Building a non-US Boglehead portfolio

From Bogleheads
Jump to navigation Jump to search

Building a non-US Boglehead portfolio provides information on building a Bogleheads investment portfolio from jurisdictions outside of the US.

It sets out at high level the steps needed to build such a portfolio and provides suggestions on the funds that can be used.

A discussion is included below on the main differences for a non-US investor to the approach that a US Boglehead investor would have.

Most of this article is applicable to all non-US investors, even though the focus of this article is on EU investors.

Context on Boglehead investing from outside of the US


Bogleheads originated from the US and is backed up by a deep knowledge base mainly orientated to US retail investors in the form of Bogleheads Wiki. Any attempt to gather together information aimed at retail investors outside the US is a vast undertaking in regards to the detail of investing from these other jurisdictions. Fundamental differences to saving and investing in the US in comparison to other countries immediately present themselves, not least of which are:

  • Taxation
  • Domicile
  • Legal system and regulations
  • Local products
  • Existing insurance pension products and tied agents

In addition language will also play a part in the interest levels of investors outside of the base language of English for Bogleheads. Having said that some Boglehead forums use other languages such as through Spanish for Bogleheads investing from Spain.

Notwithstanding these more obvious differences the basic Boglehead principles remain consistent with investing anywhere subject to the difficulties or otherwise introduced by local taxes and laws.

The principle of the benefits of asset allocation remain universal.

The section below entitled Outline of non-US domiciles provides a great deal of information and data sources relevant to many jurisdictions. For example an entirely separate Wiki available specifically for Bogleheads investing from Canada. See: finiki, the Canadian financial wiki.

This article seeks to form a bridge between the Boglehead philosophy as presented in Bogleheads' Guide to Investing and what is applicable to the non-US and the EU retail investor.

It may also provide some support to an investor's desire to adjust their portfolio by the inclusion of funds other than those suggested in the Wiki portfolios.

Outline of non-US domiciles

The non-US sections of Wiki contain information which is both universal to non-US investors and which is also specific to particular jurisdictions.

Outline of non-US domiciles is essential reading for the new non-US investor and contains content on many of the key technical issues facing the non-US and the EU-based investor and acts as a base for understanding the complexities of:

  • Domicile
  • Tax
  • Currency

These issues are set out carefully there and can be further researched.

This section contains the links to the various country profiles that will assist the investor in understanding some of the key issues related to each individual jurisdiction listed.

Links are included to pages that contain material pertaining to jurisdictions that are outside of the EU and the US.

The section also contains references to pages covering important issues such as:

Boglehead portfolio

Strictly speaking the original and still entirely relevant two or three-fund Boglehead portfolio is a US-centric construction and many US Bogleheads stick fairly carefully to the original formula notwithstanding the long debate about the introduction of international (non-US) elements to the equities side of the equation.

The two-fund version uses entirely US assets and the later three-fund version includes some international equities. In addition Vanguard and Blackrock now include international bonds in their bond fund offerings to those who wish to diversify further.

Ordinarily a non-US investor might consider simply copying the US two-fund and three-fund portfolios presented elsewhere in the Wiki. However, the problem for non-US investors is that US tax rules can make it extremely tax-inefficient to do this. The US tax rules for a non-US investor are entirely different to those of a US investor. Non-US investors are liable for US tax on dividends from US domiciled funds, and also risk significant US estate taxes. For this reason, non-US investors should generally avoid US domiciled funds and ETFs, and instead use non-US domiciled equivalents.

Basic parameters of constructing a Boglehead portfolio

A portfolio is a grouping of financial assets such as equities (including stocks), fixed income (including bonds) and cash. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives.

Portfolios are held directly by investors and/or managed by financial professionals. Mutual funds (including index funds) and exchange-traded funds (ETFs) are typical portfolio building blocks; more advanced investors might choose to select individual securities within the main asset classes.

Once a portfolio has been constructed, there is still a need for ongoing monitoring and maintenance to ensure that the portfolio objectives are being met and to deal with any life events or changes in circumstances.

The outcome of this process should be the basis for your investment policy statement.

The basic parameters for the creation of a simple Boglehead portfolio are found here: Bogleheads® investment philosophy for non-US investors. The following key steps are set out:

The Bogleheads® Philosophy
  1. Develop a workable plan
  2. Invest early and often
  3. Never bear too much or too little risk
  4. Never try to time the market
  5. Use index funds when possible
  6. Keep costs low
  7. Diversify
  8. Minimize taxes
  9. Keep it simple
  10. Stay the course
Video.png Watch the videos

Original Boglehead fund choice

The original Boglehead portfolio is now based upon the following ETFs:

  • Vanguard Total Stock ETF (VTI)
  • Vanguard Total International Stock ETF (VXUS)
  • Vanguard Total Bond Market ETF (BND)

The original Boglehead portfolio is included here as Jack Bogle and others were very clear that they considered this simplified approach to be best and would reward the patient US investor over time. Our conundrum is how to replicate this approach outside the US, but without copying it directly. Using these same investments could lead to unwanted US tax drag and entanglements.

Creating an EU version of the Boglehead portfolio

This information can provide a clear and logical path for any new EU investor into the world of Boglehead investing so as to avoid some well known pitfalls. It will lead to the understanding for EU investors, that apart from the fundamental principles; the building blocks, the construction process for their portfolio and its implementation are somewhat different than for US investors. To that end, links and references to the more detailed notes on important underlying subjects are provided. This will assist in linking the technical aspects and the high level investment aspirations.

Some justification for the investor is put forward for the choice of current Wiki suggested portfolios for EU investors.

The Wiki for EU investors includes some suggested portfolios that are considered appropriate for the Boglehead approach in investing. In addition various suggested portfolios are presented under some of the individual country Wiki pages. For example the Investing from the UK page has various suggested portfolios and links to Vanguard target funds.

These solutions should form the outcome of a considered step by step process for the investor in constructing their portfolio taking into consideration all the technical requirements of investing in the EU.

The information in this paper may be of benefit to other non-US retail investors.

The investor should carefullly research all potential investments and seek professional investment advice prior to making any investments.

Portfolio construction process for an EU investor

The general advice contained in the Wiki for the creation of a simple Bogleheads portfolio is entirely relevant to non-US investors and the EU investor should follow this guidance carefully, get comfortable with their risk appetite and prepare an investment policy statement based upon these principles and stick to it.

An excellent guide to the process of building a portfolio is provided by Vanguard and can be accessed here: Vanguard Portfolio Construction Guide.

This Vanguard guide provides high level information on the process for the creation of a portfolio, however it doesn't provide any particular guidance as to the choice of particular funds relevant to an EU investor which information is key to the implementation phase of building a portfolio. Before starting the build process for your EU portfolio it is worthwhile to review what aspects of the process differ for an EU investor.

Non-US aspects of approach to portfolio construction

Certain aspects of the build up of the Bogleheads portfolio cannot be so easily applied to and adopted by the DIY retail investor in the EU. It is essential for the new DIY investor to be aware of these differences to the original Boglehead approach before starting their investment journey, this should help to avoid costly mistakes, delay and avoid undue complexity in the construction of their portfolios. Examples of these differences such as the choice of funds based upon geography and currency are fairly obvious.

Blackrock in a recent survey Portfolio insights Q1 2019 Blackrock of their major clients in Europe (EMEA 600 clients) concluded that the two main risks to their clients’ portfolios are:

  • Equity risk
  • Currency exchange risk

Equity risk affects all investors in stocks.

For non-US investors the Wiki suggested portfolios propose global aggregate equity ETFs and global aggregate and/or global government hedged bond ETFs as the basis for building a Boglehead style portfolio. These suggestions as noted above are not strictly in conformance with the original Boglehead portfolio particularly as expressed in the two or three-fund portfolios. Below some of the main differences that may affect each individual EU DIY investor are reviewed, some or all of these issues will be covered elsewhere in the appropriate Wiki section.

Currency risk

Concentration and the currency issue immediately impact the choice of bonds and equity funds for the non-US investor should they choose US assets only. Therefore a more diversified range of assets are included in the non-US portfolios. As an aside any evidence for the comparison of this approach and the original Boglehead portfolio is difficult to access for the retail investor.

The bond elements which form the basis for the ballast side of the portfolio are generally hedged back to the investors local currency to remove additional currency volatility where a global aggregate or global government fund is used. The hedging while reducing volatility will also reduce the returns of the bond fund.

The advice to include or base your fixed income side of your portfolio on bonds in your country would lead some retail investors to include local bonds either government or aggregate in their portfolios. This approach introduces bias, has lower diversity and may lead to lower returns in the long run.

Geographical spread

The geographical spread of the global funds is entirely different to the original two and three-fund approach.

On the one hand over reliance on US equities such as is represented in the total stock market fund of the original Boglehead two or three-fund approach would expose the non-US investor to additional risks and on the other hand over emphasis in the allocation to an EU investors home country introduces a different bias that may also lead to reduced returns.

The choice of a global aggregate asset for the EU investor becomes a necessity in order to avoid bias to either the US market or to an individual country preference. This is unlike the situation for an US investor who can concentrate on the largest market in the world and feel comfortable.

Diverse and multiple countries

The EU consists of 27 different countries with different legal and regulatory systems. In addition the savings and investment industries are not aligned and the taxation, level of costs and the quality of services can be quite different.

Pension systems across the EU are different and the take up of the existing pension schemes varies. This results in varying levels of interest in DIY investing. In addition pension legislation across the EU is under revision, however this process will take many years and in the meantime the differences in access to DIY investing across the EU continue. One example of this situation is the freely available self investment and tax advantaged ISA system in the UK, this freedom to invest is not available consistently across the EU countries.

Tax issues

The EU as a collection of individual countries with disparate tax regimes, presents the investor with a range of differences to the US approach, the tax issues are set out here: Outline of non-US domiciles. The immediately obvious difference is that EU investors in the main can access and use accumulating versions of the same funds that are available only in distributing versions in the US. Thus the EU suggested Boglehead portfolios come in two versions: accumulating and distributing to be chosen to suit the local tax laws or to the investors preference.

In the case of individual investors across the EU each one needs to be aware of the tax implications of investing from their own country and this will affect the choice of sub assets. These choices may affect the returns of that investor.

To avoid discriminatory US tax laws, non-US investors should prefer non-US domiciled assets.

EU legislation

The introduction of EU-wide legislation, see this section: EU legislation : UCITS, MiFID II and PRIIPs in respect to investment has introduced significant hurdles for EU and UK investors in regards to their access to US domiciled funds and introduces complexity in respect to various matters including taxation.

Weak support for understanding the EU investors portfolio strategy

So what you might ask, but without empirical evidence to demonstrate the quality of the returns it is not a given that the non-US versions are equal to or superior to the original versions. How do the non-US investors’ portfolios perform in comparison to the US Boglehead approach?

Sources of information in regards to the basis for the construction of portfolios following the boglehead philosophy or their subsequent performance are not readily available or accessible for the non-US investor with the exception of Canada and perhaps to a lesser extent Australia where Vanguard sells direct product.

Suggested portfolios for EU based Boglehead investors

Investment principles underpinning the EU Boglehead portfolio

Outline of investing

Bogleheads® investing start-up kit for non-US investors is designed to help the non-US investor on the steps in their investing journey. The steps laid out in the these pages help the investor to understand the principles of Risk tolerance and Asset allocation.

Bogleheads investment philosophy

At the earliest point read the Bogleheads® investment philosophy for non-US investors, so as to fully understand the approach underpinning your investment decisions.

In addition the section on The twelve pillars of wisdom provides a good introduction to the investment philosophy of John Bogle. See here: The twelve pillars of wisdom for the text itself.

Sample portfolios

Two main approaches to investing for non-US retail investors are considered:

  • Simple portfolios
  • Complex portfolios

Simple portfolios

The simplest portfolios are based on using index funds (where these are easily available) or the corresponding ETFs to build a low-cost structure with a small number of funds (generally five or less) that are easy to re-balance and follow the spirit of the Bogleheads® approach.

Complex portfolios

More sophisticated investors may wish to move beyond simple three, four or five-component portfolios and either include additional components; slice and dice existing components; or purchase individual stocks and bonds.

How do these sample portfolios fit in with the Boglehead philosopy?

The different circumstances of the EU investor in comparison to the US investor using the three-fund portfolio have been pointed out above. The following logic underpins the construction of EU portfolios from the funds given below:

  • Index funds - The sample funds are constructed holding all the index securities in the same weight as the index chosen. Either (replicating) or using an optimised subset of index securities (sampling) in order to efficiently track the performance of the index.
  • Passively managed - The sample funds are all passively managed by well known asset managers such as Vanguard or Blackrock.
  • Low cost - The sample funds are all competitively priced within the EU market. AGGH for example has an ongoing charges figures of 0.10%.
  • Diversified - The sample funds follow specific global or regional indices. Therefore they are globally diversified rather than just following the US market with additional International tilting. For example with a global aggregate bond fund the assets are weighted to the proportion of developed world countries (including the US) all in proportion to the individual market capitalisations and contain both government and corporate investment grade assets.
  • Hedged - The base currency of the fixed income funds are dollars where they are global funds and they are hedged back to the Euro or Sterling dependent upon the spending currency of the investor. While US investors holding a total bond market fund do not require hedging. The hedging of the EU investors fund will reduce the returns by the hedging costs.
  • Tax efficiency - The sample funds are all ETFs domiciled in Ireland or Luxembourg. This avoids any unwanted entanglements with disproportionate US taxes for non-US investors.
  • Simplicity - The lists of EU investor funds given below are appropriate for simple two or three-fund portfolios (distributing currently without the benefit of a small cap fund).

Fund selection options

Tables showing various funds are included below as providing examples of the funds appropriate for selection for an EU version of a Boglehead portfolio. Both of the tables include a selection of bond ETFs and a selection of stock ETFs. The choice of which particular fund to choose depends upon the tax regime which the investor is under as well as their approach to costs, diversity and complexity.

Accumulating and distributing

The difference between tax regimes across the non-US world also introduces a layer of complexity arising as a result of the particular governments approach to the distribution of dividend income.

The choice of suggested funds for the construction of EU portfolios is divided in to two general categories, the first table showing accumulating and the second table showing distributing fund suggestions, the investor will need to choose the appropriate version depending upon their jurisdiction. Please refer to: Accumulating (or capitalizing) and distributing ETF share classes

Individual country portfolios

In addition specific investment products may be available and have tax friendly aspects in various countries. The individual country pages that are included in Wiki where they exist may suggest alternative products whether wrapped funds or ETFs. See here: Outline of non-US domiciles

Funds for accumulating versions

Accumulating ETFs are available to EU investors who can avail of taxation policies that do not require declaration of dividend income. This allows the fund manager to automatically reinvest the dividends and the investor to capture the gains. Certain countries do not tax dividend income.

In the accumulating table an emerging market ETF fund is put forward.

Selection of suggested funds for accumulating portfolios
ISIN, base currency and tracking indices
Description and comments TER Exchanges Trading
Global government bonds
Xtrackers Global Government Bond UCITS ETF 5C Acc
LU0908508731 Euro
Tracking FTSE World Government Bond Developed Market Index
World developed Govt bond
0.2% Xetra EUR XG7S
London GBP XG7S
Swiss EUR XG7S
Italian EUR XG7S
iShares Global Govt Bond UCITS USD ETF Acc
Tracking an index composed of local currency bonds issued by governments of developed countries
World developed Govt bond
0.2% London USD IGLA
Xtrackers II Global Govt Bd ETF EUR Hedged Acc
LU0378818131 Euro
Tracking FTSE World Government Bond Index – Developed Markets
World developed Govt bond
hedged (€)[note 1]
0.25% Xetra EUR DBZB
iShares Global Govt Bond UCITS ETF $ Hedged Acc
Tracking FTSE G7 Government Bond Index
World developed Govt bond
hedged ($)[note 1]
0.25% Euronext USD SGLU
Global aggregate bonds
iShares Global Aggregate Bd ETF USD Hedged Acc
IE00BZ043R46 USD
Tracking the Bloomberg Barclays Global Aggregate Bond Index
Global aggregate
hedged (US$)
0.10% London USD AGGU
iShares Global Aggregate Bd ETF EUR Hedged Acc
Tracking the Bloomberg Barclays Global Aggregate Bond Index
Global aggregate
hedged (€)[note 1]
0.10% London EUR AGGH
Vanguard Global Aggregate Bd ETF USD Hedged Acc
(This fund was launched on 18 June 2019. Performance data will be available after one year.)
Tracking the Bloomberg Barclays Global Aggregate Float Adjusted and Scaled Index Hedged in USD
Global aggregate
hedged (US$)
0.10% London USD VAGU
Vanguard Global Aggregate Bd ETF EUR Hedged Acc
IE00BG47KH54 Euro
(This fund was launched on 18 June 2019. Performance data will be available after one year.)
Tracking the Bloomberg Barclays Global Aggregate Float Adjusted and Scaled Index Hedged in Euro
Global aggregate
hedged (€)[note 1]
0.10% Xetra EUR VAGF
iShares Core MSCI World ETF USD Acc
IE00B4L5Y983 USD
Tracking the MSCI World Index
Global, developed markets
Large+Mid cap
0.20% London USD IWDA
Euronext EUR IWDA
Tracking the MSCI World index
Global, developed markets
Large+Mid cap
0.12% Deutsche Boerse EUR SPPW
Borsa Italiano EUR SWRD
Euronext EUR SWRD
Vanguard FTSE All-World UCITS ETF USD Acc
Tracking the FTSE All-World Index
Global, developed and emerging markets
Large+Mid cap
0.22% Deutsche Boerse EUR VWCE
Tracking the MSCI ACWI Index
Global, developed and emerging markets
Large cap
0.20% Mexico MXN ISAC
Deutsche Boerse EUR IUSQ
Tel Aviv ILS iSFF505
Emerging markets
iShares Core MSCI EM IMI ETF USD Acc
Tracking the MSCI Emerging Markets Investable Market Index
Emerging mkts
IMI : Large+mid+small
0.18% London USD EIMI
Xetra EUR IS3N
Euronext EUR EMIM
Optional (world small cap)
iShares MSCI World Small Cap ETF USD Acc
Tracking the MSCI World Small Cap Index
MSCI World developed markets
Small Cap
0.35% London USD WSML

Funds for distributing versions

Where a country requires the investor to declare dividend income distributing ETFs are provided.

For the distributing stocks a single world ETF is listed, which contains emerging market stocks.

Selection of suggested funds for distributing portfolios
ISIN, base currency and tracking indices
Description and comments TER Exchanges Trading
Global aggregate bonds
iShares Core Global Aggregate Bond UCITS ETF Dist
IE00B3F81409 USD
Tracking an index composed of global investment grade bonds
Global aggregate
0.10% London GBP AGGG
Vanguard Global Aggregate Bd ETF EUR Hedged Dist
Tracking the Bloomberg Barclays Global Aggregate Float Adjusted and Scaled Index Hedged
(This fund was launched on 18 June 2019. Performance data will be available after one year.)
Global aggregate
hedged (€)[note 1]
0.10% Xetra EUR VAGE
Global government bonds
iShares Global Govt Bond UCITS USD ETF Dist
IE00B3F81K65 USD
Tracking an index composed of local currency bonds issued by governments of developed countries
World developed Govt bond
0.2% Deutsche Boerse EUR EUN3
iShares Global Govt Bond UCITS ETF GBP Hedged
Tracking the FTSE G7 Government Bond Index
World dev, govt
hedged (£)[note 2]
0.20% London GBP IGLH
Vanguard FTSE All-World UCITS ETF
Tracking the FTSE All-World Index
World dev+em
0.22% London USD VWRD
Euronext EUR VWRL

Fixed income

The bond selection includes both world government bonds and alternatively global aggregate bonds. The main difference being that the aggregate bond includes investment grade corporate bonds.


All of the bond ETFs are hedged back to the users currency, in these cases either to euros or to sterling.


The stock selection includes a global developed market ETF including large and mid caps.

Emerging markets

Emerging market assets are included in both accumulating and distributing stock ETF choices.

Small cap

And a world small cap option is included for those who want to include that category. No small cap ETF is currently available for the distributing category.


In addition other specific ETFs can be added to the core holding stock ETF by the investor should they seek to amend or "tilt" their selection.

  • Value
  • Small cap

See Value tilting - stock where the pros and cons of tilting are discussed.

Boglehead compliance

In constructing a portfolio the principles of the Boglehead approach are based upon the tenets noted above [note 3]

Some of these tests are aimed at behavioural issues however it is a good idea to check any proposed purchase of an asset against these criteria in order to give yourself reassurance that you are acting within the parameters of Boglehead style investing and that your returns should reflect the indices your individual portfolio assets are following less the drag of costs.

In the case of the Boglehead portfolio suggestions unlike our US based friends we have little or no ability to compare the performance of our Boglehead style portfolios for EU investors as this information isn't available and the bases for comparison are as wide and varied as pointed out in the Non-US aspects of approach section above. Even anecdotal evidence isn't readily available however individuals can assess these returns for themselves.


  1. 1.0 1.1 1.2 1.3 1.4 Hedging to the Euro or US dollar is reasonable for investors whose future financial liabilities will be dominated by or pegged to that currency. Otherwise, choosing an unhedged bond ETF will probably be more appropriate.
  2. Hedging to Sterling is reasonable for UK investors. Otherwise, choosing an unhedged ETF may be more appropriate.
  3. Key steps in setting up a Boglehead portfolio
    1. Develop a workable plan
    2. Invest early and often
    3. Never bear too much or too little risk
    4. Diversify
    5. Never try to time the market
    6. Use index funds when possible
    7. Keep costs low
    8. Minimize taxes
    9. Invest with simplicity
    10. Stay the course

See also