Which ETF to track Euro Stoxx 50

Discussion in 'Exchange Traded Funds (ETFs)' started by SPC100, Jan 23, 2016.

  1. SPC100

    SPC100 Frequent Poster

    Posts:
    311
    Hi,

    There are several ETFs which track the Euro Stoxx 50.

    Which one is the wisest choice for a long term buy and hold investor?

    Thanks,

    Sean.
     
  2. dub_nerd

    dub_nerd Frequent Poster

    Posts:
    1,267
    If you rule out the ones with no tax offsetting, 41% exit tax, and 8-year deemed disposal, are there any left?
     
  3. SPC100

    SPC100 Frequent Poster

    Posts:
    311
    I understand that Not all ETFs fall under the tax regime you describe, which is the reason for my question:)

    From a tax minimisation point of view, for a long term buy and hold, it would have to be
    • An accumulating ETF
    • Taxed as a share rather as a fund (i.e. not a UCTIS ETF)
     
  4. dub_nerd

    dub_nerd Frequent Poster

    Posts:
    1,267
    I would have said there were no worthwhile ones, because of our useless tax regime. That's exactly why I asked about dividend withholding tax on Euro stocks, with a view to selecting a subset of stocks in the Euro Stoxx 50 to buy directly. But then landlord on that thread linked to a whole list of ETFs that he claimed were not taxed as UCITS. But he's never come back to clarify. Maybe you can make head or tail of it?
     
  5. landlord

    landlord Frequent Poster

    Posts:
    661
    Last edited: Jan 31, 2016
    Oh sorry will go back and look at that other thread when I get a chance. I had previously done a lot of research on UCITS and non UCITS ETFS 6 months ago.
     
    Last edited: Jan 31, 2016
  6. landlord

    landlord Frequent Poster

    Posts:
    661
    Last edited: Jan 31, 2016
    Apologies that other link showed you UCITS ETFS.

    How about this......
    Vanguard FTSE EUROPE ETF (VGK)

    https://personal.vanguard.com/us/funds/snapshot?FundId=0963&FundIntExt=INT&from=mfsResults

    This ETF ......

    Dimociled in the US.

    TER only 0.12%

    Non UCITS. All Vanguard ETFs are Non UCITS!!!!!(tax at 33% etc...)

    Dividend paying (YOU CAN NOT HAVE A NON UCITS ETF THAT IS ACCUMULATING...All US ETFs legally must distribute I.e. Pay dividends). So you can not get the benefit of an accumulating ETF taxed at 33%, which is one of the reasons why I eventually ended up going with a UCITS accumulating ETF.



    I found the above ETF in just a few minutes. I would imagine there might be others....possibly EU STOXX 50 specific.
     
    Last edited: Jan 31, 2016
  7. dub_nerd

    dub_nerd Frequent Poster

    Posts:
    1,267
    Thanks for replying. Ok, so you mean "bad" ETFs. Aren't there a few pitfalls with those, though:
    • Currency risk on non-EUR stocks. The EUR is down 25% against USD compared to relatively recent highs, which makes dollar-denominated assets expensive. I know EUR-USD is unlikely to recover in the immediate future but it wouldn't take much movement to wipe out any nominal gains on the ETFs.
    • 30% dividend withholding tax ... can 15% be reclaimed on US ETFs using W8-BEN as for stocks?
    • US estate tax on instruments bought on a US exchange, as mentioned by Marc Westlake on several threads including this one.
    If the answer to the second question is 'yes' I'd be happy to take a chance on the third, but the currency risk is a killer.
     
  8. Fella

    Fella Frequent Poster

    Posts:
    264
    Others here like sarenco and Brendan suggest ignoring currency risk , I bought investment trusts which are in sterling then the sterling weakened against the euro significantly and that cost me (in paper money terms significantly) I suppose it could go either way.

    I have started buying individual shares as watching the stock market for a while now I am noticing everything seems to move roughly together the stock market drops 2 percent all stocks drop 1-3% IMO , maybe that is just a current trend I dunno , I've plotted stuff like Coca Cola etc v s&p 500 on graphs over 20/30 years and it's very similar , so I've started to buy stuff that generally plots similar to s&p 500 , I'm buying monthly my core investment is in trusts but happy to make my monthly investment in individual shares .

    My head was melted with ETF's I would avoid them now altogether I don't think we have seen the end of government interference and the tax treatment is just too complicated I wouldn't be confident in been in non UCITS or UCITS , I had an irrational fear of holding individual shares , I think a decent strategy is hold a core % of your portfolio in investment trusts or even somthing that is like an investment trust eg berkishire and then hold a basket of blue chips also for regular topping up.
     
  9. dub_nerd

    dub_nerd Frequent Poster

    Posts:
    1,267
    I disagree with ignoring currency risk. As I understand it, the euro will have a natural tendency to rise against the dollar as long as the German economy is strongly export focused, while the US economy is much more self-contained. This will also be naturally self correcting as exports increase when the currency is depressed. Europe and the US are currently out of sync in the economic cycle, with the Fed raising interest rates while the ECB is still talking about more QE. But in the medium to long term I'd be amazed if we didn't see a rebalancing of some sort. That said, I am parroting what I have read elsewhere, I'm no expert of any sort.

    I notice the same as you about stocks moving in sync. Since several years back I've noticed that they are also in sync with oil price movements. I understand that markets have always been affected by sentiment, but it seems to me that this has reached a level of hysteria. Nobody seems to care about intrinsic worth anymore. The worse the economy gets the happier investors are, because it means more free money via QE. This fact alone makes me nervous to invest in either stocks or ETFs as the whole shootin' match seems dysfunctional.
     
  10. landlord

    landlord Frequent Poster

    Posts:
    661
    Last edited: Feb 1, 2016
    CORRECT!! Actually only 15% will be taken off at source not 30 once you have filled in that form. Actually I never even bothered filling in the form and my stockbroker only charges me 15%


    When I started researching about ETF's which was approximately six months to a year ago the terms "good and bad" in reference to ETFs were not being used. So I know nothing about these terms.

    ETF CURRENCY RISK.....
    Say you invest in a U.S. WORLD FUND, I believe there is a Double currency risk.

    A. Euros are converted to dollars to purchase the fund. You invest for 10 years and during that period the value of the Euro against the dollar strengthens. When you sell your portfolio after 10 years your profits would've been dampened by the increased value of the Euro. I personally am a believer that the dollar will continue to strengthen in the short to medium term but will collapse heavily within a few years.

    B. If you buy this ETF, you will be exposed to currency risk within the ETF. I.e. The underlying companies within this ETF have their own individual currency risk. A company's currency exposure is not related to the country its headquarters are in but the currency it does its business in. However in reality if this is a world ETF I would imagine the currency risk would balance itself out.

    When I invested I did not ignore currency risk and that is why I prioritised and more heavily weighted a Euro based ETF denominated in EUROS. Unfortunately it had to be a UCITS ETF. Because of my fear of the direction of the global stock markets six months ago I sold everything made a small loss and have now started investing small amounts into gold related assets. My original portfolio is currently down another 7% from when I sold.
    QE has greatly devalued the major world currency's and the program will be ramped up shortly in Europe, Japan and I believe the US too when recession hits.
    I personally believe equities have a long way further to fall based on global debt to GDP ratios.
     
    Last edited: Feb 1, 2016
    dub_nerd likes this.
  11. dub_nerd

    dub_nerd Frequent Poster

    Posts:
    1,267
    Fella, my head is melted too. I am interested in your comments about UK investment trusts, but are they not just as headwrecking? According to this older key post (here), these also fall into "good" and "bad" categories, to wit:

    But then some of the other posts in that thread (and particularly the last) suggest the opposite:

    I know there was a recent Revenue clarification on ETFs. Did it cover Investment Trusts as well?
     
  12. Fella

    Fella Frequent Poster

    Posts:
    264
    UK investment trusts are treated as shares according to some knowledgeable people here and I agree with that assumption , only difference I notice is on my Saxobank my investment trusts have the same equity symbol like shares I own instead of EQ/F which my exchanged traded funds have , so yeah they are treated as shares as far as I am aware.
     
  13. He-Man

    He-Man Frequent Poster

    Posts:
    84
    The base currency of VGK is actually euro, since most of its underlying stocks are from the eurozone. About 32% are GPB businesses and around 13% are Swiss franc. VGK is the very same as the Irish-domiciled ETF VEUR. The currency in this case is really just a wrapper. VGK tracks the FTSE DEveloped Europe index (around 520 holdings), which makes it better than a Eurostoxx50 tracker, since it's more diversified.