EU investing

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Euflag.jpg This page deals specifically with investing in the European Union

EU investing shows how you can apply the Bogleheads investment philosophy if you live in the European Union (EU). You must be aware of a few things described below

US domiciled funds distribute their income periodically, and you must pay withholding tax to the US government. There may be other tax-related problems with US domiciled funds, depending on your country of residence. In short, US domiciled funds aren't designed for investors from the EU.

There aren’t enough 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 (enter keywords into the search field, such as "REIT", "emerging markets", "MSCI ACWI" etc. or use the advanced search function). 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 in these documents. For example, UK citizens should investigate whether the chosen ETF has "UK Reporting Status" or not, French citizens should look for "Plan d'Épargne en Actions" (PEA) eligibility etc.

Some of the country pages in the Non-US domiciles in this 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.

This page is not intended for US (tax) resident investors, as their situation is very specific.

Example of EU domiciled ETF providers

Fig.1.Brussels Euronext Exchange
EU Domiciled Providers
Provider Website
Amundi ETF link
BlackRock iShares link
Deutsche Bank db X-trackers link
HSBC ETFs link
Lyxor ETF link
SPDR ETFs Europe link
Vanguard UK link

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

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.

As an unfortunate side-effect, it becomes difficult or even impossible for residents of the EU community to purchase US-domiciled funds.

Accumulating/capitalizing vs. distributing ETF share classes

One of the bigger differences between US domiciled ETFs and EU domiciled ETFs is that EU domiciled ETFs can reinvest the received dividends/interests, without distributing them. As such, in some countries, dividends are not taxed.

Base currency vs. trading currency vs. currency of the underlying asset

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.

Sample Portfolios

There are many Boglehead inspired portfolios that can be created. Here below are some EU investor portfolio examples for both accumulating and for distributing portfolios. 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.

Suggested Portfolio 1 - accumulating
Name
ISIN
Description and comments
base currency
TER Exchange/Trading currency/Ticker
Bonds
iShares Global Aggregate Bd ETF HAcc
IE00BDBRDM35
Global aggregate
hedged (€) †
USD
0.10% LSE+XSWX/EUR/AGGH
XTER+FRA/EUR/EUNA
Equity
iShares Core MSCI World ETF USD Acc
IE00B4L5Y983
Global, developed markets
Large+Mid
USD
0.20% LSE/USD/IWDA
XTER+FRA/EUR/EUNL
MIL/EUR/SWDA
XAMS/EUR/IWDA
LSE/GBP/SWDA
XSWX/USD/SWDA
iShares Core MSCI EM IMI ETF USD Acc
IE00BKM4GZ66
Emerging mkts
IMI : Large+mid+small
USD
0.18% LSE+XSWX/USD/EIMI
XTER+FRA/EUR/IS3N
MIL/EUR/EIMI
XAMS/EUR/EMIM
LSE/GBP/EMIM
Optional
iShares MSCI World Small Cap ETF USD Acc
IE00BF4RFH31
MSCI World developped markets
Small Cap
USD
0.35% LSE/USD/WSML
XTER+FRA/EUR/IUSN
LSE/GBP/WLDS
Suggested Portfolio 2 - distributing
Name
ISIN
Description and comments
base currency
TER Exchange/Trading currency/Ticker
Bonds
iShares Global Govt Bond UCITS ETF GBP Hedged
IE00BDFK3H31
World dev, govt
hedged (£) †
USD
0.2% London/GBP/IGLH
Stocks
Vanguard FTSE All-World UCITS ETF
IE00B3RBWM25
World dev+em
large+mid
USD
0.25% LSE/USD/VWRD
LSE/GBP/VWRL
AMS/EUR/VWRL
FRA+XTER/EUR/VWRL
XSWX/CHF/VWRL
CHIX/CHF/VWRLz

† For AGGH, hedging to the Euro is reasonable for investors whose future financial liabilities will be dominated by the Euro. For others, or where the local currency is pegged to the US dollar, possible alternatives are AGGU, accumulating and hedged to US dollar, and AGGG, distributing and unhedged. For IGLH, if hedging to UK Sterling is undesirable then an alternative is IGLO, distributing and unhedged.

Dividend taxation

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.

Net total return vs. gross total return index

Securities lending

Index tracking strategies

Notes

See also

References

Further reading

External links