VOO vs VUSA

I get it now, it’s in USD no matter what, once we buy it we hold USD but effectively don’t have to pay a currency conversion fee and it’s displayed in EUR.
So if the EUR drops against the USD, our stocks are worth more in EUR and VUSA rises more than VOO. If the opposite happers, VOO rises more than VUSA.
However does the EUR fund have to buy futures contracts to protect against fluctuation? If it has to do this frequently, am I better off over 20-30 years simply changing to USD when I enter the market and back to EUR (if I retire in Europe) and then my fund won’t have to pay for futures contracts as everything is in the same currency?
 
However does the EUR fund have to buy futures contracts to protect against fluctuation? If it has to do this frequently, am I better off over 20-30 years simply changing to USD when I enter the market and back to EUR (if I retire in Europe) and then my fund won’t have to pay for futures contracts as everything is in the same currency?

Generally, a fund wouldn't engage in currency hedging unless it's explicitly mentioned in the fund name/fact sheet. You'll often find that hedged ETFs have a higher TER which, as you say, will affect your return significantly over the long run. To see the difference, look at IUSE:LN versus CSPX:LN - both track the S&P 500 and reinvest dividends, one in USD and one in EUR but the EUR is hedged in IUSE. As a result, you won't see the deviations from FX changes but you'll see that CSPX outperforms IUSE to the tune of the difference in their TERs - 0.07% (CSPX) versus 0.45% (IUSE). Whether the premium on the TER is worth paying is down to how strong/weak you think your home currency is when you're entering the market.
 
Generally, because of the estate tax and the dividend withholding tax (even at the lower rate of 15%) mean you are generally best avoiding US based funds.

What exactly is a US "based" fund? I'm unsure what I need to avoid.

If a fund is not domiciled in USA then is it subject to estate tax?
The below is the ETF I want to invest in, in EUR through the New York Stock Exchange. Is this free from estate tax? It is traded through the NYSE which is in the USA but it is domiciled in Ireland.

https://www.vanguard.co.uk/documents/po ... ld-etf.pdf
 
A US fund is a fund bought off a US exchange. If you can buy the same fund from a non-US exchange, you will escape the estate tax.
 
The below is the ETF I want to invest in, in EUR through the New York Stock Exchange. Is this free from estate tax? It is traded through the NYSE which is in the USA but it is domiciled in Ireland.

You'll be ok with that one. It's traded on NYSE Euronext.
 
NYSE Euronext has 10 different locations, and 4 of them are in USA according to wikipedia.
How do I know which of the locations it is traded from?

Excuse the simple question, but once I see NYSE in the stock exchange name I assume it is based in USA.
 
NYSE Euronext has 10 different locations, and 4 of them are in USA according to wikipedia.
How do I know which of the locations it is traded from?

Excuse the simple question, but once I see NYSE in the stock exchange name I assume it is based in USA.

I would say that's referring to Euronext office locations but exchanges are in Amsterdam, Brussels, Lisbon, London and Paris to the best of my knowledge. If you're buying a Vanguard UK product, you won't get wrapped up in any US exchanges / estate taxes etc.
 
Hi Rekhib,

may i know if I were to buy non-US domiciled ETF such as vanguard VWRD using us-based broker such as Interactive broker.. would I subject to US estate law for the fact that a US-based corporation is owning my possession.

I have these doubts after reading Bogleheads • View topic - Non-US citizen with US Brokers: Estate Tax risk?
 
You would be subject to estate tax if you had a cash balance in your IB account of more than 60k. The US estate law is absurd - as long as the ETF is not domiciled in America, it's not eligible for estate tax. Once you cash it in and it exceeds 60k dollars in your account, it is eligible. I use IB myself.
 
Hi He-Man, forgive me as Im quite confused by your post.

Does it mean that if I'm using IB to hold non-US domiciled ETF such as VWRD and it exceeds 60K, I am not eligible to for the estate tax.

However, you mentioned about the 'cashing it in', do you mean when I sell the securities and the cash in the IB account becomes more than 60K, i will be eligible?

May I ask if you are a non-US investor?

Thanks.
 
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To your first question, answer is YES.

To answer your second question, answer is also YES.

I am a non-US investor and also following the Bogleheads thread.
 
To your first question, answer is YES.

To answer your second question, answer is also YES.

I am a non-US investor and also following the Bogleheads thread.

haha same.. u r using IB or any other brokers u could kindly intro? thanks!
 
haha same.. u r using IB or any other brokers u could kindly intro? thanks!

I use IB. There's no silver bullet...different options have their own pros and cons. IB are the cheapest by far and have a great range of ETFs, as well as multiple currencies, etc, and a whopping guarantee of 500,000 USD. But there is the estate tax issue to think about.

Saxo have a smaller range of ETFs available (but still a great many in fairness) and their fees are over 200% more expensive than IB's. That's not to say that they're exorbitantly expensive - it's just that IB is exorbitantly inexpensive in comparison. You also don't get multiple currency support from Saxo unless your account is worth 100k - though this might only apply to clients in certain jurisdictions. In addition, Saxo only guarantees a max of 100,000 euros - quite a bit less than IB. The major plus is you avoid the US Estate tax issue entirely with Saxo as long as you don't buy US-domiciled stock exceeding 60k USD. Vanguard ETFs trading on European exchanges are not domiciled in the US. They are domiciled in Ireland.

Andrew Hallam has a book for expats looking to buy ETFs and build their own portfolios. He discusses several brokers in it. If you are not an expat, much of the advice won't apply to you, but it's still a great book. Further, if you are Irish and live in Ireland, the consensus on this site seems to be that ETFs are a tax nightmare.
 
@He-Man,

There is a separate discussion on the possibility of IB causing estate tax nightmare for us (sadly i cant post URL)

In there, to quote a poster there: 'IB has ongoing plan to transition certain businesses to its new IB UK carrying broker. You may want to call IB to ask if your account can be transferred to IB UKL'


Another forumer has posted 'If it's UK-domiciled, the U.S. estate tax issue goes away. On the downside, you would lose the $500k deposit guarantee and be stuck with the UK's more measly guarantee of £50k.'

Thus Im not sure if that would really be good news for us..
 
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