Author Topic: Investment options for European residents  (Read 18328 times)

econoob

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Investment options for European residents
« on: May 06, 2013, 10:15:40 AM »
As was mentioned in this thread, the investment advice in MMM forums is pretty much US-centric so let's start posting here about investment options for folks living in Europe.

I am particularly interested in online/discount brokerage firms as they combine ease of getting started, no-frills personal portfolio management, low fees and nice trading tools and resources. Most popular US firms I've looked into are either limited to US residents only (Scottrade, TD Ameritrade, TradeKing), available in selected EU countries (Vanguard, Fidelity) or require more hoops to jump through (Etrade, Charles Schwab). The only one that seems promising is OptionsXpress, at least it is available in the countries I am interested in according to their live chat customer service. Anyone here with an account with them?

As for EU-based brokerage firms, I know almost nothing. Although there are probably some good options available in specific countries, for someone like me hopping between EU countries every other year or less doing consulting work, I'd rather not be tied to a firm operating in a single country or two. Any decent options?

mnvalente

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Re: Investment options for European residents
« Reply #1 on: June 04, 2013, 12:06:39 PM »
Hi,

I am in a different situation than yours (I'm european but live outside europe in a country with no taxes) but am facing the same problem. I am looking for a fund supermarket or online brokerage firm that can give me access to EUR denominated funds. I don't necessarily need an offshore broker since I will not pay taxes in Europe however most brokers I have contacted before will not open an account for a non resident (tried Spanish, French and German fund supermarkets).

I have recently found this useful article:
http://the-international-investor.com/comparison-tables/offshore-fund-supermarket-comparison-table

They list three brokers:
- TD Direct Investing (Luxembourg)
- Keytrade Bank (Luxembourg)
- Swissquote (Switzerland)

I have been reading through their sites and checking the list of available funds but have not yet reached a conclusion.

I hope this helps in any way!

mnvalente

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Re: Investment options for European residents
« Reply #2 on: June 05, 2013, 11:57:05 AM »
Hi,

One more update. Saxo Bank in Denmark let you open an account domiciled in Denmark to trade equities, CFD's and ETF's (and all sorts of other funny instruments). They have a lot of Vanguard ETF's all in USD. Since my salary is in USD it makes no difference to me, however if your savings are in Eur then you should probably think about hedging any USD investment.

Hope this helps!

Fiador

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Re: Investment options for European residents
« Reply #3 on: June 06, 2013, 12:31:11 AM »
saxo sounds good, any advantge versus the Louxembourg ones?

Regards

mnvalente

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Re: Investment options for European residents
« Reply #4 on: June 07, 2013, 11:41:58 AM »
Hi,

If you want to hold funds then you cannot use SAXO, they only have ETF's. The disadvantage of funds are the fees which vary a lot between the 3 different brokers and the availability of the funds you are looking for (I am interested in PIMCO but it's not easy to find their EUR versions).

I will open an account with SAXO to try out the Vanguard ETF's and then follow on from there. They have been quite fast responding to emails and the account opening procedure seems quite straight-forward.

Regards,
mnv


pom

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Re: Investment options for European residents
« Reply #5 on: June 13, 2013, 03:55:12 AM »
I am in France and I use Ingdirect. They are pretty no-frills though, don't expect them to help you with nice charts and graph. Personally I don't care, I can go to bloomberg.com if I want charts and info.

Cost of per trade: 0.3% of the amount (minimum of 9€).
No safekeeping fees : this was key to my choice, my former bank charged 0.16% per year.

As I keep my investments forever and just cash in the dividends, I don't mind to pay a little for trading but the safekeeping fees are really a drag. Why would I pay them €400 a year to just hold on to my investments? I don't see what value they add there.

I have a friend that uses TD direct in Luxembourg, he is pretty happy about it. They have safekeeping fees of 0.2% per year but "only" for the first 300k€.

I hear a lot about boursorama but I don't think that they are outside of France. I compared the prices and they are slightly more expensive than ING direct for my average order size (about €2500). Look like they would be cheaper if I was buying small amounts at a time.

As for what I invest in, most of it is in Lyxor MSCI Europe, they charge 0.3% in expense. I would be interested if anyone here knows of even lower fee funds. After all, the dividends rate is about 3.00% so 0.3% is 1/10th of my income.

Christof

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Re: Investment options for European residents
« Reply #6 on: June 13, 2013, 04:28:38 AM »
iShares has a few funds that mirror STOXX Europe indexes that are cheaper than 0.3%. You can sort the list (http://fr.ishares.com/fr/rc/produits/panorama) by TFE% to find which ones are cheaper and then check if they meet your profile. The MSCI Europe is more expensive, though.

pom

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Re: Investment options for European residents
« Reply #7 on: June 13, 2013, 10:59:42 AM »
Thanks, I'll look it up.

turboseize

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Re: Investment options for European residents
« Reply #8 on: July 25, 2013, 04:56:42 AM »
The most common online brokers in Germany are Cortal Consors (BNP Paribas), Comdirect (Commerzbank) and maxblue (Deutsche Bank). At least Cortalconsors and Comdirect also offer "classic" banking services, with checking and savings accounts. Fees and terms of service are comparable. Personally, I use Cortal Consors, but friends and family members are using the competition and are equalliy happy with them.

« Last Edit: July 25, 2013, 04:58:53 AM by turboseize »

Vincentash

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Re: Investment options for European residents
« Reply #9 on: July 27, 2015, 09:00:32 AM »
Also, I could advise Meinl Bank in Austria. Thy have many different investment programs and our clients are very happy about this bank's offers.

Best regards,
Vincent Ashton
http://www.world-offshore.com/

forummm

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Re: Investment options for European residents
« Reply #10 on: July 27, 2015, 09:42:07 AM »
Vanguard has low-cost ETFs denominated in a number of currencies:

https://www.vanguard.co.uk/documents/adv/literature/generic-product-list-adv.pdf

brainfart

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Re: Investment options for European residents
« Reply #11 on: July 27, 2015, 12:59:06 PM »
> I would be interested if anyone here knows of even lower fee funds.

www.justetf.com has a database with most of the available ETFs in Europe.

(Beware: This Web site is not aimed at US citizens. US citizens are prohibited from accessing the data on this Web site. None of the products listed on this Web site is available to US citizens. Any services described are not aimed at US citizens.
"US citizens" are:

    Citizens of the United States of America (regardless of their place of residence),
    Citizens of other countries with their current place of residence in the United States of America,
    Future or existing companies and organisations that are organised by statutory regulations of a federal state, territory or ownership of the United States of America
    Assets and trusts that are subject to the law of the United States of America.

Reference is also made to the definition of Regulation S in the U.S. Securities Act of 1933.

Attention:

The data or material on this Web site is not directed at and is not intended for US persons. US persons are:

    United States residents
    residents of other countries who are temporarily present in the United States
    any partnership, corporation, or entity organised or existing under the laws of the United States of America or of any state, territory, or possession thereof,
    any estate or trust which is subject to United States tax regulations

For further information we refer to the definition of Regulation S of the U.S. Securities Act of 1933.

The data or material on this Web site is not an offer to provide, or a solicitation of any offer to buy or sell products or services in the United States of America. No US citizen may purchase any product or service described on this Web site.)

:P

> The most common online brokers in Germany are Cortal Consors (BNP Paribas), Comdirect (Commerzbank) and maxblue (Deutsche Bank).

Add DAB Bank, Onvista, Flatex, ING Diba, Sparkassen, Volksbanken and you might have the larger, more common ones. But there are many more.


> Vanguard has low-cost ETFs

As I have said before, owning Vanguard, for a variety of reasons, offer no advantages compared to the locally available stuff here, and has several disadvantages.

>  denominated in a number of currencies:

The currency issue actually isn't an issue for us, most investors do not care. You guys seem to overcomplicate this, out of some fear of the unknown maybe?

Many ETFs and stocks that are traded here are denominated in dollars or other currencies, but we simply buy them through our brokers on the local stock exchange for Euros. If I for example want to buy Apple I don't care much about the €/$ exchange ratio, because Apple is traded here in Euros (well of course the exchange ratio influences the price, but that fluctuation just becomes part of the daily up and down and you don't see it). Of course we could buy Apple in NY for dollars, but why should we do that? It's much more expensive, the different currencies complicate everything, and it takes much more time until the stock shows up in our accounts. That's why we buy all that stuff locally.

Grog

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Re: Investment options for European residents
« Reply #12 on: July 27, 2015, 10:59:54 PM »

> Vanguard has low-cost ETFs

As I have said before, owning Vanguard, for a variety of reasons, offer no advantages compared to the locally available stuff here, and has several disadvantages.



I don't agree with you. Vanguard remains one of the best even in Europe for the following reasons:

1) the particular shareholder structure, which is unique in the industry, in which the fund (and the owner of the funds, alas us investors) are the owner of Vanguard. A great reduction of conflict of interest.
http://www.bogleheads.org/wiki/Vanguard_safety

2) Full replicating ETF are safer then synthetic swap-based ETF. All the vanguard etf are full replicating, there are maybe cheaper ETF (like 0.05% instead of 0.07%, a difference that is probably cancelled by the tracking error) but all the cheaper are synthetic ETF. Vanguard offer some of the cheapest full replicating ETF out there in europe.

3) Funds are really large, which is better, and they are based in Ireland, that for people living in countries without a tax agreement with the US is even better. ETF based in Luxemburg are worse.
http://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETFs

So in general the best ETF for non-resident alien is a full-replicating ETF based off in Ireland with a middle-large fund dimension. Vanguard covers all of this point and has the added bonus of the shareholder structure (point 1). I really don't see many competitor, and I remind you that a better TER of 0.01-0.03% is irrelevant and is cancelled by the tracking error, where btw Vanguard excels.

Why do you think it has several disadvantages?

brainfart

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Re: Investment options for European residents
« Reply #13 on: July 28, 2015, 08:38:33 AM »

I don't agree with you. Vanguard remains one of the best even in Europe for the following reasons:

1) the particular shareholder structure, which is unique in the industry, in which the fund (and the owner of the funds, alas us investors) are the owner of Vanguard. A great reduction of conflict of interest.
http://www.bogleheads.org/wiki/Vanguard_safety

Vanguard Europe is a different business than Vanguard USA. This shareholder structure does not apply to us.

Quote
2) Full replicating ETF are safer then synthetic swap-based ETF. All the vanguard etf are full replicating, there are maybe cheaper ETF (like 0.05% instead of 0.07%, a difference that is probably cancelled by the tracking error) but all the cheaper are synthetic ETF. Vanguard offer some of the cheapest full replicating ETF out there in europe.

Vanguard Euope isn't all that much cheaper than other local ETFs. Replicating ETFs are available here, too. And I think the risks of synthetic ETFs are overrated. Replicating funds do risky stuff, too, like lending their stocks to others.

Quote
3) Funds are really large, which is better, and they are based in Ireland, that for people living in countries without a tax agreement with the US is even better. ETF based in Luxemburg are worse.
http://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETFs

Vanguard USA is huge. Vanguard Europe isn't.
Taxes... Without going into the delicious details, Vanguard dividend taxation is complicated and sucks, many local ETFs are simple and easy (ideally don't pay any taxes until you sell them). You decide what's better, paying taxes on dividends every year or paying them in 20+ years and letting the money compound like it's supposed to.
To complicate this further, every European nation has different tax laws. So broad generalisations like "Vanguard is best" might be true for a few of us, but for many more that's just plain wrong.

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So in general the best ETF for non-resident alien

So nearly everyone on this planet is an alien. Isn't that a bit too US-centric?

Quote
is a full-replicating ETF based off in Ireland with a middle-large fund dimension. Vanguard covers all of this point and has the added bonus of the shareholder structure (point 1). I really don't see many competitor, and I remind you that a better TER of 0.01-0.03% is irrelevant and is cancelled by the tracking error, where btw Vanguard excels.

TER is not the issue. Neither is tracking error.

Quote
Why do you think it has several disadvantages?

Taxation. Hidden, non-obvious fees and costs. Not being able to hold my investment in MY account in MY home country.
Try trading Vanguard at one of the local stock markets. Good luck.

Grog

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Re: Investment options for European residents
« Reply #14 on: July 28, 2015, 10:55:07 AM »

Vanguard USA is huge. Vanguard Europe isn't.
Taxes... Without going into the delicious details, Vanguard dividend taxation is complicated and sucks, many local ETFs are simple and easy (ideally don't pay any taxes until you sell them). You decide what's better, paying taxes on dividends every year or paying them in 20+ years and letting the money compound like it's supposed to.
To complicate this further, every European nation has different tax laws. So broad generalisations like "Vanguard is best" might be true for a few of us, but for many more that's just plain wrong.


I think you are referring to accumulating dividend (ETF/fund that keep dividend in the fund) vs distributing dividend, or so I interpret your word. I speak for Switzerland (and probably Germany) but you have to declare the dividend income each year even for accumulating ETF. There is no difference between accumulating vs distributing in regarding to taxable income. If you buy in an accumulating ETF and do not declare each year how much dividend it generated (and kept to himself) then you are committing tax evasion.
What I noticed is that distributing ETF are much more practical since the taxable income is = the dividend, whereas in many synthetic/accumulating ETF you have to dig deep in the ETF report to find the correct amount of taxable income. We are lucky that for ETF quoted here in Switzerland the central Tax Office keep a database with the correct amount of taxable dividend for accumulating ETF.
Please be careful since I believe in most country dividend from accumulating ETF must be declared.


Quote
Taxation. Hidden, non-obvious fees and costs. Not being able to hold my investment in MY account in MY home country.
Try trading Vanguard at one of the local stock markets
. Good luck.

Well vanguard europe propose all world ETF for simple portfolio directly in CHF available in all swiss stock broker. The same fund can be bought in EUR or GBP or USD. I think this is a very good point since for us swiss guy only a few international ETF are quoted directly in CHF ( sowe don't have to lose 5% to the currency exchange before buying at some broker).

Thank you for all your other considerations, but in cas of ETF you have to watch the dimension of the ETF, not the dimension of Vanguard europe, and how big it is compared to other. Some Vanguard ETF are among the biggest fund in Europe

brainfart

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Re: Investment options for European residents
« Reply #15 on: July 29, 2015, 03:15:44 PM »
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We are lucky that for ETF quoted here in Switzerland the central Tax Office keep a database with the correct amount of taxable dividend for accumulating ETF.

That information is published by the government in Germany, too ("ausschüttungsgleiche Erträge").

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What I noticed is that distributing ETF are much more practical since the taxable income is = the dividend, whereas in many synthetic/accumulating ETF you have to dig deep in the ETF report to find the correct amount of taxable income.

Quote
If you buy in an accumulating ETF and do not declare each year how much dividend it generated (and kept to himself) then you are committing tax evasion.

Some ETFs are completely tax free until they are sold. They do not generate dividends or similar payments. No taxes are due when you hold them. This is quite a tax advantage.

grantmeaname

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Re: Investment options for European residents
« Reply #16 on: July 29, 2015, 04:22:56 PM »
Quote
What I noticed is that distributing ETF are much more practical since the taxable income is = the dividend, whereas in many synthetic/accumulating ETF you have to dig deep in the ETF report to find the correct amount of taxable income.

Quote
If you buy in an accumulating ETF and do not declare each year how much dividend it generated (and kept to himself) then you are committing tax evasion.

Some ETFs are completely tax free until they are sold. They do not generate dividends or similar payments. No taxes are due when you hold them. This is quite a tax advantage.
I'm going to out my ignorance here, because this is a really interesting point. Are we talking about otherwise similar ETFs? How can this be possible? What differences of structure between Fund 1 (that holds a basket of securities, including some that pay dividends) and Fund 2 (that holds a similar basket) cause this different treatment?

forummm

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Re: Investment options for European residents
« Reply #17 on: July 29, 2015, 04:50:27 PM »
Quote
What I noticed is that distributing ETF are much more practical since the taxable income is = the dividend, whereas in many synthetic/accumulating ETF you have to dig deep in the ETF report to find the correct amount of taxable income.

Quote
If you buy in an accumulating ETF and do not declare each year how much dividend it generated (and kept to himself) then you are committing tax evasion.

Some ETFs are completely tax free until they are sold. They do not generate dividends or similar payments. No taxes are due when you hold them. This is quite a tax advantage.
I'm going to out my ignorance here, because this is a really interesting point. Are we talking about otherwise similar ETFs? How can this be possible? What differences of structure between Fund 1 (that holds a basket of securities, including some that pay dividends) and Fund 2 (that holds a similar basket) cause this different treatment?

I think there are some synthetic ETFs that hold derivatives so that there are no dividends distributed. The downside is that there is counterparty risk, higher transaction costs, and higher ERs.

grantmeaname

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Re: Investment options for European residents
« Reply #18 on: July 29, 2015, 05:00:48 PM »
Ah, that's what is meant by synthetic ETF. How worrisome is the counterparty risk? Are the derivatives equivalent in value to holding the underlying securities and reinvesting dividends?

forummm

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Re: Investment options for European residents
« Reply #19 on: July 29, 2015, 05:09:22 PM »
Ah, that's what is meant by synthetic ETF. How worrisome is the counterparty risk? Are the derivatives equivalent in value to holding the underlying securities and reinvesting dividends?

It really depends on the specific ETF. AIG had a AAA credit rating--until they didn't. I think things are equivalent, minus the transaction costs (and the fee you're paying someone to do the swap with you).

Grog

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Re: Investment options for European residents
« Reply #20 on: July 29, 2015, 10:55:57 PM »

Some ETFs are completely tax free until they are sold. They do not generate dividends or similar payments. No taxes are due when you hold them. This is quite a tax advantage.

I would love to see an example of such an ETF because it doesn't matter what I was looking for all the ETF I've seen generates an annual taxable income.

brainfart

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Re: Investment options for European residents
« Reply #21 on: July 29, 2015, 11:40:09 PM »
An example is ComStage MSCI World LU0392494562. A fully synthetic, swap based MSCI World ETF.
Emerging markets: Amundi ETF MSCI Emerging Markets UCITS ETF EUR, FR0010959676
These usually have a lower TER than the replicating ETFs.

What the taxation is like for you I don't know. Every country is different I suppose. Just saying that Vanguard isn't necessarily the best for everyone.
You really should look into this carefully, some of the ETFs have changed their tax status in the past, and TERs might change, too (usually go down, the Comstage lowered its TER by 50% a year or two ago). For a lot of investors the lower TER and no dividend taxation offer quite an advantage in my opinion.

Grog

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Re: Investment options for European residents
« Reply #22 on: July 30, 2015, 02:33:56 AM »
I agree. Every country in Europe is different and has different taxation system, and you are right that the first thing to watch for is taxation and transaction costs.
Since in Europe is very difficult to have free transaction for ETF (not in every country there are ETF-Savings plan) is important in my opinion to keep the portfolio as simple and diversified as possible. One way to do this is to buy an ETF that follows both developed and emerging markets together. This helps in keeping the concentration of US stocks lower (about 60% in a MSCI Wordl, that has only developed countries vs 50% in a MSCI ACWI (all-countries world index) or a FTSE all-world).

There are only a few of ETF that offer both world(developed and emerging) and Vanguard, in my opinion, offer the best one in his All-World ETF (TER 0.25%, ISIN:IE00B3RBWM25)

Thank you for providing an example. In my case (Switzerland) and I think in many other case I still have to paid tax on dividend every year even for the ETF you provided as an example (see attached picture as confirmation). So there isn't a real taxable difference with a distributing ETF, but they do have the advantage that avoiding distribution in USD let you skip the fact that you have to convert the dividend from USD to CHF/EUR to buy again in the same ETF.

So accumulating ETF have their advantages, but I don't think that the dividend-taxation is one of them. You still get taxed for the synthetic, index-equivalent dividend that the index has generated during the year. The fact that the synthetic dividend stays in the synthetic ETF doesn't change the fact taht you have to report the dividend as taxable income/dividend!!

And, as far as I understand this article, for Germany is the same problem:
http://www.gevestor.de/details/was-anleger-bei-der-besteuerung-ausschuettungsgleicher-ertraege-beachten-muessen-717948.html


brainfart

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Re: Investment options for European residents
« Reply #23 on: July 30, 2015, 04:10:43 AM »
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The fact that the synthetic dividend stays in the synthetic ETF doesn't change the fact taht you have to report the dividend as taxable income/dividend!!

Funny, you are the second swiss investor who tells me that. That's why I said every country is different.
In several other countries including Germany when you own the above Comstage ETF no taxes whatsoever need to be paid. You only pay taxes on the capital gains when you sell it.

Grog

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Re: Investment options for European residents
« Reply #24 on: July 30, 2015, 04:30:38 AM »
Ok! Then case closed, everyone should really watch for himself in his country. Cool thing about switzerland is that there are no capital gain taxes whatsoever, so maybe it is why all dividend are taxed, even synthetic ones.

Ralph

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Re: Investment options for European residents
« Reply #25 on: July 30, 2015, 04:32:45 AM »
Grog, this is really interesting. I remember that according to ICTAX, my ComStage and db x-trackers ETFs did not produce any taxable income in the last couple of years.
I used to compare with the German Bundesanzeiger, too.

But now the ICTAX Website tells me something different, even for those years. Suddenly, there ARE taxable incomes.
Maybe the regulations were changed?

Regards, Ralph