US expat in UK looking for UK reporting fund investment advice
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US expat in UK looking for UK reporting fund investment advice
Hey everyone! I'm an American living in the UK indefinitely and I spoke with a financial advisor who recommended I move all my non-UK reporting mutual funds over to UK-reporting funds for tax purposes. I had originally wanted to do the following split with my assets:
- VTI - Vanguard Total Stock Market ETF (50%)
- Vanguard FTSE All-World ex-US ETF (15%)
- Vanguard Total Bond Market ETF (30%)
The advisor cautioned me against investing so much in US stocks, especially in VTI, because the top ten holdings are almost all tech companies and 23% of the fund. They believe there's likely a correction coming in the US similar to the dotcom boom and to slightly underweigh the US from their 60% market cap down to around 55%.
I'm wondering if anyone is willing to share their current ETF investment strategy (ideally it's simple with 3-4 funds) or if they have a better suggestion than the VTI fund? There is a massive list of UK reporting funds and I use Schwab, so I've stuck to Vanguard because I know Schwab has those. Thanks!!
- VTI - Vanguard Total Stock Market ETF (50%)
- Vanguard FTSE All-World ex-US ETF (15%)
- Vanguard Total Bond Market ETF (30%)
The advisor cautioned me against investing so much in US stocks, especially in VTI, because the top ten holdings are almost all tech companies and 23% of the fund. They believe there's likely a correction coming in the US similar to the dotcom boom and to slightly underweigh the US from their 60% market cap down to around 55%.
I'm wondering if anyone is willing to share their current ETF investment strategy (ideally it's simple with 3-4 funds) or if they have a better suggestion than the VTI fund? There is a massive list of UK reporting funds and I use Schwab, so I've stuck to Vanguard because I know Schwab has those. Thanks!!
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Re: US expat in UK looking for UK reporting fund investment advice
Welcome.
Vanguard US domiciled ETFs that are UK HMRC reporting funds - Bogleheads
My only comments on your other points would be a) that everyone has been saying for some time now that US markets are due a fall, and so far they have all been wrong, and b) recommending underweighting by just 5% doesn't seem to be evidence of a lot of conviction. :-)
This wiki page can save you the effort of hauling through HMRC's rather unwieldy list of Vanguard's US domiciled UK reporting funds:Londoner123 wrote: ↑Mon Jan 18, 2021 12:39 pm There is a massive list of UK reporting funds and I use Schwab, so I've stuck to Vanguard because I know Schwab has those.
Vanguard US domiciled ETFs that are UK HMRC reporting funds - Bogleheads
My only comments on your other points would be a) that everyone has been saying for some time now that US markets are due a fall, and so far they have all been wrong, and b) recommending underweighting by just 5% doesn't seem to be evidence of a lot of conviction. :-)
Re: US expat in UK looking for UK reporting fund investment advice
Stick to your 3 ETFs BND, VTI and VXUS.
Its not un reasonable to go up to 50/50 VTI/VXUS.
Be extremely careful if you need to file tax return with IRS. Any investments outside pension, most UK funds are no go because of the PFIC rule.
Its not un reasonable to go up to 50/50 VTI/VXUS.
Be extremely careful if you need to file tax return with IRS. Any investments outside pension, most UK funds are no go because of the PFIC rule.
Re: US expat in UK looking for UK reporting fund investment advice
Why not simply own the Vanguard global index fund VWRL, it's already 56% US stocks.
Amateur Self-Taught Senior Macro Strategist
Re: US expat in UK looking for UK reporting fund investment advice
Vineviz has a post on a five-fund model portfolio. All of them are HMRC Reporting Funds: VTI, VIOV, VSS, VWO, EDV.
Buy some combo of those and whatever crappy total market fund you can get in your pension.
Buy some combo of those and whatever crappy total market fund you can get in your pension.
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Re: US expat in UK looking for UK reporting fund investment advice
Thanks for this advice!! I'm a bit confused though - if I choose BND, VTI and VXUS, would those be an issue? Or you are just saying UK funds in general?
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Re: US expat in UK looking for UK reporting fund investment advice
Thx so much for this! I'm checking it out. To be honest, I'm still new at all of this and these five funds seem more intimidating than three...I'm also still trying to learn the difference between small cap, large cap, etc. So much to learn!
Re: US expat in UK looking for UK reporting fund investment advice
The 3 ETFs are OK with both IRS and HMRC.Londoner123 wrote: ↑Tue Jan 19, 2021 3:45 pm if I choose BND, VTI and VXUS, would those be an issue? Or you are just saying UK funds in general?
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Re: US expat in UK looking for UK reporting fund investment advice
Like other posters are saying, read up on PFIC before making a move. I can't believe your FA is advising to go with UK-reporting funds. Might have to find a different FA.
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Re: US expat in UK looking for UK reporting fund investment advice
Right on PFIC, but just for clarity, 'UK reporting' is not the same as 'UK domiciled'.Marseille07 wrote: ↑Tue Jan 19, 2021 4:35 pm Like other posters are saying, read up on PFIC before making a move. I can't believe your FA is advising to go with UK-reporting funds. Might have to find a different FA.
A 'UK reporting' fund is a non-UK domiciled fund that the UK's tax authority will treat as if UK domiciled. This allows it to escape the UK's (much, much milder) analogue to the US's PFIC tax regime. Advising a US citizen living in the UK to use US domiciled UK reporting status funds is entirely a good thing.
Re: US expat in UK looking for UK reporting fund investment advice
A recent post on BH about US person moving to UK you should read.
viewtopic.php?f=22&t=336738
As a UK tax payer, you might like to take advantage of ISA. It is a UK tax free wrapper but you might find it difficult to buy US registered ETFs. In that case, I would go to individual shares (at least 15 to start with)
viewtopic.php?f=22&t=336738
As a UK tax payer, you might like to take advantage of ISA. It is a UK tax free wrapper but you might find it difficult to buy US registered ETFs. In that case, I would go to individual shares (at least 15 to start with)
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Re: US expat in UK looking for UK reporting fund investment advice
Under the PRIIP (sp?) rules regarding what can be sold to individual customers in the EU, a UK broker won't sell him a US registered ETF? AFAIK that's not possible, unless we diverge from EU Financial Regulation right away.jw50 wrote: ↑Wed Jan 20, 2021 12:26 am A recent post on BH about US person moving to UK you should read.
viewtopic.php?f=22&t=336738
As a UK tax payer, you might like to take advantage of ISA. It is a UK tax free wrapper but you might find it difficult to buy US registered ETFs. In that case, I would go to individual shares (at least 15 to start with)
So the PFIC will catch a US citizen with a UK ISA. It avoids UK tax (which is usually higher) but not US tax.
15 shares is a large portfolio to manage. Transactions costs could become a factor.
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Re: US expat in UK looking for UK reporting fund investment advice
Yes, exactly this. Thx for explaining!TedSwippet wrote: ↑Tue Jan 19, 2021 4:48 pmRight on PFIC, but just for clarity, 'UK reporting' is not the same as 'UK domiciled'.Marseille07 wrote: ↑Tue Jan 19, 2021 4:35 pm Like other posters are saying, read up on PFIC before making a move. I can't believe your FA is advising to go with UK-reporting funds. Might have to find a different FA.
A 'UK reporting' fund is a non-UK domiciled fund that the UK's tax authority will treat as if UK domiciled. This allows it to escape the UK's (much, much milder) analogue to the US's PFIC tax regime. Advising a US citizen living in the UK to use US domiciled UK reporting status funds is entirely a good thing.
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Re: US expat in UK looking for UK reporting fund investment advice
Yes, I've been advised by multiple people not to invest in a UK ISA as an American citizen given it will be taxed punitively by the IRS.Valuethinker wrote: ↑Wed Jan 20, 2021 3:04 amUnder the PRIIP (sp?) rules regarding what can be sold to individual customers in the EU, a UK broker won't sell him a US registered ETF? AFAIK that's not possible, unless we diverge from EU Financial Regulation right away.jw50 wrote: ↑Wed Jan 20, 2021 12:26 am A recent post on BH about US person moving to UK you should read.
viewtopic.php?f=22&t=336738
As a UK tax payer, you might like to take advantage of ISA. It is a UK tax free wrapper but you might find it difficult to buy US registered ETFs. In that case, I would go to individual shares (at least 15 to start with)
So the PFIC will catch a US citizen with a UK ISA. It avoids UK tax (which is usually higher) but not US tax.
15 shares is a large portfolio to manage. Transactions costs could become a factor.
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Re: US expat in UK looking for UK reporting fund investment advice
Thanks for this! I'm going to start with these 3 because I'm intimidated by the 5-fund model lol. I appreciate your help!jw50 wrote: ↑Tue Jan 19, 2021 4:10 pmThe 3 ETFs are OK with both IRS and HMRC.Londoner123 wrote: ↑Tue Jan 19, 2021 3:45 pm if I choose BND, VTI and VXUS, would those be an issue? Or you are just saying UK funds in general?
Re: US expat in UK looking for UK reporting fund investment advice
As I already pointed out:Londoner123 wrote: ↑Wed Jan 20, 2021 6:01 am Yes, I've been advised by multiple people not to invest in a UK ISA as an American citizen given it will be taxed punitively by the IRS.
-no restriction on pension
-ISA: you can have a collection of individual shares to stay on the right side of IRS; ie build your own portfolio. One possible way to get share diversification is buy some Berkshire. Reminder, no investment trusts!
Re: US expat in UK looking for UK reporting fund investment advice
Personally I'd keep everything as simple as possible and in any case ignore advisor hunches unless you are a gambling man. So yes vti ,vxus and bnd sound good for the reasons others have given. Good advice about the reporting funds.
Re: US expat in UK looking for UK reporting fund investment advice
If you are owning BND for diversification purposes away from the GBP or for ultimate retirement in the USA this will work fine. If you are owning it for stability in a portfolio then it will fluctuate with the USD and GBP exchange rate (when using GBP as basis). You might also find that it can't be used effectively for rebalancing as it can throw off gains in one country and at the same time losses in the other (and vice versa).Londoner123 wrote: ↑Wed Jan 20, 2021 6:02 amThanks for this! I'm going to start with these 3 because I'm intimidated by the 5-fund model lol. I appreciate your help!jw50 wrote: ↑Tue Jan 19, 2021 4:10 pmThe 3 ETFs are OK with both IRS and HMRC.Londoner123 wrote: ↑Tue Jan 19, 2021 3:45 pm if I choose BND, VTI and VXUS, would those be an issue? Or you are just saying UK funds in general?
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Re: US expat in UK looking for UK reporting fund investment advice
I think that's valid, but it does raise the question of which US domiciled bond fund a US citizen living in the UK should use? As far as I'm aware, there are no US domiciled UK gilts funds. No US domiciled analogue to VGOV (UK Gilts UCITS ETF), for example.halfnine wrote: ↑Wed Jan 20, 2021 10:19 am If you are owning BND for diversification purposes away from the GBP or for ultimate retirement in the USA this will work fine. If you are owning it for stability in a portfolio then it will fluctuate with the USD and GBP exchange rate (when using GBP as basis). You might also find that it can't be used effectively for rebalancing as it can throw off gains in one country and at the same time losses in the other (and vice versa).
My guess is that BNDW (Total World Bond ETF) would have perhaps been a reasonable choice, but unfortunately that's not in the list of UK 'reporting status' ETFs. Blending BND with BNDX (Total International Bond ETF) in ratios to match BNDW seems possible, though, and both of these do have UK 'reporting status'.
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Re: US expat in UK looking for UK reporting fund investment advice
Interesting thread. But very little discussion on PRIIP other than one comment by ValueThinker.
I gather that the OP (US expat in UK) is limited to *) US domiciled funds/ETFs due to PFIC and *) within that set limited to those funds/ETFs which are UK HMRC reporting funds. *) Furthermore, OP's broker may not allow OP to buy US domiciled ETF due to PRIIP.
It is not just UK brokers who deny US domiciled ETFs due to PRIIP, even few US brokers are doing the same. ETrade isnt letting me buy VTI, VT, VOO in my Etrade US dollar account that I have from the old days in US. Etrade however allowed me to do the same in Mar 2020. So far Vanguard US is fine. I called up Schwab with whom I dont have an account and they also said I will not be allowed to buy US domiciled ETFS since I am EU resident.
So I am really curious how US citizens in UK/EU are coping. Perhaps US brokers are allowing only US *citizens* to buy US domiciled ETFs even if they live in the UK/EU ? Surely that would be a violation of PRIIP. I would thnk PRIIP was intended to apply to all EU residents, even if they are US citizens.
I guess the only options are
*) Use Vanguard US - have a mutual fund account and brokerage account - set this up before leaving the US.
*) Use the option loophole : But it is too good to last. Loophohes are meant for the Big Boys and Mighty and Powerful not to Joe Schmoe. There are already threads on various forums that this loophole is closed. It seems Interactive brokers is liquidating the position if they see you doing this. You exercise the option and cash appears in your account instead of underlying ETF shares.
*) Buy individual stocks
I am curious what OP finally did. I am not a US citizen but still curious.
I gather that the OP (US expat in UK) is limited to *) US domiciled funds/ETFs due to PFIC and *) within that set limited to those funds/ETFs which are UK HMRC reporting funds. *) Furthermore, OP's broker may not allow OP to buy US domiciled ETF due to PRIIP.
It is not just UK brokers who deny US domiciled ETFs due to PRIIP, even few US brokers are doing the same. ETrade isnt letting me buy VTI, VT, VOO in my Etrade US dollar account that I have from the old days in US. Etrade however allowed me to do the same in Mar 2020. So far Vanguard US is fine. I called up Schwab with whom I dont have an account and they also said I will not be allowed to buy US domiciled ETFS since I am EU resident.
So I am really curious how US citizens in UK/EU are coping. Perhaps US brokers are allowing only US *citizens* to buy US domiciled ETFs even if they live in the UK/EU ? Surely that would be a violation of PRIIP. I would thnk PRIIP was intended to apply to all EU residents, even if they are US citizens.
I guess the only options are
*) Use Vanguard US - have a mutual fund account and brokerage account - set this up before leaving the US.
*) Use the option loophole : But it is too good to last. Loophohes are meant for the Big Boys and Mighty and Powerful not to Joe Schmoe. There are already threads on various forums that this loophole is closed. It seems Interactive brokers is liquidating the position if they see you doing this. You exercise the option and cash appears in your account instead of underlying ETF shares.
*) Buy individual stocks
I am curious what OP finally did. I am not a US citizen but still curious.
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Re: US expat in UK looking for UK reporting fund investment advice
Replying just to keep track.
"Crossing the steam by feeling the stones"
Re: US expat in UK looking for UK reporting fund investment advice
New member Teafor3 has a question which I've moved into a new thread. See: [US ex-pat in UK - Portfolio help requested]