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Ask HN: How to invest safely in Europe?
81 points by register 26 days ago | hide | past | web | favorite | 54 comments
I have seen many discussions about how to invest but they seem targetted at the USA market. The main assumption is that one can expect to have a 6-7% return by investing in good ETFs. I have researched a little bit and I don't see how that can be achieved investing in the European bonds/stocks. At the moment the safest bet seems to park money in monetary/government bonds that however don't return more than 1.5% on average. Can somebody provide some suggestion references about good investment strategies with a low risk profile in an european context?



You're not comparing the same things. The US stock market that returns 6.5% is much more volatile than European government bonds that return 1.5%. You need to compare either bonds or stocks for both. It's difficult to compare the long-term performance of American/European because different starting points and the world wars confound things but European stocks certainly don't outperform American ones by as much as you're suggesting.

But in any case, there's no reason why you can only invest in European things (and in fact that would be stupid). The starting strategy for most people should be a mixture of index funds covering the whole world (weighted by market size) and bonds. The proportion of stocks/bonds is determined by your tolerance for risk. You can fiddle with this (for instance as a European it might make sense to overweight European markets because of exchange risk, on the other hand you might prefer to overweight American markets because you already have exposure to the European economy from living there) but you almost certainly want to invest somewhat internationally.


You are in Europe yourself I take it? In the Eurozone?

I'd forget bonds personally. With negative real interest rates, bonds are just the safest way to lose money slowly.

You mention elsewhere you want to avoid currency risk in an ETF. You won't be able do that completely, but to keep it to a minimum you'd need an ETF composed of smaller European companies which have less of an international presence.

I'm unexpectedly in the market for a good European ETF myself as the provider of the two I currently hold (iShares) have just announced they're both being delisted, so I'll have to sell those and re-buy something else, with all the cost and risk that entails, which is pretty annoying. I'm currently considering the "iShares Core MSCI EMU UCITS ETF", which tracks 252 Eurozone companies, but again, these are generally big multinational companies so you're not really protected from currency risk.


Even with negative interest rates bonds can turn a profit if the rates go even lower, as one does not need to hold them to maturity.

This happened during the past 3 months with German Bunds fe.


In Europe the investment climate is substantially different than in the United States to the point that the same rules do not apply except for the most generic ones. The stock market isn't nearly as important a factor for the European economies as it is in the United States, the market is more fragmented and the typical stock market listed company is much smaller than its equivalent in the United States.

To some extent this is also why it is much harder to run a successful start-up in the EU.


Probably depends on the country. In .se for example with any bank you'll be able to buy ETFs that are index funds that invest in the US, Europe or Asia markets with a yearly fee of 0.20% or less. Those will give you pretty much what you are asking for. Talk to your bank and ask for index funds and don't accept higher fees than 0.25% or so (depending on country, again).


Without giving specific advice, here are some things to keep in mind:

- the same principles apply regardless of the market, you can just pick European equity or bond funds and add them to your portfolio (as long as they're available on your investing platform)

- you don't have to limit your portfolio to US and/or Europe, you can invest internationally

- historically the European markets have performed worse than the US. That won't necessarily continue in the future but keep in mind that you're making a similar assumption (that the future will be similar to the past) when you expect a 6-7% return from American funds.

- many of the the big US companies are international anyway - for example when you buy Apple stock, even though you're investing in an American company, you're betting on Apple's performance everywhere in the world including in Europe

- investing in companies that are traded in a different currency adds another moving part to the machine; you can be hurt or benefit from the movement of the exchange rates in addition to the stock/bond price fluctuations


Is there any reason why you want exposure to Europe in the first place? Maybe you just want American equity exposure without the currency risk? If so, you might be interested in ETFs that attempt to track the S&P 500 EUR Hedged Index. One ETF that does this is called theiShares S&P 500 EUR Hedged UCITS ETF.

I would not recommend European government bonds as most of them have real negative rates.

Is there any reason why you don't want just pure straight up American equity exposure? There's no reason you couldn't be buying American listed equities from Europe.


> The main assumption is that one can expect to have a 6-7% return by investing in good ETFs. I have researched a little bit and I don't see how that can be achieved investing in the European bonds/stocks.

A reasonable investment strategy involving ETFs will involve investing in companies throughout the whole world. Not just European companies or US companies. Ideally you want to have an investment strategy that maximizes return for your risk profile. That strategy is independent of where you live. There are S&P 500 ETFs in the US and there are S&P 500 ETFs in the EU (try googling for "S&P 500 UCITS ETF").

> At the moment the safest bet seems to park money in monetary/government bonds that however don't return more than 1.5% on average. The "good ETFs" you mentioned that have a 6-7% return are anything but safe. They aren't as "safe" as bonds. the "good ETFs" you mentioned likely invest in companies, the stock market has a high degree of risk and volatility. That is fine in the sense that with greater risk comes greater reward. You should just keep in mind that if you want something safe you shouldn't be looking at anything that invests in equities.

> Can somebody provide some suggestion references about good investment strategies with a low risk profile in an european context? I've written a lot about it on my blog: https://indexfundinvestor.eu/2019/05/29/the-step-by-step-gui... I also have suggestions to books there.


I, a Dutch national, invest in the stock market through Meesman [0]. Meesman offers the following funds for investing in the European stock market:

- MSCI Europe Custom ESG [1]

- Barclays Euro Govt. Bond [2]

Please note Meesman offers a very limited selection of funds (5 total). As such I am quite sure the Meesman company did good research on what funds best represent certain markets.

If you'd like to invest in the European markets, I suggest you take a look at both. These funds can be bought elsewhere as well, of course.

---

[0]: https://www.meesman.nl

[1]: https://www.blackrock.com/lu/intermediaries/products/305363/...

[2]: https://www.blackrock.com/lu/intermediaries/products/228477/...


I'm also in NL but use DeGiro, and I compared the two back when starting out on my first investments. Maybe I missed something but it seems DeGiro is much cheaper in terms of fees, and it's straightforward to set up a portfolio that's similar to any of Meesman's offerings. For something a single ETF that's globally diversified I buy Vanguard's VWRL monthly, which is also on DeGiro's list of "free" ETFs. The only drawback I've found is it's not automated like with Meesman and it's very "Doe Het Zelf".


U vraagt, wij draaien: https://www.consumentenbond.nl/sparen-en-beleggen/beleggings... https://www.iex.nl/Column/117156/DeGiro-en-het-risico.aspx https://www.reddit.com/r/DutchFIRE/comments/95kh7m/degiro_no...

EN: DeGiro is a dutch broker which is known for it's low costs, however they can short your stocks unless you're willing to pay an additional fee and they sometimes trade stocks on their own "internal market".


I've used both DeGiro and Meesman as well in the past. From what I've read funds should be a bit more safe with Meesman compared to DeGiro. For me safety is a prime concern as this will be my retirement money.


Why do you want to invest in the European stock market specifically in the first place?

There's nothing that keeps non-US citizens from investing in US market ETFs.

That said, European economies are quite diverse. There are ETFs for the European market as a whole (Euro Stoxx 50, for instance) but they tend to fare worse than their national counterparts.

In addition to simply investing in US ETFs you might consider investing in European ETFs that reflect strong national markets. However, investing in European markets probably requires more research and market knowledge than the fire-and-forget approach US-based ETFs are famous for.

National NASDAQ equivalents such as TECDAX might be interesting, too. Keep in mind, though that these typically are much more volatile than NASDAQ because these indices don't comprise tech giants such as Amazon or Apple but much smaller companies which often are unknown to the general public but in many cases still are market leaders in their respective categories. Therefore the risk higher is higher - but so is the potential return.


> There's nothing that keeps non-US citizens from investing in US market ETFs.

Actually, there is. Unless an ETF provider publishes key investor information documents in the format required by the EU, EU citizens are not allowed to buy those ETFs.

Since 2018, I have a number of US ETFs that I can no longer buy. I have to search for alternative UCITS funds instead, which are neither as diverse nor as large.


To my knowledge, EU citizens are still allowed to buy those ETFs, but EU brokers are not allowed to sell them. This means you can open an account at a non-EU broker (e.g. in Switzerland) and still buy them. This is perfectly legal, although it is a bit more work taxwise.


It is outrageous that the eu is effectively blocking its citizens access to products like spyder snp500 etf which is a far cheaper and more liquid etf than what is offered on the European markets.


I'm an EU citizen and I can buy, e.g, the iShares Core S&P 500 UCITS ETF (ISIN IE0031442068) which gives me access to the S&P 500 and is as cheap as it can get.


The spy etf has better liquidity and (probably) lower costs.


The iShares one is actually cheaper (TER of 0.07% vs. 0.09%) but it seems its tracking difference is worse (for the last years), so it seems the SPDR performs better. However, you can also buy the Vanguard S&P 500 UCITS ETF in Europe, which has also has a TER of 0.07% but an even better tracking difference than SPDR.

I don't think liqudity is a problem for such huge funds.


Maybe the liquidity (though for a buy-and-hold retail investor the iShares has plenty) but the costs are comparably minuscule for both: <0.1% pa.


That's not a problem for non-US citizens in general. It's a problem the EU imposes upon its own citizens.


Nothing in the parent comment was untrue.


If you are a US-based investor and want exposure to Europe, you can get some ideas by navigating the ETF groupings on https://pages.etflogic.io. (I built the page). You'll find all US-listed ETFs (2000+ of them) - many of which can easily and cheaply provide you exposure to the European markets.

VEA gives you exposure to European Developed Markets (equity). FEZ is the Euro-Stoxx 50 (equity)...


Only high risk (i.e. bonds of dangerous countries) have high yields. European economy is doing significantly worse than US. You can always invest in US equities ...


Curious, why would you want to invest in Europe at all? For awhile now I've seen Europe as the past, and Asia as the future.


Europe has a rich diversified economy with the rule of law, strong reporting etc.

Asia has economies that respect the rule of law (e.g. sg, kr, several others) but they are small. There are also some large economies (China, India) but they lack much transparency and especially in the case of China obscure manipulation and heavy government participation. Japan of course is the exception (large economy, good governance, good reporting etc) but is less of a growth prospect.

These aren't reasons to put all your money in Europe and none in Asia. I also don't mean to challenge your statement that Europe is the past and Asia the future. But there are good reasons for some people to choose to invest in Europe even if they don't live there.


Yeah, why would you want to support your own economy rather than someone else's?


I don’t think buying some stock from Euro-based companies constitutes as “supporting your own economy.”

If that’s your goal, then I’d argue buying Euro bonds would be closer to that, though many have negative interest rates at the moment.


Your 5-7 figures are a margin of error of a margin of error (maybe a few more of these?) of a global financial market. All you are supporting is your ego.


Asia, and then Africa


You can have a look at ETF from Amundi, Lyxor, Legal and General (UK), Vanguard EU/UK.

There are three problems broadly speaking. First is the currency, American index funds are in dollars while you don't have dollars. There are a couple of index funds that are quoted in EUR/GBP, above.

Second you need to find a bank that offers trading accounts and allow to buy these. It is god awful to find one. European banks are simply disconnected from the stocks market, they don't run brokerage and might not even know what it is when you ask for it. The only thing they sell and know about is their shitty in-house investment plan that's losing money every year.

Third is taxation. American have lax taxation because it's local and they depend on it for their retirement. On the other hand Europe can have high taxation which really kills your profit and some classes of assets have dual taxation (US export + EU taxes) that makes even the best investment worthless.


In general, you can ignore the currency that an index fund uses internally for reporting. You can buy A1JX52 using USD in the US or using EUR in the EU; the same as you can buy JPY using USD or EUR, whatever is more convenient for you.

I don't know how the situation in general with Banks in Europe. But in Germany you will find many Banks which are convenient and offer cheap access to the stock market. Yes, they will try to sell you shit, but if you select an online bank and know what you are doing, you will never have to talk to anyone and get really good products.

Taxation varies across Europe. Some countries take less than the US, some take more. But pretty much all countries of the western world have double-taxation agreements, so there is no double taxation. A German citizen, e.g., pays not more than 15% tax on the dividend of a US stock. It looks that this is even less than US citizens, but I'm not sure. That is of course and bit annoying when filling out tax forms, but if you invest in an fund, the issuer of the fund does it for you.


US applies 15% dividend taxes then France applies income tax 0 to 30% depending on your personal situation, a part of the double taxation can be had back through tax credits in the following year. It's yet another thing for capital gains.

It's quite complicated and it's up in recent years with the government going against capital gains (i.e. rent seeking). If you invest in some European stocks instead, it can be eligible to 0% taxation on all gains.

https://www.abcbourse.com/apprendre/5_fiscalite_us.html


Why do you want to invest in Europe specifically? There are European ETFs that track US indexes if that's what you're interested in.

Europe is a harder market for sure. There are less internationally recognized names, so you have to do more research.


There is an exchange risk inherent in that which will turn your real estate speculation into a currency speculation.


Not sure if these are available in Europe, but Vanguard in Australia offers hedged indexes like this one https://www.vanguardinvestments.com.au/retail/ret/investment... specifically to avoid the currency exchange floating.


Vanguard doesn't really exist in Europe per se.

They have a range of funds in GBP in the United Kingdom, because the retirement system there is similar to the US. That's all.

There is a handful of funds in EUR through an European subsidiary, but it's laughable compared to what is available in the US and they are pretty hard to buy.


Vanguard offers a number of exchange traded funds in Europe domiciled in Ireland.

There are funds in base currencies of USD, EUR and GBP and traded on number of exchanges across Europe in several currencies.

https://americas.vanguard.com/institutional/funds/all-produc...

Someone looking for exposure to Europe could get that through one of the Vanguard FTSE Developed Europe funds - they’re available including or excluding UK and in accumulating or distributing versions.

Very easy to buy just submit an order on the market. I personally use Interactive Brokers and buy on London Stock Exchange but any broker that gives you access to one of the major European exchanges should do.


Vanguard as well as iShares (Blackrock) funds are readily available in Europe unless you are looking for niche stuff. But then there also is Xtrackers, Lyxor, HSBC, .. which offern funds based on the famous and not so famous indices.

And they not hard to buy at all.


I wasn't pointing out Vanguard really, just the hedged index option as a way to avoid the exchange rate issues.


Because I don't want to deal with exchange rates risks as Jacquesm already pointed out.


Deviations from purchasing power parity in currencies have a half life of seven years. Unless you’re investing for the short term the effects of currency fluctuations on returns to your portfolio will be swamped by differences in growth across national economies and their stock exchanges’ growth rates. In the long run currency risk washes out in differences in economic growth. You’re better off investing in the stock market indices you think will grow more. Population growth in the US compared to the EU alone would suggest investing in the US over Europe. If you think we’ll continue to have a more or less peaceful 21st century you’re better off investing in economies you think will grow more, which would suggest investing in the Indian subcontinent and Africa. If you don’t think that’s the way to bet you should invest in places likely to have political stability above most anything else so you should invest in places with strong states unlikely to have massive political unrest that will maintain good relations with your home country. For security you’d invest in property in someplace like Switzerland through real estate investment trusts, or the US if you think the West will endure as a political reality and the US will avoid civil unrest in the coming decades.


On a particular point: the number of vacant properties in Switzerland has exceeded the population of the capital. The safe property investment idea got too popular to stay effective.


There are euro hedged S&P 500 ETFs. One of them is this:

https://us.spindices.com/indices/equity/sp-500-eur-hdg

But, if I may ask. What is the specific reason you don't want currency risk? The dollar has maintained it's strength since the recession and if there's a currency pair where one might not need to hedge, it would be USD/EUR.


I created an Interactive Brokers account and used this investment scheme:

    65% of funds in:
    80% VWRL
    10% VEUR
    10% VFEM
    
    35% of funds in:
    VECP
This is pretty fire-and-forget. I also don't really know anything more about investing, so this is pretty much the extent of my help, sorry. I don't know if these ETFs are hedged against currency fluctuations, but my gains/losses don't seem to have followed the USD, so maybe?


I am not sure if you are looking for suggestions on specific investment opportunities but check

https://www.mintos.com


Do you have any experience with it? If yes, you mind sharing some words?


I do (www.mintos.com/en/l/ref/B3H9ZN referral link) and I find it a very good option. You pretty much buy shares in loans that are listed on the platform. Mintos screens the loan providers and evaluates them regularly.

I have used it for about two years for medium risk investments (~12%) and have had no losses so far.

It helps that many providers have a "buyback guarantee" that automatically repays you for investments if the payment is late for more than 60 days.

I just transfer an amount of money there every month, and the auto-invest feature just picks investments across providers.

I hope it helps, but feel free to ask specific questions if you like :)


Look into etfmatic.com it’s London based and you can specify where you’d like to invest


Sign up on Interactive Brokers.


Sign up for one of those bonds where you can invest $1000 and get back $990, it’s so hot right now in Europe!


How about don't.

Europe is in huge decline right now. Asset prices are artificially inflated, bond yields are negative and the export surplus can only be maintained because the Central Bank is devaluing the currency by printing money like there is no tomorrow. The house of cards will fall as soon as some major trade partner introduces tariffs.

The demand for credit is especially weak which shows you that nobody really wants to invest, because the future outcome is presumed to be worse than paying negative interest to the ECB.

Bedsides that there are major societal turmoils on the horizon. Crime is rampant, the quality of life for the middle class quickly decreasing and there is a huge demographic decline going on for some time now. Large youth unemployment in the periphery and a real estate bubble with stagnating wages in the center which boils away the middle class only shows you what the future will bring.

In the best case this will be like another Japan. In the worst case there will be civil war.


It's predictable that you would get downvotes, but your points are generally true. The Monetary Union of Europe is failing just like the socialism of some of its member states. Europe's economies are strangled by taxation and regulation.

In a thread on investing in Europe these are important perspective to bring up.


When a bank robber has no more banks to rob, his standard of living tends to go down.

Most economic surpluses in Europe over the last 2 centuries have been thanks to importing stolen goods/criminality, only change is, some of the biggest victims of this type of "economic growth" now have nukes.




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