EU investing

🇪🇺 EU investing shows how you can apply the Bogleheads investment philosophy if you live in the European Union (EU). In addition to the topics described in the Bogleheads® investing start-up kit for non-US investors and Index funds and ETFs outside of the US you must be aware of a few things described below.

A person's domicile is often the determining factor for many legal aspects, including investing and taxation. Investment funds also have a domicile, and here this too determines the applicable legislation, including taxation.

Introduction
European MiFID II and PRIIPs regulations make it difficult or even impossible for residents of the EU community to purchase funds domiciled outside of the EU. See below for more.

There are few low-cost index mutual funds available in the EU, but there are a lot of index exchange-traded funds (ETFs) available. You can find all the ETFs available in the EU at etfinfo.com. These ETFs are usually domiciled in Ireland or Luxembourg. You should consult with your tax advisor before investing in ETFs. You must carefully read the Key Investor Information Document (KIID) and the prospectus of each ETF you choose. Look for important tax-related information such as registration and reporting in these documents.

The same ETF can have different share classes, and can be listed on several different stock exchanges in different currencies. Look for the ISIN code as unique identifier together with the name. Funds with different trading currency will have a different ticker if traded on the same exchange. If the fund is trading on different exchanges then it may or may not have the same ticker.

Some of the country pages in the Non-US domiciles wiki category contain sample portfolios or suggestions for (ETF) funds. While these can be taken to draft a first portfolio it is good to post a question on the forum as every country is different and the recommendation might change over time.

Non-EU domiciled funds
A European investor purchasing non-EU domiciled funds needs to validate the practical aspects of such a fund.

For example, US domiciled funds distribute their income periodically, and you must pay withholding tax to the US government. Depending on your country of residence, there may be other tax-related problems with US domiciled funds, for example US estate tax on holdings above just $60,000. In short, US tax policy can make US domiciled funds unattractive to EU investors.

EU domiciled ETF providers


The following are the major companies that provide EU domiciled ETFs. This list is not exhaustive.

EU domiciled ETF exchanges
The following stock exchanges are the primary ones for trading EU domiciled ETFs. This list is not exhaustive.

EU legislation : UCITS, MiFID II and PRIIPs
While every EU country has its own legislation there are a number of EU guidelines that most EU countries implement:
 * UCITS
 * MiFID II
 * PRIIPs

UCITS (Undertakings for Collective Investment in Transferable Securities Directive) is an EU directive that allows mutual funds and ETFs to operate freely throughout the EU on authorisation from a single member state.

Since 2018, the European MiFID II (Markets in Financial Instruments Directive) and PRIIPs (Packaged Retail and Insurance-based Investment Products) have become effective. The goal of this legislation is to protect the individual investor.

PRIIPs requires a retail investment product such as an ETF to provide a Key Information Document in a clear and relatively tightly specified format. US domiciled funds and ETFs do not currently produce such documents, and because the EU is not a primary market for them, few if any have indicated that they will do so. Products lacking these documents cannot be offered to EU investors.

As a result, it is now difficult or even impossible for residents of the EU community to purchase US domiciled funds. Shares purchased before the regulation came into effect can be kept and sold, but EU residents can generally no longer buy new shares of these funds or ETFs.

Index funds and ETFs outside of the US
Index funds and ETFs were first created in the US and are now widely available outside of the US.

Depending on the domicile of the fund it is subject to local legislation leading to local differences. Notable characteristics that are explained in the main article on index funds and ETFs outside of the US, are:
 *  Differences between accumulating (or capitalizing) and distributing ETF share classes
 *  Differences between base currency of the fund, trading currency of the fund, and currency of the underlying assets. The same ETF can have different share classes, and can be listed on several different stock exchanges in different currencies. Look for the ISIN code as unique identifier together with the name.
 * Securities lending
 * Index tracking strategies: replication or synthetic
 * Net total return and gross total return index
 * Cost and expenses related to UCITS index funds and ETFs
 * Investors that hold funds that hold securities are taxed at multiple levels: level of the asset, level of the fund, level of the investor. Depending on the situation of the individual investor, one can optimize the taxation.

Sample portfolios
There are many Boglehead inspired portfolios that can be created. Here below are some EU investor fund examples that are suitable for both accumulating and for distributing portfolios. Where available, funds from both iShares and Vanguard are shown. Multiple choices are provided for the bond funds both in the accumulating and the distributing lists.

Two main approaches to investing for non-US retail investors are considered:


 * Simple portfolios
 * Complex portfolios

Simple portfolios
The simplest portfolios are based on using index funds (mutual funds - where these are easily available or the corresponding ETFs) to build a low-cost portfolio with a small number of funds that are easy to re-balance and follow the spirit and principles of the Bogleheads® approach.

Complex portfolios
Investors may wish to move beyond simple three, four or five-component portfolios and either include additional components; slice and dice existing components; or purchase individual stocks and bonds.

Lists of ETF funds
The investor will need to assess their risk appetite and other criteria and decide which particular global bond fund ETF suits their purposes. The more cautious investor might choose to invest in one of the government ETFs or alternatively invest in an aggregate version.

The Xtrackers global bond ETF (DBZB) is domiciled in Luxembourg and the investor should review the tax arrangements in their home country in this regard.

Please also review the country specific pages.

These examples should be checked for best fit in the investor's particular tax domicile as noted above and also to align with the investor's optimal costs.