Author Topic: Investing in Europe  (Read 1454 times)

a532942

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Investing in Europe
« on: June 07, 2017, 10:26:49 AM »
I am a 23 year old PhD student in the UK, from Spain.
I have decided that I will not be staying in the UK after these three years, so it is more practical for me to keep my savings in euros, so I will be transferring my money to Spain. I don't pay any tax in the UK out of my scholarship, because I am a student.
Because I am just starting, I cannot invest directly in a Vanguard fund (they require 100000 dollars minimum), so after much looking, I found the company Indexa Capital, which is the only company that I found that allows me to invest in low cost index funds (although they force you to buy several index funds with bonds, because the funds are bought automatically).
From what I understand, Spain does not tax unrealized capital gains, and neither does the UK. There won't be much gains in this time, but do i need to declare hese gains? if so, where?
Also, when I move to some other european country, would I have problems with the taxes because I invest money in another country?

If somebody has found good tools to invest in Spain, with little money (less than 10,000 euros), it would be nice to hear about that, too.

nugget

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: Investing in Europe
« Reply #1 on: June 08, 2017, 01:34:25 AM »
check out Interactive Brokers https://www.interactivebrokers.com/en/home.php

it works well for the swiss mustachian community, giving you access to all the vanguard index funds in form of their ETF-Versions https://investor.vanguard.com/etf/list#/etf/asset-class/month-end-returns whcih should cover most of your investment desires :) minimum is always one share, typically between $50 and $200.

they have unmatched low costs, at least compared to any swiss based brokerage.

your account will probably be with IB London.

a532942

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Investing in Europe
« Reply #2 on: June 09, 2017, 01:15:13 AM »
Quote
check out Interactive Brokers https://www.interactivebrokers.com/en/home.php

I checked it out, and the require a minimum of 10,000 dollars account (and I don't even have that yet, as I said, I have less than 10,000 euros in my account).
It also charges 10 dollars/month minimum. It may be reasonable when you have a good salary and you save and invest a lot of money every month, but I right now (I just finished my studies, so it is my first long lasting 'job'), I save about 5000 gbp/year.
How much money do you have to save so these charges become reasonable?

FrugalByChance

  • 5 O'Clock Shadow
  • *
  • Posts: 10
  • Age: 44
  • Location: The Netherlands
    • Net Worth Progress
Re: Investing in Europe
« Reply #3 on: June 09, 2017, 04:39:12 AM »
Another option is DeGiro (https://www.degiro.es/ or https://www.degiro.co.uk/ ). I have a Dutch account with them. No minimum required account balance. Some ETFs can be traded once a month without fees (https://www.degiro.es/data/pdf/es/lista-etfs-con-operativa-gratuita.pdf), so perfect for buy-and-hold investing.
« Last Edit: June 09, 2017, 12:50:04 PM by FrugalByChance »
--It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult.
--  Lucius Annaeus Seneca
My Net Worth

a532942

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Investing in Europe
« Reply #4 on: June 09, 2017, 05:36:02 AM »
Quote
Another option is DeGiro (https://www.degiro.es/ or https://www.degiro.co.uk/ ).

Thanks! I will definitely look into that. Seems like I would pay no fees at all!
How do you balance your investments, to make sure you buy a diversifiedset of ETFs? I think it would probably be a good idea to invest into American and european market ETFs, but I am new to this, so I am figuring this on the go (otherwise I would suffer from analysis paralysis).

daverobev

  • Magnum Stache
  • ******
  • Posts: 2668
  • Location: Canada
Re: Investing in Europe
« Reply #5 on: June 09, 2017, 02:21:02 PM »
Quote
Another option is DeGiro (https://www.degiro.es/ or https://www.degiro.co.uk/ ).

Thanks! I will definitely look into that. Seems like I would pay no fees at all!
How do you balance your investments, to make sure you buy a diversifiedset of ETFs? I think it would probably be a good idea to invest into American and european market ETFs, but I am new to this, so I am figuring this on the go (otherwise I would suffer from analysis paralysis).

You need to work out your own risk tolerance, then your asset allocation.

Depending on your age and so on, you may or may not want bonds (some is almost always recommended, even 10%).

So, say: 10% bonds, 30% US, 30% EAFE, 10% emerging.. it won't be perfect but it'll probably be ok. EAFE is Europe/Australasia/Far East... you could just do the Eurofirst 300 or something similar.. as long as it holds a decent amount of companies in lots of sectors, and has a low MER/TER. Same with the US - you want a total market fund if possible, S&P500 if you can't get something with 2000+ stocks in.
Lending Loop - Peer to Peer Lending for Canadians - $25 sign up bonus

My current yield is about 13%, but who knows. Loans do go bad. Caveat Emptor and all that.

a532942

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Investing in Europe
« Reply #6 on: June 11, 2017, 05:22:44 PM »
Does anybody know whether I would directly own the shares?
In a lot of cheap/free traders, this is managed by the so called 'omnibus accounts' where the bank own the shares and transfers ownership by reshuffling ownership between the different people in the same bank. i think that for really long term investing, having your shares owned by the bank may be risky (as the Banco popular proves). Because the Fondo de Garantia de ingresos would pay you back the money back ''in a period of 15 days to 10 years''.

I could not clearly discern that from the webpage.

daverobev

  • Magnum Stache
  • ******
  • Posts: 2668
  • Location: Canada
Re: Investing in Europe
« Reply #7 on: June 11, 2017, 06:12:51 PM »
Does anybody know whether I would directly own the shares?
In a lot of cheap/free traders, this is managed by the so called 'omnibus accounts' where the bank own the shares and transfers ownership by reshuffling ownership between the different people in the same bank. i think that for really long term investing, having your shares owned by the bank may be risky (as the Banco popular proves). Because the Fondo de Garantia de ingresos would pay you back the money back ''in a period of 15 days to 10 years''.

I could not clearly discern that from the webpage.

Only in very rare circumstances does an individual have their actual name on a share. AFAIK in no brokerage would you be the named owner.

It's not risky for 'the bank' to have 'ownership' because... they don't. You own it. It's a totally separate account, segregated from the bank's funds.

But in a brokerage, shares are fungible - you own "100 shares" but not "those 100 shares". Just like you have, in a bank account, $100, but not 5 x $20 with these serial numbers... (and moreso because your $100 IS in the bank's general funds, where the 100 shares are not).

I may be missing something in your question or situation though, this is just general knowledge about brokerage accounts. There are such things as "swap based" ETFs and mutual funds generally that don't own anything, they just have an agreement with a counterparty to track an index. THAT I don't like the sound of. I don't even like 'partial replication' ETFs. I'd much rather own an ETF that owns the things in the index.

You have very indirect ownership in an ETF (that is full replication), but ownership nonetheless.
Lending Loop - Peer to Peer Lending for Canadians - $25 sign up bonus

My current yield is about 13%, but who knows. Loans do go bad. Caveat Emptor and all that.

patrickza

  • Bristles
  • ***
  • Posts: 469
  • Age: 38
    • The Investor Challenge
Re: Investing in Europe
« Reply #8 on: June 12, 2017, 08:49:01 AM »
Another option is DeGiro (https://www.degiro.es/ or https://www.degiro.co.uk/ ). I have a Dutch account with them. No minimum required account balance. Some ETFs can be traded once a month without fees (https://www.degiro.es/data/pdf/es/lista-etfs-con-operativa-gratuita.pdf), so perfect for buy-and-hold investing.
One very very VERY important point with DeGiro, make sure you apply for a custody account. If you don't, they'll use your holdings for shorting, they'll claim the profit and you'll take the risk!

daverobev

  • Magnum Stache
  • ******
  • Posts: 2668
  • Location: Canada
Re: Investing in Europe
« Reply #9 on: June 12, 2017, 09:06:33 AM »
Another option is DeGiro (https://www.degiro.es/ or https://www.degiro.co.uk/ ). I have a Dutch account with them. No minimum required account balance. Some ETFs can be traded once a month without fees (https://www.degiro.es/data/pdf/es/lista-etfs-con-operativa-gratuita.pdf), so perfect for buy-and-hold investing.
One very very VERY important point with DeGiro, make sure you apply for a custody account. If you don't, they'll use your holdings for shorting, they'll claim the profit and you'll take the risk!

You don't take any risk. Most brokerages (AFAIK) have it as part of their t's & c's that they may lend out 'your' shares to shorters.

You still own what you own. If the shorter AND the brokerage went bankrupt, I'm pretty sure most countries would have government insurance backing you.

More likely to be run over by a bus.
Lending Loop - Peer to Peer Lending for Canadians - $25 sign up bonus

My current yield is about 13%, but who knows. Loans do go bad. Caveat Emptor and all that.

patrickza

  • Bristles
  • ***
  • Posts: 469
  • Age: 38
    • The Investor Challenge
Re: Investing in Europe
« Reply #10 on: June 12, 2017, 10:24:56 AM »
Check the Ts and C's of Degiro very carefully. They are different. After many complaints they launched the custody accounts. They now have two account types and let you choose between them.

daverobev

  • Magnum Stache
  • ******
  • Posts: 2668
  • Location: Canada
Re: Investing in Europe
« Reply #11 on: June 12, 2017, 10:59:57 AM »
Check the Ts and C's of Degiro very carefully. They are different. After many complaints they launched the custody accounts. They now have two account types and let you choose between them.

Interesting! Ok, I bow to your superior knowledge.
Lending Loop - Peer to Peer Lending for Canadians - $25 sign up bonus

My current yield is about 13%, but who knows. Loans do go bad. Caveat Emptor and all that.

PapaBear

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: Investing in Europe
« Reply #12 on: June 13, 2017, 12:23:23 PM »
You might find this blog post helpful: https://jeangalea.com/finding-best-buy-hold-stock-broker-spain/
It is written from the perspective of an American expat in Spain, but I guess it covers most of the relevant bases.

Please note that DeGiro might not be the most comfortable solution, since they don't report to the Spanish tax authorities and you might need to declare your assets to Spanish authorities (using modelo 720 tax form). This might not be relevant now, in case you are only taxable in the UK, but might be a hassle later when you move back.

In terms of investment strategy:
- As another poster has already mentioned, first figure out your asset and risk allocation (e.g., 30% low risk, 70% higher risk)
- For the low risk part, I would just use a current deposit account for the moment and start thinking about bonds when your portfolio reaches other dimensions
- For the higher risk part, I would just invest in a cheap ETF replicating the MSCI World index. It is broadly diversified, should be available at low cost and you can always add other ETFs when you have more money in your accounts (the rationale behind this is that you will be most likely paying small fees for every transaction. For low investment amounts, these are usually fixed, e.g. 5-10 EUR/transaction. The more ETF you buy, the more fees will rack up. With the MSCI World, you have already covered most of the industrialized countries and more that 1500 companies. Additionally, this index is so common, that there should be plenty of ETF with low TER = Total expense ratio)
- Always keep in mind that you might be able to lower the transaction cost by combining purchases - e.g. instead of buying your ETF monthly, you can buy them bi-monthly or quarterly and save transaction cost
 
« Last Edit: June 13, 2017, 12:38:04 PM by PapaBear »

Chairman

  • 5 O'Clock Shadow
  • *
  • Posts: 48
Re: Investing in Europe
« Reply #13 on: September 07, 2017, 12:38:20 AM »
The level of insurance/asset protection in these brokers is a bit worrying.

In the US we have FDIC insurance of up to $250,000 per account. If you have a million bucks you can split it across three or four banks and voila you are safe.

These EU brokers, on the other hand have low limits: $20,000, $100,000 etc. Where can you safely buy-and-hold a million bucks worth of ETFs or index funds? Then there's this alarming business of them loaning out your damn stock for their own gain. (I guess that's why they can keep their fees so low, but still, it's worrying.)

I have almost all my investments with Vanguard in the US. I don't know if they have insurance, but hey, it's Vanguard; seems like they are not going anywhere. They manage trillions in assets.

But the prospect of investing in Europe scares the crap out of me.

UncleX

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Investing in Europe
« Reply #14 on: September 07, 2017, 03:05:47 AM »
The level of insurance/asset protection in these brokers is a bit worrying.

In the US we have FDIC insurance of up to $250,000 per account. If you have a million bucks you can split it across three or four banks and voila you are safe.

These EU brokers, on the other hand have low limits: $20,000, $100,000 etc. Where can you safely buy-and-hold a million bucks worth of ETFs or index funds? Then there's this alarming business of them loaning out your damn stock for their own gain. (I guess that's why they can keep their fees so low, but still, it's worrying.)

I have almost all my investments with Vanguard in the US. I don't know if they have insurance, but hey, it's Vanguard; seems like they are not going anywhere. They manage trillions in assets.

But the prospect of investing in Europe scares the crap out of me.

I'm not from the U.S., so correct me if I'm wrong, but according to https://www.fdic.gov/deposit/deposits/faq.html stocks and bonds are not covered:

Investment products that are not deposits, such as mutual funds, annuities, life insurance policies and stocks and bonds are not covered by FDIC deposit insurance.

It's the same in the E.U., money in saving and checking accounts is covered, money in stocks and bonds isn't. The minumum covered amount is 100,000 euro, it can be more but never less.

It isn't scarier to invest in the E.U. than it is in the U.S.
« Last Edit: September 07, 2017, 06:01:38 AM by UncleX »

Feivel2000

  • Stubble
  • **
  • Posts: 156
  • Age: 32
  • Location: Germany
Re: Investing in Europe
« Reply #15 on: September 07, 2017, 03:52:47 AM »
The level of insurance/asset protection in these brokers is a bit worrying.

In the US we have FDIC insurance of up to $250,000 per account. If you have a million bucks you can split it across three or four banks and voila you are safe.

These EU brokers, on the other hand have low limits: $20,000, $100,000 etc. Where can you safely buy-and-hold a million bucks worth of ETFs or index funds? Then there's this alarming business of them loaning out your damn stock for their own gain. (I guess that's why they can keep their fees so low, but still, it's worrying.)

I have almost all my investments with Vanguard in the US. I don't know if they have insurance, but hey, it's Vanguard; seems like they are not going anywhere. They manage trillions in assets.

But the prospect of investing in Europe scares the crap out of me.

(In Germany, probably all of Europe,) You own your stocks, not your bank. They are seperate assetts. If the bank goes bankrupt, your stocks are not part of the bank's assetts used to pay creditors. Maybe it takes a little longer to access them, but that is more a logistical problem.