If you're looking for income then you should look at this list of the 20 best income portfolios.
This post is for you if you live in the EU.
If your home country is Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain or Sweden then you cannot buy US-based ETFs like the wonderful VTI or AGG.
There’s hope! We go through the major asset classes and suggest the best ETFs that you can buy if you are a European investor.
What are the symbols of some of the best ETFs you can buy now if you are a European investor?
Type the symbols into the platform of your broker.
- Total US Stock Market: CSUS (iShares MSCI USA UCITS ETF)
- US Large Cap Blend (S&P500): CSPX (iShares Core S&P 500 UCITS ETF)
- European Stocks: CEUD(iShares Core MSCI EMU UCITS ETF)
- Emerging Market Stocks: EIMU (iShares Core MSCI EM IMI UCITS ETF)
- Total US Bond Market: SUAG (iShares US Aggregate Bond UCITS ETF)
We go through 47 asset classes with ticker symbols for ETFs for European Investors below.
, not all asset classes are available as ETFs to European investors.
Here are the best ETFs for Europeans
Below you see a list of the best ETFs for Europeans.
|Asset Class||Best In Class||Best Vanguard ETF||Best iShares ETF||Best Xtrackers ETF|
|Total US Market||IE00BJ0KDR00||IE00BKX55R35||IE00B52SFT06|
|Large Cap Value||IE00BFF5RX68|
|Large Cap Blend (S&P 500)||IE00B5BMR087||IE00B3XXRP09||IE00B5BMR087|
|Large Cap Growth||IE00B3XXRP09||IE00B5BMR087|
|Mid Cap Value|
|Mid Cap Blend||IE00BJZ2DC62|
|Mid Cap Growth|
|Small Cap Value|
|Small Cap Blend||IE00B2QWCY14|
|Small Cap Growth||IE00B2QWCY14|
|Real Estate - REIT||IE00B1FZSF77|
|Total International Ex-US|
|Long Term Treasury||IE00BSKRJZ44|
|Intermediate Term Treasury||IE00B1FZS798|
|Short Term Treasury||IE00B14X4S71|
|Total Bond Market||IE00B44CGS96|
|Short Term Govt/Corp Bond|
|T-bills/Treasury Money Market|
|Inter. Term Corporate Bond||IE00BZ163K21||IE0032895942|
|Health Care Sector||IE00BJ5JNZ06|
|Precious Metals Sector||IE00B4ND3602|
|Short Term Tax Exempt Munis|
|Intermediate Term Tax Exempt Munis|
|Long Term Tax Exempt Munis|
|Short Term Investment Grade||IE00BCRY5Y77|
|High Yield Corporate Bonds||IE00B4PY7Y77|
|Treasury Inflation-Protected - TIPS||IE00B1FZSC47|
|Total World Market||IE00B6R52259||IE00B3RBWM25||IE00B6R52259|
|Minimum Volatility Factor||IE00BD93YH54|
|High Dividend Yield||IE00B8GKDB10||IE00BYYHSQ67|
|International Small Value||IE00BQZJC527|
|Emerging Markets Small Blend||IE00B3F81G20|
|Emerging Markets Value||IE00BG0SKF03|
|Two-Year Global Fixed-Income||IE00BG47KJ78||IE00B3F81409|
|Five-Year Global Fixed-Income||IE00BG47KJ78||IE00B3F81409|
|Emerging Market Bonds||IE00BZ163L38||IE00B2NPKV68|
|Long Term Investment-grade Bonds||IE00BZ163K21||IE0032895942|
|Long Term Treasury STRIPS|
|Intermediate Term Govt/Corp Bond||IE00B44CGS96|
Here are some notes to the table
Also, check the expense ratio of the ETFs. It is also called TER (Total Expense Ratio). Most are below 0.5%, so you should be fine.
There are no developed markets ex-US ETFs available to EU residents. There are ETFs that cover Europe, Japan, and Australia.
Our recommendation is to buy the developed world ETF. If you want more European exposure, then buy the ETF that exposes you to the Eurozone.
Also, check if you want the distributing or accumulation ETF. Distributing means the ETF pays out the dividend it receives from the companies. Accumulation means it reinvests the dividends in the fund immediately.
Why Can’t Europeans buy US Based ETFs?
Ever since 2018, EU investors have not been able to buy US-based ETFs.
This is because of the regulation known as PRIIPs – Packaged Retail Investment and Insurance Products regulation.
This puts investors in the EU at a considerable disadvantage compared to US investors. With the PRIIPS Regulation, the EU has, in this case, created a significant disservice to its citizens.
The resulting loss to investors is in the hundreds billions of euros as a result of the loss of investment returns and because of higher expenses paid for European ETFs.
All is not lost. EU investors can still buy ETFs that will cover most of the relevant asset classes, though none are as cheap as their US counterparts.
How you can buy US ETFs if you are an EU investor
According to the PRIIPS regulation, you cannot trade in US Domiciled ETFs if you are a European resident.
This is because the US Domiciled ETFs don’t contain Key Investor Information Document (KIID). The KIID comes with the details of an investment, such as risk, cost involved, investment strategy etc.
The Key Investor Information Document makes the investor well-informed about the investment. The largest issuers of ETFs announced that they weren’t willing to provide Key Investor Information Documents.
The providers have instead made some ETFs that are accepted by the PRIIPS Regulation.
The ETFs belong to a group known as UCITS ETFs (Undertakings for Collective Investments in Transferable Securities).
The European Union regulates these ETFs, and they have a UCITS KIID.
The largest issuers of ETFs are offering UCITS ETFs in the EU.
What are the two choices if you want to buy US ETFs as a European investor?
- You can buy the European ETFs that iShares and other providers offer. Most of the main asset classes are available as ETFs for European investors. See below for more info.
- You open an account with a US-based broker and hope they offer you US-based ETFs. It can be tricky to open a US brokerage account because new US regulations make it very cumbersome for US brokers and banks to comply with regulations if they allow international customers, so very few banks and brokerages offer this. This is because of money laundering and fraud concerns.
If you want to open an account your best bet is:
- Interactive Brokers
- Charles Schwab International
- Travel overseas to the USA and open an account at a bank branch when you have a permanent US address.
The US ETF market began in 1993 with the launch of the first modern ETF – the S&P 500 Trust ETF (or SPY). SPY is still one of the largest ETFs in the world today.
Who are the largest European ETF providers?
Here are the largest (and best) ETF providers for European investors. The links will take you to the European pages where you can see which ETFs they offer to Europeans.
Vanguard and iShares are the most significant players. Their ETFs have the largest liquidity and lowest expenses. Expenses play a massive part in selecting the best ETFs.
Each provider has many ETFs for the same asset class but denominated in different currencies. We list either Euro- or Dollar-denominated ETFs on this page.
You can look up the symbols on the provider’s page to see all the currencies the ETF is denominated in.
Here is what to look for in an ETF if you are a European investor
There is not a huge difference when selecting a US-based ETF or an ETF for a European investor. We wrote an article on how to choose the best ETF. You can start by referring to that, What Is The Best ETF And Mutual Fund?
When selecting a good ETF, you should look at the following factors:
- Check the expense ratios of the ETF. This is also called TER. The expense ratio needs to be below 0.5%. Anything above that, and you need to question why the ETF is so expensive.
- Check the liquidity of the ETF. Liquidity tells us how much the ETF is traded on the exchange. If an ETF has high liquidity is has low spreads between its buy and sell prices. We want low spreads in our ETFs so we want high liquidity. This is also called high volume.
- Check assets under management. How big is the ETF? – How many assets under management does it have? This is abbreviated AUM. You want to see at least €100 million. A large asset under management guarantees that the ETF will continue to exist – it is also a good indicator of high liquidity.
- Does it follow a well-known index? The ETF needs to replicate an asset class with high fidelity. This means that if it is a large-cap value ETF, it needs to follow a well-known index that tracks large-cap value stocks, and it needs to have a low tracking error. Well-known providers of indices include MSCI, S&P Global, FTSE, Morningstar, and CRSP.
- Can you buy it? Check to see if you can buy the ETF with your broker. I have checked all the European ETFs below with DeGiro, a well-known broker in the EU. You could buy them all at DeGiro and all them in different currencies.
- Do not buy leveraged ETFs. There are better ways to use leverage in investing, but leveraged ETFs are not one of them. Leveraged ETFs are susceptible to time decay, they are not transparent, and most are constructed using derivatives like futures, which have a cost when rolling them over.
What about currency risk in European ETFs?
You take on currency risk when you buy a European ETF, but you always take on currency risk to some degree when you invest in the stock market!
Let’s take an example.
When you invest in European ETFs denominated in Euros that buy US companies, you don’t have to exchange currency to buy the ETF, but the companies that the ETF hold are all denominated in USD. The companies that the ETF hold are listed in the US on NYSE, NASDAQ, etc.
This means that when a change in currency happens between the Euro and the Dollar, the value of your portfolio will also change. This is in addition to any changes to the actual stock price of the companies. This could be good or bad, depending on the direction of the change of the two currencies.
Almost all major companies do business in other countries than their own. All companies, therefore, also experience currency risk. Apple, for example, sells iPhones in China, Germany, and Russia. The iPhones are sold in the country’s currency, not USD. If the ruble increased massively in relation to the Dollar, Apple would experience a loss if they wanted to exchange their rubles to dollars.
Some companies try to hedge this risk. Hedging means that the currency risk is minimized or completely neutralized. That sounds wonderful, but hedging carries an additional cost because you buy insurance against currency swings, for example, through the purchase of future contracts.
You could also try to hedge your investment. Or you could buy ETFs that are hedged. The downside of this is that it costs extra for the ETF to hedge. The additional cost could hurt your returns.
With European ETFs you often get a choice of a hedged ETF
You essentially have two options when you think about currency hedging.
- Either you always try to hedge your investments.
- Or you never hedge your investment.
Either approach is fine, but don’t try to combine the two, or you’ll get a poor result.
Personally, I never hedge or buy hedged products. I also believe it makes the investment less transparent and more susceptible to poor management because the managers have to buy risk protection actively.
I don’t like my passive investment strategy to be tainted by this element of active investing. Also, you are hard-pressed to find the exact methodology the managers use for managing their currency risk.
I take on the currency risk and believe that it will even itself out in the Long-Term. Sometimes you gain a little, and sometimes you lose. I’m not alone in this. Meb Faber wrote an excellent piece on hedging your currency risk. I have just restated his arguments.
What are some portfolios I can build using European ETFs (UCITS)
There are a ton of portfolios that you can build using European ETFs. As you can see from the table, most of the major asset classes are represented by European ETFs.
Here are the asset classes that are not covered by European ETFs:
- Mid-cap value
- Mid-cap growth
- Total International ex-US (this is perhaps the worst omission)
- Short-term/gov bonds
It means that portfolios containing the above-mentioned asset classes would be hard to replicate. The total international ex-us (The VEU ETF in the US) is a quite popular asset class, so that is an ETF that is most needed.
Here are a few examples of portfolios that you can implement with European UCITS ETFs:
You could still tilt your portfolio towards small and value, but the European UCITs ETFs are less than stellar for this purpose. For example, the only European ETF that covers the US Small-Cap Value asset class is WisdomTree’s Small cap dividend ETF (DESD). That’s not perfect, but not terrible either.
What is PRIIPS? What is MiFID?
Here is a short dictionary of the alphabet soup that you will encounter when researching ETFs as a European:
- PRIIPs – Packaged Retail Investment and Insurance Products
- MiFID II – Markets in Financial Instruments Directive II
- KIID – Key Investor Information Document
- UCITS – Undertakings for Collective Investment in Transferable Securities
- ISIN – International Securities Identification Number
- AIFs – Alternative Investment Funds
- EEA – European Economic Area
Taxation – The taxation of an ETF is influenced by the domicile of the ETF and the tax residency of the investor.
You may experience taxes such as withholding tax, income tax, and capital gain tax while trading in ETFs. So always take these aspects into consideration while you are making the trade. You can get information about these details from your accountant or your tax advisor.
You can’t buy US-based ETFs as a European because of the PRIIPS Regulation.
iShares, Vanguard, WisdomTree, and Xtrackers provide UCITS ETFs to help you gain exposure to most of the main asset classes.
We have listed the ticker symbols for most of the asset classes on this page.