Why is stock investing not as popular in Europe?

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alpine_boglehead
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Re: Why is stock investing not as popular in Europe?

Post by alpine_boglehead »

Living in Austria, I'd like to invert the question - why should you invest (in stocks)?

You go to a free public school, go to a free public university, have a stable income job, get a mortgage to finance the real estate you live in. You get a government pension (social security). Why should you invest - at all?

I see the need of you US people to invest (in stocks) primarily driven by the absence of a safe (government) pension system. From what I have read, this has changed for the worse over the last 60 years, i.e. there were more company pensions in the past.

My sympathy goes to you US citizens for the poor social safety net that forces you to take care of this yourself. And the result of this we can see in the very existence of this board. If financing your retirement were taken care of for you, there would be much less interest.

And if you read through the questions being asked here ... you're surrounded by enemies when trying to take care of your own retirement savings (with the bogleheads being the exception). The worst enemy is you yourself - how many people are mentally equipped to plan ahead for decades, defer spending, save diligently, stay the course? Especially under the onslaught of consumerism where everyone wants you to hand over your money buy their stuff. And then there's lots and lots of people being taken advantage of by expensive advisors (there's a "fleeing from EJ" thread about every day), expensive mutual funds, putting their life savings into oil wells (yikes), and generally being lured into the latest and hottest investment fads for someone else's benefit (there's a reason crypto talk is verboten here).

Bogleheads is a shining beacon in a stormy ocean in the night, you have to realize that anyone happening to stumble across this site is very lucky (well, unless they get sucked in by the eternal US vs ex US discussions :P). Where else do you get top-notch, free, unbiased advice without ulterior thoughts?

And this is also a reason why people are skeptical of investments around here. When there's advertisements for investments, it's usually banks or advisors still trying to sell their 5% front-loaded 2% expense ratio funds. Now we have pseudo-robo-advisors (which around here are basically rip-off ersatz of LifeStrategy funds) with 1% AUM fees being pushed. And as someone mentioned, many older people in Europe were also burned during the dot com crash (Deutsche Telekom etc.).

For better or worse, currently there seems to be a heightened interest in stock investing among the (upper) middle class in my social bubble. A reason might be easier access to cheap diversified investments via ETFs. Partly also due to the inflation bout of the last year, and of course recency bias (good market returns over the last few years). And probably just more wealth.
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Re: Why is stock investing not as popular in Europe?

Post by UpperNwGuy »

Thank you, alpine_boglehead! That’s a useful comparison.
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Re: Why is stock investing not as popular in Europe?

Post by German Expat »

Apline bogleheads described it very nicely. A lot of older people I know are very risk averse and I know people that put their money into money market funds (with negative actual returns) because they do want 'safety'. The understanding is not there around broad ETF's and if you hear about investments it is usually sales people at banks, insurances etc. that sell you products with high fees. Also some of them still remember their parents loosing a lot because of the war. An older relative is a case in point buying gold and some (bad) investments the bank sold to him.

This is now changing a bit with the new generations being better informed and discount brokers are a thing now in Europe. Also low cost ETF's exist now while many years ago it was relative high fee funds only. But the younger people investment tend to be the same people that then also dabble in e.g. crypto or know wallstreetbets. I know very few bogleheads in Switzerland and usually do not approach the topic except when it is brought up by somebody else.

Also looking at e.g. one of the big pension funds (2nd Swiss Pillar, my wife is in there) they invest only 36% into stocks and it is the same reason (safety):

https://bvk.ch/de/ueber-bvk/anlagestrategie

In this type of pension plan you have no say about the investment strategy (except electing the right people) but most of the 2nd pillars are invested the same way.

In my opinion it is mainly cultural but slowly changing because of better information (Internet) and more willingness to risk taking. I also think if your social security network is good and your basics are covered when you retire there is a point to be made that you can afford to take a higher risk. Its not like you will sleep below a bridge if your investments crater in the same year you retire.
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Re: Why is stock investing not as popular in Europe?

Post by alpine_boglehead »

UpperNwGuy wrote: Wed Dec 08, 2021 2:24 am Thank you, alpine_boglehead! That’s a useful comparison.
Thanks. What perhaps also plays into the issue of stock (un)popularity is just culture. You'll seldom hear people at social gatherings (cocktail parties etc. ) talking about the stock market.
German Expat wrote: Wed Dec 08, 2021 3:14 am
This is now changing a bit with the new generations being better informed and discount brokers are a thing now in Europe. Also low cost ETF's exist now while many years ago it was relative high fee funds only. But the younger people investment tend to be the same people that then also dabble in e.g. crypto or know wallstreetbets. I know very few bogleheads in Switzerland and usually do not approach the topic except when it is brought up by somebody else.
I also see this generation gap. For many (older) people (even those with lots of savings) stocks are outside of what they view as investments appropriate for themselves and others. Savings accounts (despite 0% interest rates for years now) are the standard "investment". And real estate. The few older people I talked with about owning stocks said something along the lines of "isn't that very risky? Why don't you buy an apartment instead?". The younger generation (millennials) in my surroundings is more likely to invest in stocks. Some in boglehead-approved ways (regularly invest in an MSCI World ETF and be done), many as you say are into "stonks", TSLA, crypto, peer-to-peer lending.

Adding to what others above already wrote regarding real estate: local residential real estate (i.e. owning a flat for investment purposes near your own home) is quite popular, it's seen as tangible, e.g. your kids could later live in it (Europeans are generally less mobile than Americans, but it's also changing a bit). Real estate is seen as a conservative investment, so much that it's nicknamed "concrete gold" (Betongold). And as with stocks, there's an industry thriving on it, realtors, investment advisors etc.
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Re: Why is stock investing not as popular in Europe?

Post by German Expat »

alpine_boglehead wrote: Wed Dec 08, 2021 3:25 am
UpperNwGuy wrote: Wed Dec 08, 2021 2:24 am Thank you, alpine_boglehead! That’s a useful comparison.
Thanks. What perhaps also plays into the issue of stock (un)popularity is just culture. You'll seldom hear people at social gatherings (cocktail parties etc. ) talking about the stock market.
German Expat wrote: Wed Dec 08, 2021 3:14 am
This is now changing a bit with the new generations being better informed and discount brokers are a thing now in Europe. Also low cost ETF's exist now while many years ago it was relative high fee funds only. But the younger people investment tend to be the same people that then also dabble in e.g. crypto or know wallstreetbets. I know very few bogleheads in Switzerland and usually do not approach the topic except when it is brought up by somebody else.
I also see this generation gap. For many (older) people (even those with lots of savings) stocks are outside of what they view as investments appropriate for themselves and others. Savings accounts (despite 0% interest rates for years now) are the standard "investment". And real estate. The few older people I talked with about owning stocks said something along the lines of "isn't that very risky? Why don't you buy an apartment instead?". The younger generation (millennials) in my surroundings is more likely to invest in stocks. Some in boglehead-approved ways (regularly invest in an MSCI World ETF and be done), many as you say are into "stonks", TSLA, crypto, peer-to-peer lending.

Adding to what others above already wrote regarding real estate: local residential real estate (i.e. owning a flat for investment purposes near your own home) is quite popular, it's seen as tangible, e.g. your kids could later live in it (Europeans are generally less mobile than Americans, but it's also changing a bit). Real estate is seen as a conservative investment, so much that it's nicknamed "concrete gold" (Betongold). And as with stocks, there's an industry thriving on it, realtors, investment advisors etc.
Good point about the 'Betongold'. My cousin in Germany during he was in the military (served 12 years) got sold 2 apartments by an investment advisor focusing on military people. Apartments were in former East Germany and a 'great investment'. You can probably guess how that ended at the time (he got out of it with a loss, maybe by now would have worked out but it was many years ago).
Also have friends that bought an apartment in Germany as an investment right around the last Euro crisis to not 'loose' their savings. Worked out very well for them with the recent run up but was not a great investment at the time based on the numbers I saw. People tend to be a lot more loss adverse in Europe and have a hard time understanding that on the long run you are ahead investing in the stock market.
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Re: Why is stock investing not as popular in Europe?

Post by ScubaHogg »

Wannaretireearly wrote: Tue Dec 07, 2021 11:17 pm
ScubaHogg wrote: Tue Dec 07, 2021 2:22 pm Personally I think a part of this might be there are just a lot more people in America with six figure plus incomes. The very low income people don't invest must in equities anywhere because they just can't invest much. Whereas "high income" people have a lot more room to invest since they can relatively easily meet their basic needs.
This. Incomes in US are higher. Expenses in the US are higher, especially healthcare!

Need to build a nest egg in Europe is lower. Some countries have close to zero healthcare costs. Imagine that!

Make your money in the US. Retire in Europe 👍
Not clear to me that housing, when adjusted for size and other quality factors, is more expensive in the US.
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Re: Why is stock investing not as popular in Europe?

Post by German Expat »

ScubaHogg wrote: Wed Dec 08, 2021 7:52 am
Wannaretireearly wrote: Tue Dec 07, 2021 11:17 pm
ScubaHogg wrote: Tue Dec 07, 2021 2:22 pm Personally I think a part of this might be there are just a lot more people in America with six figure plus incomes. The very low income people don't invest must in equities anywhere because they just can't invest much. Whereas "high income" people have a lot more room to invest since they can relatively easily meet their basic needs.
This. Incomes in US are higher. Expenses in the US are higher, especially healthcare!

Need to build a nest egg in Europe is lower. Some countries have close to zero healthcare costs. Imagine that!

Make your money in the US. Retire in Europe 👍
Not clear to me that housing, when adjusted for size and other quality factors, is more expensive in the US.
Europe is like the US in this respect. You can get inexpensive housing or you can pay a lot dependent on the country or city you are in. But homeowner ship rates in Europe are all over the board. e.g. you would think Germans are 'rich' compared to Italians but it is the other way around. Homeownership rates in Germany are very low.

https://www.dw.com/en/are-germans-poore ... in%20Spain.
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Re: Why is stock investing not as popular in Europe?

Post by mr_brightside »

Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

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Re: Why is stock investing not as popular in Europe?

Post by mikejuss »

Good question. My thought: Europe has a thicker social-safety net than America. But is the lack of investing there why most international stocks lag those of America?
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Re: Why is stock investing not as popular in Europe?

Post by German Expat »

mr_brightside wrote: Wed Dec 08, 2021 8:39 am Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

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Sweden and Norway (which are considered more socialist by a lot of Americans) has more billionaires compared to population than the US. So there is significant growth possible but it is by owning a successful business. I would actually argue by being a boglehead you get 'some' or at least the average.

https://en.wikipedia.org/wiki/List_of_c ... llionaires
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Re: Why is stock investing not as popular in Europe?

Post by jeffyscott »

klaus14 wrote: Tue Dec 07, 2021 10:32 pmStock allocations are percentage-wise low in Europe, both compared to their own peak (2001) and also compared to US. This suggests there is more room for price appreciation. i agree charts doesn't tell this is individual investors but it probably applies to individual investors too. discussion in this thread provided good reasons why.
Perhaps it is largely just this, meaning basically the difference in recent returns? Looking at EZU for european stocks, they would have to more than double to catch up with the returns from US stock over the last 10 years. If European's stock holdings were to double, they would suddenly be 30% rather than 15% and would be above the allocation from 2000. Of course, Europeans may own US stocks as well, so a doubling of European stocks may not mean a doubling of the allocation. But I assume they (in aggregate) have a home bias, like everyone else, and so have a high percentage of European stocks.

Are these percentages basically just reflecting the what is available in the market? The US market value is pretty close to 50/50 between stocks at bonds, so investor portfolios kinda have to match this in aggregate more or less. I have not found what the current relative market values of stock and bonds is in Europe, but if businesses are much more likely to be private and finance via debt, that would mean more bonds than stocks. Of course, the percentages change with the market values and that's going to be mostly related to the market value of stocks, as bonds are less volatile.
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Re: Why is stock investing not as popular in Europe?

Post by mr_brightside »

German Expat wrote: Wed Dec 08, 2021 9:00 am
mr_brightside wrote: Wed Dec 08, 2021 8:39 am Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

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Sweden and Norway (which are considered more socialist by a lot of Americans) has more billionaires compared to population than the US. So there is significant growth possible but it is by owning a successful business. I would actually argue by being a boglehead you get 'some' or at least the average.

https://en.wikipedia.org/wiki/List_of_c ... llionaires
the problem with comparisons like that is -- it just doesn't scale. we have CITIES with populations higher than those countries...

when you get BIG (just like companies) -- the things that worked well when you were SMALL just aren't possible.

another conversation for another day is how a country spends its tax dollars. in Europe they are spent a lot more on social programs -- much less on defense. the US VASTLY out-spends on defense -- in both % and $$s. So you could make the case -- European social programs are subsidized by US vastly 'carrying the load' in terms of the NATO defense budget (to the tune of billions of dollars every year).

if you look at the $$ it will blow your mind

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Re: Why is stock investing not as popular in Europe?

Post by Jack&Warren disciple »

Living in Austria, I'd like to invert the question - why should you invest (in stocks)?

You go to a free public school, go to a free public university, have a stable income job, get a mortgage to finance the real estate you live in. You get a government pension (social security). Why should you invest - at all?
You bring up some good points. Perhaps generally speaking Americans have a more negative view of their government vis a vis Europeans and prefer as little interference by it in their personal lives as possible so that they can pursue whatever it is that they decide is their "American Dream". So does a more laissez-faire attitude by a country's population result in a bigger appetite for stock investing? Are there more entrepreneurs per capita in the US versus Europe? Do Europeans generally pay higher capital gains taxes than those in the US?
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Re: Why is stock investing not as popular in Europe?

Post by German Expat »

Jack&Warren disciple wrote: Wed Dec 08, 2021 9:39 am
Living in Austria, I'd like to invert the question - why should you invest (in stocks)?

You go to a free public school, go to a free public university, have a stable income job, get a mortgage to finance the real estate you live in. You get a government pension (social security). Why should you invest - at all?
You bring up some good points. Perhaps generally speaking Americans have a more negative view of their government vis a vis Europeans and prefer as little interference by it in their personal lives as possible so that they can pursue whatever it is that they decide is their "American Dream". So does a more laissez-faire attitude by a country's population result in a bigger appetite for stock investing? Are there more entrepreneurs per capita in the US versus Europe? Do Europeans generally pay higher capital gains taxes than those in the US?
You can't generalize Europe across all countries. I am e.g. in Switzerland and there is no capital gains tax. Even with this there is less investment into stocks compared to the US. I think it is partially cultural but also curious how much of it was driven by 401k's in the US where people got used to having invest their own savings. I could not find good data on it but they claim here a lot is related to 401k's:

https://www.fdic.gov/about/history/timeline/1920s.html

I still think its a cultural thing around risk avoidance. Switzerland has lower taxes compared to the US, has way lower government expenses compared to GDP but people like to play it safe and do not take on risk. Also the 2nd pillar here (comparable to 401k) can not be managed by yourself which is also a bit of risk avoidance or thinking the professionals will do better than you can.

It is changing with the younger generation and I would assume over time will get closer to the US. But I have a hard time with older relatives and friends understanding the concept of a long term view and balanced investments including investing into low cost diversified ETF's.
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Re: Why is stock investing not as popular in Europe?

Post by random_walker_77 »

Jack&Warren disciple wrote: Wed Dec 08, 2021 9:39 am Are there more entrepreneurs per capita in the US versus Europe? Do Europeans generally pay higher capital gains taxes than those in the US?
Keep in mind there are cultural issues. In some countries, trying to start a company and failing marks you as a failure and that stigma follows you around. In silicon valley, a failed startup can be a badge of honor.

I didn't find stats on entrepreneurs per capita. The US does have some of the highest venture capital funding per capita: https://news.crunchbase.com/news/countr ... nvestment/
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Re: Why is stock investing not as popular in Europe?

Post by jeffyscott »

alpine_boglehead wrote: Wed Dec 08, 2021 1:32 am Living in Austria, I'd like to invert the question - why should you invest (in stocks)?

You go to a free public school, go to a free public university, have a stable income job, get a mortgage to finance the real estate you live in. You get a government pension (social security). Why should you invest - at all?
And, in fact, nearly half (44%) do not.
https://news.gallup.com/poll/266807/per ... stock.aspx
This assumes they answered the survey questions accurately, of course. And, in any case, for most of those who do own stocks it's a token amount. The median would appear to be something under $40K.
https://www.forbes.com/sites/teresaghil ... 3d323a1154

So if something like 75% of Americans own $40K or less stock is that really so different from a European who, perhaps, owns none?
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Re: Why is stock investing not as popular in Europe?

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random_walker_77 wrote: Wed Dec 08, 2021 10:08 am Keep in mind there are cultural issues. In some countries, trying to start a company and failing marks you as a failure and that stigma follows you around. In silicon valley, a failed startup can be a badge of honor.
I would discount that suggestion. A minor reason is that attitude is changing.

A major reason is that it dodges the OP's question. From a technical perspective it is pretty easy for a European to invest in US stocks. They are not limited to just home-grown stocks.

This is why I think it mainly falls on behavioral reasons (risk adverse, home bias) and higher taxes - in particular wealth and gift (inherence) taxes.
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Re: Why stock investing is not as popular in Europe ?

Post by Big Dog »

Nathan Drake wrote: Tue Dec 07, 2021 1:25 am :dollar
klaus14 wrote: Tue Dec 07, 2021 1:22 am Stock allocation for US Investors are close to all time highs at 51%. See here.
But it is also on average higher than Europe. See EU allocations here.

Above charts also argue high allocation implies low future returns. This is because there won't be any further demand to move prices even higher.

This means there is more room to run in Europe. So I wonder why stock investing is not as popular in Europe, especially considering their even lower interest rates.
More social safety nets (pensions, etc).

In the US those are mostly a thing of the past, so you’re forced to play the stock market game
And to pay for those special safety nets, taxes are higher. The flip side is that US folk have higher after-tax incomes (to enable more investing)?

Obviously, it's not so simple.

https://www.pewresearch.org/fact-tank/2 ... r-smaller/
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Re: Why stock investing is not as popular in Europe ?

Post by alex_686 »

Big Dog wrote: Wed Dec 08, 2021 10:29 am And to pay for those special safety nets, taxes are higher. The flip side is that US folk have higher after-tax incomes (to enable more investing)?
I don't think so. I want to stress the "think" part.

The larger safety net is a bond-like asset so the person should be able to take on more equity risk. So even with a smaller amount to invest the logical conclusion would be a higher AA towards equity - all things being equal. Which they are not. We have multiple dimensions to think about.
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Re: Why is stock investing not as popular in Europe?

Post by Jack&Warren disciple »

German Expat wrote: Wed Dec 08, 2021 10:01 am
Jack&Warren disciple wrote: Wed Dec 08, 2021 9:39 am
Living in Austria, I'd like to invert the question - why should you invest (in stocks)?

You go to a free public school, go to a free public university, have a stable income job, get a mortgage to finance the real estate you live in. You get a government pension (social security). Why should you invest - at all?
You bring up some good points. Perhaps generally speaking Americans have a more negative view of their government vis a vis Europeans and prefer as little interference by it in their personal lives as possible so that they can pursue whatever it is that they decide is their "American Dream". So does a more laissez-faire attitude by a country's population result in a bigger appetite for stock investing? Are there more entrepreneurs per capita in the US versus Europe? Do Europeans generally pay higher capital gains taxes than those in the US?
You can't generalize Europe across all countries. I am e.g. in Switzerland and there is no capital gains tax. Even with this there is less investment into stocks compared to the US. I think it is partially cultural but also curious how much of it was driven by 401k's in the US where people got used to having invest their own savings. I could not find good data on it but they claim here a lot is related to 401k's:

https://www.fdic.gov/about/history/timeline/1920s.html

I still think its a cultural thing around risk avoidance. Switzerland has lower taxes compared to the US, has way lower government expenses compared to GDP but people like to play it safe and do not take on risk. Also the 2nd pillar here (comparable to 401k) can not be managed by yourself which is also a bit of risk avoidance or thinking the professionals will do better than you can.

It is changing with the younger generation and I would assume over time will get closer to the US. But I have a hard time with older relatives and friends understanding the concept of a long term view and balanced investments including investing into low cost diversified ETF's.
Robin Wigglesworth in an interview at minute mark 15 suggests that the reason "Why stock investing is not as popular in Europe at the retail level" is simply that more people have public pensions and these managers tend to invest in index funds for them and that financial services in Europe are largely distributed through banks. Worth a listen.

https://youtu.be/FW4HQCnW4co
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Re: Why stock investing is not as popular in Europe ?

Post by Big Dog »

alex_686 wrote: Wed Dec 08, 2021 10:56 am
Big Dog wrote: Wed Dec 08, 2021 10:29 am And to pay for those special safety nets, taxes are higher. The flip side is that US folk have higher after-tax incomes (to enable more investing)?
I don't think so. I want to stress the "think" part.

The larger safety net is a bond-like asset so the person should be able to take on more equity risk. So even with a smaller amount to invest the logical conclusion would be a higher AA towards equity - all things being equal. Which they are not. We have multiple dimensions to think about.
Yeah, behavioral (& cultural) economics are hard.

I could see your 'thinking' analysis and lower it one: with smaller ability to invest, Euros might be more conservative so the small next egg doesn't get slaughtered in the next recession. (And that is even with the safety net.)
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Re: Why is stock investing not as popular in Europe?

Post by lusoman »

I am Portuguese and in fact equity investing is not that popular here, although that is changing with the younger generation. There is traditionally risk aversion, and the stock market is seen as a casino where many people lose. Most only invest in real estate. The younger generation, with greater use of new technologies, adheres more to investing in stocks, and above all to investing in listed funds, and in recent years Vanguard has launched several new funds such as VWCE, which is equivalent to the American VT. Things are slowly changing.
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Re: Why stock investing is not as popular in Europe ?

Post by Apathizer »

I'll add to the chorus. Since most of us in the US have less guaranteed retirement security (pension, free or affordable health care, etc.) we necessarily need a larger nest egg for retirement. If I were reasonably confident my retirement needs would be met I wouldn't bother as much with a ROTH or other investments.
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Re: Why is stock investing not as popular in Europe?

Post by Northern Flicker »

I generally agree with alpine_boglehead. By socializing the risk of an individual being underfunded in retirement, the risk is managed in aggregate. A European person can spend more of their disposable income enjoying their life when not having to try to overfund everything to cover the worst case outcomes. As a result, my opinion is that people in Europe on average enjoy a higher standard of living than people in the US.

But I would add that the US does have a government pension system (Social Security), so the gap is not as large as perhaps is being described by alpine_boglehead.
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Re: Why is stock investing not as popular in Europe?

Post by AnnetteLouisan »

Are European state funded pensions really that much more than social security plus Medicare?

I have some European relatives in Europe collecting European pensions and those are survival amounts, not anything an average American would consider enough. And people live month to month (as do many Americans), often in multigenerational households of necessity, drawing the full amount of their pensions from direct deposit at their bank.

Average social security may be around $1200-1500 and the max around $4400 - per month! Can anyone confirm. Numbers I hear for Europe are like EUR 500-800/mo as of a few years ago (probably not subject to tax) but it depends a lot on what country and obviously on your income. While it varies greatly by country, European salaries tend to be much lower than comparable positions here, since they are bundled w tax incentives, subsidies (example, a subsidized car) and workplace regulations.
Last edited by AnnetteLouisan on Wed Dec 08, 2021 6:56 pm, edited 2 times in total.
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Re: Why is stock investing not as popular in Europe?

Post by Northern Flicker »

Retirement savings is just one part of it. You don't need a 529 if higher education is affordable. You don't need an HSA with a nat'l health care plan, etc. The contributions to those and health insurance premiums can instead finance a nice vacation for the month of August, which American employers also do not like.
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Re: Why is stock investing not as popular in Europe?

Post by jeffyscott »

Average SS retirement benefit is $1558 per month.

https://www.bankrate.com/retirement/ave ... ity-check/

Do European retirees typically collect a pension from their former employer(s) in addition to getting a benefit from whatever SS-like pension system they have?
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Re: Why is stock investing not as popular in Europe?

Post by willthrill81 »

klaus14 wrote: Tue Dec 07, 2021 1:22 am Stock allocation for US Investors are close to all time highs at 51%. See here.
But it is also on average higher than Europe. See EU allocations here.
FYI, those charts are nearly a year old.
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Re: Why is stock investing not as popular in Europe?

Post by arcticpineapplecorp. »

maybe also because the top 10 holdings of total US stock market index fund are:

Month-end 10 largest holdings
(24.90% of total net assets) as of 10/31/2021
1 Microsoft Corp.
2 Apple Inc.
3 Alphabet Inc.
4 Amazon.com Inc.
5 Tesla Inc.
6 Meta Platforms Inc.
7 NVIDIA Corp.
8 Berkshire Hathaway Inc.
9 JPMorgan Chase & Co.
10 UnitedHealth Group Inc.

whereas the top 10 holdings of the European Stock Market Index Fund are:

Month-end 10 largest holdings
(16.90% of total net assets) as of 10/31/2021
1 Nestle SA
2 ASML Holding NV
3 Roche Holding AG
4 LVMH Moet Hennessy Louis Vuitton SE
5 AstraZeneca plc
6 Royal Dutch Shell plc
7 Novartis AG
8 Novo Nordisk A/S
9 SAP SE
10 HSBC Holdings plc

which companies seem "sexier" to you?
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Re: Why is stock investing not as popular in Europe?

Post by wineandplaya »

German Expat wrote: Wed Dec 08, 2021 9:00 am
mr_brightside wrote: Wed Dec 08, 2021 8:39 am Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

-------------------------------------------------------
Sweden and Norway (which are considered more socialist by a lot of Americans) has more billionaires compared to population than the US. So there is significant growth possible but it is by owning a successful business. I would actually argue by being a boglehead you get 'some' or at least the average.

https://en.wikipedia.org/wiki/List_of_c ... llionaires
I'm always baffled by these threads, seeing how little Americans understand about what's going on in Europe, how different the situation can be between countries and even within countries. And also not understanding how things are changing over time, often for the better via EU harmonizations that strengthen competition and consumer protection.
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Re: Why is stock investing not as popular in Europe?

Post by AnnetteLouisan »

A truly wonderful novel on the dissonance and mutual lack of understanding between Americans and Europeans, including attitudes toward business, is Dodsworth, by Sinclair Lewis.

Midwestern successful US car manufacturer in the 30s travels through several European countries on a months long tour with his wife, who has European relatives, after selling his company. Attitudes and mutual befuddlement clash amusingly, but enlightenment ultimately ensues, on many different levels, for many of the characters, including the protagonist.
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Re: Why is stock investing not as popular in Europe?

Post by peterinjapan »

I once met a tourist in Tokyo from Norway who asked why I was working so hard. (I live here was was pecking away on my laptop in a cafe.) I replied that hard work and being industrious is viewed as a positive thing in Japan, and it gets rewarded. She said, "In Norway we want to work as little as possible, and relax and have fun as much as possible." Both approaches seem fine to me! :sharebeer
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Re: Why is stock investing not as popular in Europe?

Post by AnnetteLouisan »

I was in Southern Europe on a beach in my late 30s talking with a European friend and her husband about various wide ranging topics. Very nice people, very hospitable. We decided to have a swim. As we were all wading into the water, the friend’s husband summed up the discussion by saying something like.. “after all, the meaning of life is…. to enjoy!!” He said it like it was self evident, common knowledge.

I remember stopping and thinking… “wait, WHAT!!!?!! The meaning of life is to work really, really hard, engage in lifelong learning, create something of lasting value, distinguish yourself through self actuation and contribute importantly to the world in a way you’ll be proud of!” (The prevailing view where I’m from).

The meaning of life is … to enjoy? It probably says more about me than about him, but I had literally never heard that until that moment. Seemed pretty barren, nihilistic and hedonistic to me at the time although probably his comment had some wisdom for his circumstances. Many people there have highly constricted options due to poor employment prospects, a prevalence of companies with fewer than five employees, public corruption and rigid social rules. So having fun (which of course is fine) becomes what’s left to them and their means of reclaiming autonomy and transcending those limitations. Although no doubt he’ll have the last laugh.
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Re: Why is stock investing not as popular in Europe?

Post by TheoLeo »

I can speak of Germany only. How people finance their retirement here depends on their type of employement.

Type 1: The state employee (teachers, politicians): They don't have to waste a single second on retirement planning or finances in general. The finest real estate in every city (if you exclude true luxury) is owned by teacher couples because the salaries are just better than in the "open economy". They can not be fired, ever. They get private health insurance and therefore have access to the best medical services. And lastly they get real nice pensions, compared to other people in Germany. The average is around 2500 euro (2800 USD).

Type 2: Professions with their own social security system. This includes lawyers, architects, dentists, medical doctors and propably more. They get, on average between 2000 and 3500 (2200 - 4000 USD) euro social security out of it. I am sure some of them do invest. But most won't have enough to invest AND pay off a mortgage so most simply pay off a mortgage all their lives.

Type 3: The corporate employee. They usually get a combination of SS (average 1000 euro) plus a corporate pension (average 600 euro). They also will pay off a mortgage mostly and that is it.

For most people a social security benefit and a pension that covers basic needs plus maybe a house they own is all they can hope for. This is already an accomplishment here and requires sacrifices. Excluding crypto people and criminals, there simply are no 30 somethings here with millions in their portfolios. What is left of your paycheck after taxes and all simply is not that much.
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Re: Why is stock investing not as popular in Europe?

Post by alpine_boglehead »

jeffyscott wrote: Wed Dec 08, 2021 10:14 am
alpine_boglehead wrote: Wed Dec 08, 2021 1:32 am Living in Austria, I'd like to invert the question - why should you invest (in stocks)?

You go to a free public school, go to a free public university, have a stable income job, get a mortgage to finance the real estate you live in. You get a government pension (social security). Why should you invest - at all?
And, in fact, nearly half (44%) do not.
https://news.gallup.com/poll/266807/per ... stock.aspx
This assumes they answered the survey questions accurately, of course. And, in any case, for most of those who do own stocks it's a token amount. The median would appear to be something under $40K.
https://www.forbes.com/sites/teresaghil ... 3d323a1154

So if something like 75% of Americans own $40K or less stock is that really so different from a European who, perhaps, owns none?
If the numbers are correct, only 17.5% of Germans own stocks or mutual funds (hard to come by English sources, this FT article from 2016 says it was about 12% back then). But you are right that its likely Pareto distributed in both countries (and probably most others as well).
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Re: Why is stock investing not as popular in Europe?

Post by jeffyscott »

TheoLeo wrote: Thu Dec 09, 2021 4:20 am I can speak of Germany only...

For most people a social security benefit and a pension that covers basic needs plus maybe a house they own is all they can hope for.
For most people in the US, it's about the same, less the pension (but it sounds like the average SS benefit here is close to SS + pension there). The 30 somethings (or even 60 somethings) with millions in their portfolio are not the norm, the participants here are not at all a representative sample of the US population.

According to this: https://www.marketwatch.com/story/here- ... 2020-11-16 only about 1/2 of US households have any retirement savings at all, even in their 50s and 60s. And the median, I assume among the half that do have anything, maxes out at $164K. So about half have essentially nothing at retirement and another ~1/4 have less than $164K. At that level of $164K, they might be able to spend about $500 per month, in addition to SS.

Government employees do generally still get defined benefit pensions, but in the private sector it's mostly just SS and (maybe) a 401K or equivalent. The employer usually contributes very little to the 401K (I believe typical would be that about 3% of the employees pay is contributed by the employer), so this is mostly just a tax deferred way for the employee to save a part of their income.
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Re: Why is stock investing not as popular in Europe?

Post by Wannaretireearly »

AnnetteLouisan wrote: Thu Dec 09, 2021 3:06 am I was in Southern Europe on a beach in my late 30s talking with a European friend and her husband about various wide ranging topics. Very nice people, very hospitable. We decided to have a swim. As we were all wading into the water, the friend’s husband summed up the discussion by saying something like.. “after all, the meaning of life is…. to enjoy!!” He said it like it was self evident, common knowledge.

I remember stopping and thinking… “wait, WHAT!!!?!! The meaning of life is to work really, really hard, engage in lifelong learning, create something of lasting value, distinguish yourself through self actuation and contribute importantly to the world in a way you’ll be proud of!” (The prevailing view where I’m from).

The meaning of life is … to enjoy? It probably says more about me than about him, but I had literally never heard that until that moment. Seemed pretty barren, nihilistic and hedonistic to me at the time although probably his comment had some wisdom for his circumstances. Many people there have highly constricted options due to poor employment prospects, a prevalence of companies with fewer than five employees, public corruption and rigid social rules. So having fun (which of course is fine) becomes what’s left to them and their means of reclaiming autonomy and transcending those limitations. Although no doubt he’ll have the last laugh.
Really enjoying the last few responses.
Work to Live vs. Live to Work. Sums up European vs US culture, in general. Only thing I’d argue is that even folks who are successful in Europe have this ‘enjoy first’ viewpoint (I was born there). Perhaps cultural and not related to economic opportunities.
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Re: Why is stock investing not as popular in Europe?

Post by Valuethinker »

klaus14 wrote: Tue Dec 07, 2021 1:22 am Stock allocation for US Investors are close to all time highs at 51%. See here.
But it is also on average higher than Europe. See EU allocations here.

Above charts also argue high allocation implies low future returns. This is because there won't be any further demand to move prices even higher.

This means there is more room to run in Europe. So I wonder why stock investing is not as popular in Europe, especially considering their even lower interest rates.
If you asked on the non-US investing board, you might get more of an international response?

There's going to be a lot of airy theorising here, from people who have only lived under one, or another system.
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Re: Why is stock investing not as popular in Europe?

Post by AnnetteLouisan »

Although Max Weber and the so called Protestant work ethic (salvation through work and saving in the glory of god) originated in Europe. And taken to extremes by the Puritans in colonial America. And the Joint Stock Corporation originated in Europe. Ok, back to the markets for me.
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Re: Why is stock investing not as popular in Europe?

Post by WoodSpinner »

wineandplaya wrote: Wed Dec 08, 2021 10:14 pm
German Expat wrote: Wed Dec 08, 2021 9:00 am
mr_brightside wrote: Wed Dec 08, 2021 8:39 am Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

-------------------------------------------------------
Sweden and Norway (which are considered more socialist by a lot of Americans) has more billionaires compared to population than the US. So there is significant growth possible but it is by owning a successful business. I would actually argue by being a boglehead you get 'some' or at least the average.

https://en.wikipedia.org/wiki/List_of_c ... llionaires
I'm always baffled by these threads, seeing how little Americans understand about what's going on in Europe, how different the situation can be between countries and even within countries. And also not understanding how things are changing over time, often for the better via EU harmonizations that strengthen competition and consumer protection.
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Re: Why is stock investing not as popular in Europe?

Post by mr_brightside »

wineandplaya wrote: Wed Dec 08, 2021 10:14 pm

I'm always baffled by these threads, seeing how little Americans understand about what's going on in Europe, how different the situation can be between countries and even within countries. And also not understanding how things are changing over time, often for the better via EU harmonizations that strengthen competition and consumer protection.
of course that's the case. you really wouldn't expect a European to have much understanding about how varied the United States can be -- with various local, state, regional and national differences / opinions / politics / social mores, etc. which can be huge.

as an American there have been some places in the US I have gone and felt like i was in another country and I've lived here for 50+ years :o

---------------------------------
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Re: Why is stock investing not as popular in Europe?

Post by Wannaretireearly »

Valuethinker wrote: Thu Dec 09, 2021 8:44 am
klaus14 wrote: Tue Dec 07, 2021 1:22 am Stock allocation for US Investors are close to all time highs at 51%. See here.
But it is also on average higher than Europe. See EU allocations here.

Above charts also argue high allocation implies low future returns. This is because there won't be any further demand to move prices even higher.

This means there is more room to run in Europe. So I wonder why stock investing is not as popular in Europe, especially considering their even lower interest rates.
If you asked on the non-US investing board, you might get more of an international response?

There's going to be a lot of airy theorising here, from people who have only lived under one, or another system.
Always like to read your views Valuethinker. Hope you’ll weigh in on this thread with your always thoughtful and insightful global perspective!
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Re: Why is stock investing not as popular in Europe?

Post by William Million »

The main difference, in my opinion, is John Bogle.

As a few other posters have alluded to, the Bogle Revolution in the US has had a profound impact. Not speaking so much of Vanguard, which has slipped since Bogle's time, but about almost all other US investing firms. Many of them charge no commissions and offer low-cost funds. This has made it very comfortable for Americans to invest. Fidelity, Schwab, Merrill Edge, E*TRADE, etc,, have been impacted by Bogle's influence. Even Franklin Templeton is now trying to transition to low-cost ETFs. Online sites like Morningstar inform readers upfront about fees, thanks to Bogle's impact.

By contrast, I've spent considerable time in Spain - own property, have family, etc. Equity investing in Spain is far more expensive, less customer friendly and far less transparent in terms of past performance and fees. Most of my Spanish friends and relatives have to turn to banks to buy stocks, and the banks train their staff to take advantage of clients. This is where the US was 1970s and before - or perhaps even a bit worse.

Honestly, given his contribution to making tens-of-millions of Americans richer, I can't believe Bogle didn't receive something like a Medal of Freedom, or doesn't have schools of economics/business/accounting named after him. If Bogle had never lived, many of us would be in a different place today.
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Re: Why is stock investing not as popular in Europe?

Post by prioritarian »

German Expat wrote: Wed Dec 08, 2021 9:00 am
mr_brightside wrote: Wed Dec 08, 2021 8:39 am Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

-------------------------------------------------------
Sweden and Norway (which are considered more socialist by a lot of Americans) has more billionaires compared to population than the US. So there is significant growth possible but it is by owning a successful business. I would actually argue by being a boglehead you get 'some' or at least the average.

https://en.wikipedia.org/wiki/List_of_c ... llionaires
The word you are using is far less absolute than you are making it out to be:

"Social democracy is a political, social, and economic philosophy within socialism[1] that supports political and economic democracy.[2] "

https://en.wikipedia.org/wiki/Social_democracy

https://en.wikipedia.org/wiki/Market_socialism
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Re: Why is stock investing not as popular in Europe?

Post by prioritarian »

ScubaHogg wrote: Tue Dec 07, 2021 2:19 pm
prioritarian wrote: Tue Dec 07, 2021 1:33 pm
The poverty data is also misleading because european social safety nets provide substantial non-income benefits: e.g. social housing, free medical care, free long-term care etc.
It's not overly important to the question, but for Americans in poverty (as defined above) the government provides many, but by no means equal, of the same benefits (Medicaid, etc.)
As an EU national and US citizen I suspect that like many USAnians you are simply unaware of how lacking the USA is in this respect.

Social housing is effectively illegal in the USA (google Faircloth Amendment) and many low-income people either lack medical care or are bankrupted when they seek medical care. Moreover, there is no broad social safety net for education or long-term care in the USA.
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Re: Why is stock investing not as popular in Europe?

Post by Wannaretireearly »

prioritarian wrote: Thu Dec 09, 2021 12:01 pm
ScubaHogg wrote: Tue Dec 07, 2021 2:19 pm
prioritarian wrote: Tue Dec 07, 2021 1:33 pm
The poverty data is also misleading because european social safety nets provide substantial non-income benefits: e.g. social housing, free medical care, free long-term care etc.
It's not overly important to the question, but for Americans in poverty (as defined above) the government provides many, but by no means equal, of the same benefits (Medicaid, etc.)
As an EU national and US citizen I suspect that like many USAnians you are simply unaware of how lacking the USA is in this respect.

Social housing is effectively illegal in the USA (google Faircloth Amendment) and many low-income people either lack medical care or are bankrupted when they seek medical care. Moreover, there is no broad social safety net for education or long-term care in the USA.
E.g. Just the ability to get sick and walk into doctors/hospitals without fear of massive bills. And that’s with insurance!
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Re: Why is stock investing not as popular in Europe?

Post by German Expat »

prioritarian wrote: Thu Dec 09, 2021 11:55 am
German Expat wrote: Wed Dec 08, 2021 9:00 am
mr_brightside wrote: Wed Dec 08, 2021 8:39 am Alpine makes the case for a population being content with 'good enough'. That's pretty much the mindset (and attraction for some) of socialism. Basically -- everybody gets 'some'.

But my question for that group: how do you grow significantly your wealth? Answer is probably not much chance of that.

And basically underscores why we should underweight VXUS. :happy

-------------------------------------------------------
Sweden and Norway (which are considered more socialist by a lot of Americans) has more billionaires compared to population than the US. So there is significant growth possible but it is by owning a successful business. I would actually argue by being a boglehead you get 'some' or at least the average.

https://en.wikipedia.org/wiki/List_of_c ... llionaires
The word you are using is far less absolute than you are making it out to be:

"Social democracy is a political, social, and economic philosophy within socialism[1] that supports political and economic democracy.[2] "

https://en.wikipedia.org/wiki/Social_democracy

https://en.wikipedia.org/wiki/Market_socialism
I was using socialism not in the scientific sense. We can go really deep down that rabbit hole and e.g. China considers itself a socialist democracy (at least according to its leaders).
My reference was towards the common usage by a lot of people including our previous president in the US e.g. in 2018.

https://www.tnp.no/norway/economy/donal ... -in-norway
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Re: Why is stock investing not as popular in Europe?

Post by mr_brightside »

Wannaretireearly wrote: Thu Dec 09, 2021 12:13 pm

E.g. Just the ability to get sick and walk into doctors/hospitals without fear of massive bills. And that’s with insurance!
those hospital bills are getting paid one way or another -- either by higher taxes or higher health insurance premiums / out-of-pocket expenses

there is no free lunch

----------------------------------------
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Re: Why is stock investing not as popular in Europe?

Post by avidracer »

Simple, as I hear from my EU colleagues: They dont have to worry about big medical bill or about a steady revenue stream during retirement. Some even state they do not worry about higher taxes presently for the 'promised' safety nets. My observation is that they do enjoy life in the present and with relatively less worry about present job security.
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Re: Why is stock investing not as popular in Europe?

Post by hnd »

William Million wrote: Thu Dec 09, 2021 10:44 am The main difference, in my opinion, is John Bogle.

As a few other posters have alluded to, the Bogle Revolution in the US has had a profound impact. Not speaking so much of Vanguard, which has slipped since Bogle's time, but about almost all other US investing firms. Many of them charge no commissions and offer low-cost funds. This has made it very comfortable for Americans to invest. Fidelity, Schwab, Merrill Edge, E*TRADE, etc,, have been impacted by Bogle's influence. Even Franklin Templeton is now trying to transition to low-cost ETFs. Online sites like Morningstar inform readers upfront about fees, thanks to Bogle's impact.

By contrast, I've spent considerable time in Spain - own property, have family, etc. Equity investing in Spain is far more expensive, less customer friendly and far less transparent in terms of past performance and fees. Most of my Spanish friends and relatives have to turn to banks to buy stocks, and the banks train their staff to take advantage of clients. This is where the US was 1970s and before - or perhaps even a bit worse.

Honestly, given his contribution to making tens-of-millions of Americans richer, I can't believe Bogle didn't receive something like a Medal of Freedom, or doesn't have schools of economics/business/accounting named after him. If Bogle had never lived, many of us would be in a different place today.
The gentlemen I know also stated the expense of investing in the countries he was stationed in. net of fees, and based on the returns available in the Euro markets, it hardly seemed worth it.

I agree with you that it appears Europe has not yet had its jack bogle moment.
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