXUS with the ACTIAM (Verantwoord Index Aandelenfonds Wereld)

https://www.actiam.com/nl/fondsoverzich ... ds-wereld/

at some point in the long term (or with another Dutch domiciled fund if a better one comes up). Also here you miss small caps so again you have to add another fund to get those. That's why I hope that at some point we get a real equivalent of VTI + VXUS in Europe for private investors, I don't care if in the form of ETF or fund.

TVL wrote:
Sun May 05, 2019 5:44 am
Which broker do you use in the Netherlands to execute the options? Im now registered at DeGiro.
To execute the options I use Lynx. I'm not sure if DeGiro supports options on american equities and ETFs.

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by ohai » Wed May 08, 2019 7:33 am

"You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options."

1) and 3) yes. 2) no.

OP, if you decide to do options (which seems like too much trouble if you ask me), don't use VTI and VXUS as options are illiquid in these names. The most liquid international ETF options are SPY, EFA and EEM.

2) - Option prices are priced on the no arbitrage future value of the stock. This means that the forward price accounts for projected dividend payments; calls are cheaper, all else equal, and puts are more expensive.

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by YRT70 » Wed May 08, 2019 7:48 am

finrod_2002 wrote:
Wed May 08, 2019 7:25 am
That said I plan to probably switch VTI + VXUS with the ACTIAM (Verantwoord Index Aandelenfonds Wereld) at some point in the long term (or with another Dutch domiciled fund if a better one comes up).
Have you looked at Northern Trust funds? Dutch domiciled, no dividend "leakage" and low TER.

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed May 08, 2019 8:06 am

ohai wrote:
Wed May 08, 2019 7:33 am
"You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options."

1) and 3) yes. 2) no.

OP, if you decide to do options (which seems like too much trouble if you ask me), don't use VTI and VXUS as options are illiquid in these names. The most liquid international ETF options are SPY, EFA and EEM.

2) - Option prices are priced on the no arbitrage future value of the stock. This means that the forward price accounts for projected dividend payments; calls are cheaper, all else equal, and puts are more expensive.
Please read the entire thread, since I'm not interested in the options, but only in the underlying. This is only a vehicle, a way, to eventually get the underlying, VTI and VXUS in my case. So what I do is buying the options as close as possible to expiration and executing them right away.

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed May 08, 2019 8:13 am

YRT70 wrote:
Wed May 08, 2019 7:48 am
finrod_2002 wrote:
Wed May 08, 2019 7:25 am
That said I plan to probably switch VTI + VXUS with the ACTIAM (Verantwoord Index Aandelenfonds Wereld) at some point in the long term (or with another Dutch domiciled fund if a better one comes up).
Have you looked at Northern Trust funds? Dutch domiciled, no dividend "leakage" and low TER.
As far as I know you get it with Meesman and the TER is 0.5%. Not too bad, but also not too good. Also the dividend leakage is not exactly 0, but according to Meesman around 2-5%.

Is there also another way to get to those funds apart via Meesman?

ohai
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by ohai » Wed May 08, 2019 8:34 am

finrod_2002 wrote:
Wed May 08, 2019 8:06 am
ohai wrote:
Wed May 08, 2019 7:33 am
"You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options."

1) and 3) yes. 2) no.

OP, if you decide to do options (which seems like too much trouble if you ask me), don't use VTI and VXUS as options are illiquid in these names. The most liquid international ETF options are SPY, EFA and EEM.

2) - Option prices are priced on the no arbitrage future value of the stock. This means that the forward price accounts for projected dividend payments; calls are cheaper, all else equal, and puts are more expensive.
Please read the entire thread, since I'm not interested in the options, but only in the underlying. This is only a vehicle, a way, to eventually get the underlying, VTI and VXUS in my case. So what I do is buying the options as close as possible to expiration and executing them right away.
You're still going to want to avoid those ETF options you mentioned. Have you looked at screens? VTI is $1.00 wide and SPY is $0.01 wide for May maturity. I am a professional options trader and am trying to be helpful here.

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed May 08, 2019 8:53 am

ohai wrote:
Wed May 08, 2019 8:34 am
finrod_2002 wrote:
Wed May 08, 2019 8:06 am
ohai wrote:
Wed May 08, 2019 7:33 am
"You are paying the volatility premium, and you are not getting the dividends, and you are paying the spread on the options."

1) and 3) yes. 2) no.

OP, if you decide to do options (which seems like too much trouble if you ask me), don't use VTI and VXUS as options are illiquid in these names. The most liquid international ETF options are SPY, EFA and EEM.

2) - Option prices are priced on the no arbitrage future value of the stock. This means that the forward price accounts for projected dividend payments; calls are cheaper, all else equal, and puts are more expensive.
Please read the entire thread, since I'm not interested in the options, but only in the underlying. This is only a vehicle, a way, to eventually get the underlying, VTI and VXUS in my case. So what I do is buying the options as close as possible to expiration and executing them right away.
You're still going to want to avoid those ETF options you mentioned. Have you looked at screens? VTI is $1.00 wide and SPY is $0.01 wide for May maturity. I am a professional options trader and am trying to be helpful here.
Ok, thanks for that. Still I don't understand why I should care? If my goal is to buy one option per year to get my 100 VTI share and hold them for the next 30 years when I go to pension?

YRT70
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by YRT70 » Wed May 08, 2019 9:10 am

finrod_2002 wrote:
Wed May 08, 2019 8:13 am
As far as I know you get it with Meesman and the TER is 0.5%. Not too bad, but also not too good. Also the dividend leakage is not exactly 0, but according to Meesman around 2-5%.

Is there also another way to get to those funds apart via Meesman?
ABN, ING, Rabo, Binck fund coach, maybe some other options. They involve service fees but the service fee is limited to a fixed amount at Binck and Rabo, this can work out cheaper for large amounts.

Morningstar mentions a TER of 0.15% on the World fund. On how much dividend leakage it has I'm not sure.

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Thu May 09, 2019 6:41 am

YRT70 wrote:
Wed May 08, 2019 9:10 am
finrod_2002 wrote:
Wed May 08, 2019 8:13 am
As far as I know you get it with Meesman and the TER is 0.5%. Not too bad, but also not too good. Also the dividend leakage is not exactly 0, but according to Meesman around 2-5%.

Is there also another way to get to those funds apart via Meesman?
ABN, ING, Rabo, Binck fund coach, maybe some other options. They involve service fees but the service fee is limited to a fixed amount at Binck and Rabo, this can work out cheaper for large amounts.

Morningstar mentions a TER of 0.15% on the World fund. On how much dividend leakage it has I'm not sure.
As far as I can see from Morningstar the domicile is Ireland and not the Netherlands at least not for the World fund. Also it doesn't include small caps. So I don't think it is exactly an equivalent of VTI (total market) + VXUS (total market ex US) or VT (total world). So it would be necessary to add a small cap fund to mimic the whole world market.

YRT70
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by YRT70 » Thu May 09, 2019 11:09 am

finrod_2002 wrote:
Thu May 09, 2019 6:41 am
As far as I can see from Morningstar the domicile is Ireland and not the Netherlands at least not for the World fund. Also it doesn't include small caps. So I don't think it is exactly an equivalent of VTI (total market) + VXUS (total market ex US) or VT (total world). So it would be necessary to add a small cap fund to mimic the whole world market.
It is Netherlands based: http://www.morningstar.nl/nl/funds/snap ... F00000VSM9

It tracks the MSCI World Custom ESG Index. It does not contain small caps or emerging markets. They have a separate emerging markets fund.

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Thu May 09, 2019 2:56 pm

YRT70 wrote:
Thu May 09, 2019 11:09 am
finrod_2002 wrote:
Thu May 09, 2019 6:41 am
As far as I can see from Morningstar the domicile is Ireland and not the Netherlands at least not for the World fund. Also it doesn't include small caps. So I don't think it is exactly an equivalent of VTI (total market) + VXUS (total market ex US) or VT (total world). So it would be necessary to add a small cap fund to mimic the whole world market.
It is Netherlands based: http://www.morningstar.nl/nl/funds/snap ... F00000VSM9

It tracks the MSCI World Custom ESG Index. It does not contain small caps or emerging markets. They have a separate emerging markets fund.
Interesting, but by looking at the factsheet I'm not comfortable with the sentence:
The Fund is a feeder fund, which will invest 85% or more of its assets permanently in Northern Trust World
Custom ESG Equity Index Fund (Master Fund), a sub-fund of Northern Trust UCITS Common Contractual Fund.
The Master Fund seeks to closely match the risk and return characteristics of MSCI World Custom ESG Index
(Index) with net dividends reinvested.
What is a master/sub-fund construction? Also, the master fund is accumulating and the subfond is distributing. What does that mean?

By looking at the Kiid I found what happens to the remaining 15%:
The
Fund may invest up to 15% of net assets in aggregate in ancillary liquid assets
including cash deposits, cash equivalents, certificates of deposits and Money
Market Instruments which may be held by the Fund to meet expenses or pending
investment
Does that mean that up to 15% of my invested money is put in cash equivalent instruments? I don't feel really ok with that.

And that's why I love the total market Vanguard funds so much. Simple and straightforward.

YRT70
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by YRT70 » Fri May 10, 2019 7:48 am

finrod_2002 wrote:
Thu May 09, 2019 2:56 pm
What is a master/sub-fund construction?
I think they choose this construction to offer both the efficiency of a large fund as well as the tax advantage to Dutch investors.

From what I've read they reinvest dividend (fund documentation & Morningstar).
The Fund may invest up to 15% of net assets in aggregate in ancillary liquid assets
including cash deposits, cash equivalents, certificates of deposits and Money
Market Instruments which may be held by the Fund to meet expenses or pending
investment
99.46% of the assets is invested in stocks, while iShares IWDA is 99.38% invested in stocks. It's not something I'd worry about.
And that's why I love the total market Vanguard funds so much. Simple and straightforward.
If Vanguard had an easy option to avoid dividend leakage of ~0.25% I'd probably go with Vanguard. At the moment they don't so I'll probably go with the Northern Trust funds. I wouldn't be surprised if Vanguard is working on a solution because I expect they're losing a lot of Dutch customers. 0.25% difference compounded over decades can become pretty significant.

The Northern Trust fund doesn't lend out stocks, as opposed to Vanguard by the way.

The fact that the 3 largest Dutch banks are offering these funds is probably also an indicator of their reliability (all though by no means conclusive).

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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by sean.mcgrath » Thu Nov 07, 2019 5:16 am

finrod_2002 wrote:
Wed Mar 06, 2019 8:52 am
The thing I find most annoying is that that way I cannot buy a fraction of 100 shares. Specially for VTI (Total market) priced at ~140-150, this is a bit of an issue. A stock split would be nice!! :mrgreen:
Hi finrod,
Thank your for the post, it is an interesting approach (and a nice potential backup plan for me). Re. the 100 shares per call option. If you want to buy, say, fifty shares, why don't you just sell fifty and use the money for the rest of the call? Some transaction costs, but does not seem that bad.

cheers,
Sean

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Sun Nov 10, 2019 3:02 pm

sean.mcgrath wrote:
Thu Nov 07, 2019 5:16 am
finrod_2002 wrote:
Wed Mar 06, 2019 8:52 am
The thing I find most annoying is that that way I cannot buy a fraction of 100 shares. Specially for VTI (Total market) priced at ~140-150, this is a bit of an issue. A stock split would be nice!! :mrgreen:
Hi finrod,
Thank your for the post, it is an interesting approach (and a nice potential backup plan for me). Re. the 100 shares per call option. If you want to buy, say, fifty shares, why don't you just sell fifty and use the money for the rest of the call? Some transaction costs, but does not seem that bad.

cheers,
Sean

I think in my case (as non US citizen and no relationships at all with US) it's more cost effective to avoid the extra transactions cost in selling the shares.

What I'm doing now is temporarily storing my money in the Irish Vanguard FTSE All-World UCITS ETF using dollar cost averaging. With de Giro broker there are no transaction costs on that ETF. When I saved enough I sell it and buy VTI and VXUS and try to keep it roughly around 55% VTI and 45% VXUS. I periodically look at VT (Total World) to see if the proportions are still roughly ok.

Henry Curtmantle
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Henry Curtmantle » Mon Nov 11, 2019 3:35 pm

I am a Dutch resident and I still can purchase US-based ETFs via Interactive broker. So, to OP: maybe it's a broker thing?

True, I recently moved in the Netherlands, from a country outside the EU, where it is allowed to buy US-based ETFs. But I told Interactive broker about my new residence and they validated it. So it's a bit weird that I can still buy US products... I buy Vanguard total world stock ETF, VT.

Are there other Dutch people who are IB clients who can purchase US based ETFs ?

Zilvervloot
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Zilvervloot » Tue Nov 12, 2019 6:30 am

I am also using options to invest (receive shares) in VTI and VXUS and still think it is a great idea, given the Dutch tax and inheritance treaties with the US. You can read more about the latter in https://www.trackerbelegger.nl/ (in Dutch). It still poses a risk though because I cannot oversee all the risks of investing in US etf's.
Given the new tax rules in 2022 it might be better to invest in futures or options in the future instead of etf's, but we wil have to see until it passes parliament.

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finrod_2002
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Tue Nov 12, 2019 10:41 am

Zilvervloot wrote:
Tue Nov 12, 2019 6:30 am
I am also using options to invest (receive shares) in VTI and VXUS and still think it is a great idea, given the Dutch tax and inheritance treaties with the US. You can read more about the latter in https://www.trackerbelegger.nl/ (in Dutch). It still poses a risk though because I cannot oversee all the risks of investing in US etf's.
Given the new tax rules in 2022 it might be better to invest in futures or options in the future instead of etf's, but we wil have to see until it passes parliament.
Yes, I read almost everything on https://www.trackerbelegger.nl/, very useful... :beer :beer

What do you think could be possible risks of investing in US ETFs besides the estate tax which is shielded by the estate tax treaty between the Netherlands and US (as far as I know?)

Zilvervloot
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Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Zilvervloot » Wed Nov 13, 2019 3:57 am

The thing is I just don't know what the extra risks are. Maybe capital restrictions if things go really sour between the US and Europe/Netherlands, but you would see that coming. I do not see really good alternatives in the Netherlands for VTI/VXUS. I have some doubts about Actiam, because they have Chinese shareholders (Anbang). VanEck might be interesting with the Global Equal Weight fund with a TER of 0,16%. Both should solve the dividend leakage. Paying 0,5% to Meesman is just ridiculous.

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finrod_2002
Posts: 28
Joined: Fri Feb 15, 2019 6:04 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Wed Nov 13, 2019 8:04 am

Zilvervloot wrote:
Wed Nov 13, 2019 3:57 am
The thing is I just don't know what the extra risks are. Maybe capital restrictions if things go really sour between the US and Europe/Netherlands, but you would see that coming. I do not see really good alternatives in the Netherlands for VTI/VXUS. I have some doubts about Actiam, because they have Chinese shareholders (Anbang). VanEck might be interesting with the Global Equal Weight fund with a TER of 0,16%. Both should solve the dividend leakage. Paying 0,5% to Meesman is just ridiculous.
I think a valid alternative are the Northern Trust funds, which are the ones that Meesman uses. You can buy them directly via ABN Amro, Rabobank and ING. Still VTI + VXUS have small caps already included and the Northern Trust funds don't.

Have you already read the following thread on reddit ? There is a nice overview of all the costs and different options available for Dutch investors with all the costs included.

Below a brief summary
combination total costs (including dividend leakage, internal transaction costs, TER, security lending)
VWRL 0.569% (old costs, now Vanguard reduced the TER if I remember correctly)
VT 0.263%
VTI + VXUS 55/45 0.121%
IWDA + EMIM 85/15 0.447%
Northern trust 85/15 0.189%
meesman 0.524%
AVIAW + EMIM 85/15 0.241%%

Zilvervloot
Posts: 14
Joined: Fri Jun 01, 2018 3:00 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by Zilvervloot » Mon Nov 18, 2019 6:35 am

Great overview, although for the Northern Trust you have to pay for an account at one of the big banks right? So that adds around 0,2%.

Topic Author
finrod_2002
Posts: 28
Joined: Fri Feb 15, 2019 6:04 am

Re: European, dutch investor here: Is investing in VTI and VXUS still a good choice?

Post by finrod_2002 » Mon Nov 25, 2019 9:14 am

Zilvervloot wrote:
Mon Nov 18, 2019 6:35 am
Great overview, although for the Northern Trust you have to pay for an account at one of the big banks right? So that adds around 0,2%.
That's correct for the Northern Trust you have indeed to add around 0,2% of bank fees.

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