US Citizen residing in Germany. Where to invest?

74 posts in this topic

On 9/21/2019, 12:44:13, Idyllic Blues said:

Time to revive an old thread. I have been reading all the related threads on Bogleheads, Toytown, r/Finanzen and have came up with very little as far as good solutions for those Americans without large investment capital. I have additionally spoken with several Steuerberaters, one of which gave me extremely incorrect information. I am looking for clarification, confirmation, or other advice.

 

Background:

  • Studied for 2 years and graduated with a degree in Germany;
  • employed for 1.5 years and expecting to receive my niederlassungserlaubnis in June of next year;
  • No intentions of moving back to the USA, but unable to read the future;
  • living in a small town in East Germany with extremely low rent (350 cold/82m2);
  • No investments in USA or Germany. Almost paid off all student loans over the past year and a half (€3,500 left at 4%).

Summary of common advice:

  1. First Option: Transferring euros to USA and investing there in ETFs. drawbacks: Currency exchange losses both ways, costs and/or difficulties associated with filing German taxes, tax on unrealized gains (?);
  2. Second Option: investing within Germany only using stocks. Drawbacks: No access to ETFs (PFICs), difficulty finding a German broker as an American;
  3. Third Option: Investing in real estate. Drawbacks: Difficult to generate profit (especially with low rents, small town), work associated with rental properties.

Finances:

I am looking for an expedient way to invest approximately €750 a month, indefinitely.

 

Questions:

  1. I still have a Schwab account. If I invest in the USA are there any major advantages to using Interactive brokers (IB) instead or Schwab (Tax forms for Germany, etc.)?

  2. My local bank (Commerzbank) has denied me the option of opening any sort of investment account. Are there any German brokers (which would automatically file tax information for me) which would accept me as a client to buy only stocks within Germany? And if so, would it be restricted to German stocks, or could I also buy American stocks?

  3. Due to the low capital I am investing, my goal is to file my taxes on my own. I have done so for my entire life both Germany and in the USA for all previous years without issue - but this was before I began investing abroad. My assumption is that investing in Germany using stocks will be simple, but that investing in Germany will create a more difficult filing situation (assuming self-filing in both countries). Can anyone confirm this or provide advice in this area?

  4. In general, I am looking for advice on my options. Currently (if I can find a local broker) I am leaning towards the idea of buying individual stocks (diversifying through buying 6 different stocks yearly at €1500 each).

     

I welcome any advice, recommendations, corrections. The information out there feels really scarce and difficult to navigate for me, so I am just hoping to compile a little bit more here.

 

@Starshollow

I saw in a recent post that you were working on a solution for smaller funds. Please update us as information is available in this regard.

 

Thank you everyone for any additions to the discussion.

 

I invest in BRK Berkshire 
They are well diversified and I think it will work out better than ETFs.

BRK does not pay any dividends. 
So, stay invested until retirement with BRK.

 

PS: Please consult your financial advisor.

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On ‎31‎.‎12‎.‎2013‎ ‎18‎:‎37‎:‎39, fraufruit said:

Where do you get $5k?

 

 

"five figure" could be anything from 10000 to 99999 - definitely more than 5K (which is only 5000)

 

on the interesting topic, though, of where to invest, if you travel with a US passport and live anywhere but the USA, here's my personal solution:

(Take it with a grain of salt, your mileage may vary) I invest in real estate - and actively manage it myself. My goal is long term rental income (when I retire from my day job), and a solid capital base that I could tap into if I have a real (health) problem some day.

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On 2/1/2020, 6:26:19, jeba said:

I doubt this is correct. There are US registered ETFs / mutual funds you can buy as a German resident via a German broker. E. g. my mother (a German tax resident with German bank/broker account) held ISIN: US00162Q8666 | WKN: A1H99H | Symbol: 03AC

Hi jeba,

Thanks for your comment. Hmm, I checked, I cannot buy the fund you quoted via Onvista right now. I get an error message basically saying they are not MiFID compliant. I asked Onvista and they told me that this would be the problem with all German (European) brokers as this is European legislation, not only Onvista.

Probably your mother purchased these before MiFID become active I think around summer or Fall 2018 or so. As long as she does not sell the funds she can keep them, but she can probably not buy new ones... At least this is the case for my US-registered funds I still have...

If this is different for you or your mother, I would really be interested in what broker she is using!

 

As I am really interested in purchasing some US-registered funds I event thought about opening a broker account in Switzerland, but it seems they largely have to abide by European rules as well in order to keep their access to European stock markets, so I dropped the idea.

 

Really a bummer all this...

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18 hours ago, TowerSpire said:

Probably your mother purchased these before MiFID become active I think around summer or Fall 2018 or so.

Yes, that´s true.

I´m not residing in Germany anymore (within the EU though) but am using Lynxbroker.de. I never had a problem buying US funds but had some buying ETNs (bought e. g. FPF a week ago). They said that was because of IRS regulation 871(m) trying to stop non US persons from avoiding withholding tax. Strange thing is that I can buy some ETNs but not all. They couldn´t explain to me why I can buy some but not others. I had have to have myself classified a professional trader to be able to buy ETNs.

 

Edit: looking at the title of this thread it might be noteworthy that I´m not a US citizen.

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On 9/21/2019, 12:44:13, Idyllic Blues said:

Time to revive an old thread. I have been reading all the related threads on Bogleheads, Toytown, r/Finanzen and have came up with very little as far as good solutions for those Americans without large investment capital. I have additionally spoken with several Steuerberaters, one of which gave me extremely incorrect information. I am looking for clarification, confirmation, or other advice.

 

Background:

  • Studied for 2 years and graduated with a degree in Germany;
  • employed for 1.5 years and expecting to receive my niederlassungserlaubnis in June of next year;
  • No intentions of moving back to the USA, but unable to read the future;
  • living in a small town in East Germany with extremely low rent (350 cold/82m2);
  • No investments in USA or Germany. Almost paid off all student loans over the past year and a half (€3,500 left at 4%).

Summary of common advice:

  1. First Option: Transferring euros to USA and investing there in ETFs. drawbacks: Currency exchange losses both ways, costs and/or difficulties associated with filing German taxes, tax on unrealized gains (?);
  2. Second Option: investing within Germany only using stocks. Drawbacks: No access to ETFs (PFICs), difficulty finding a German broker as an American;
  3. Third Option: Investing in real estate. Drawbacks: Difficult to generate profit (especially with low rents, small town), work associated with rental properties.

Finances:

I am looking for an expedient way to invest approximately €750 a month, indefinitely.

 

Questions:

  1. I still have a Schwab account. If I invest in the USA are there any major advantages to using Interactive brokers (IB) instead or Schwab (Tax forms for Germany, etc.)?

  2. My local bank (Commerzbank) has denied me the option of opening any sort of investment account. Are there any German brokers (which would automatically file tax information for me) which would accept me as a client to buy only stocks within Germany? And if so, would it be restricted to German stocks, or could I also buy American stocks?

  3. Due to the low capital I am investing, my goal is to file my taxes on my own. I have done so for my entire life both Germany and in the USA for all previous years without issue - but this was before I began investing abroad. My assumption is that investing in Germany using stocks will be simple, but that investing in Germany will create a more difficult filing situation (assuming self-filing in both countries). Can anyone confirm this or provide advice in this area?

  4. In general, I am looking for advice on my options. Currently (if I can find a local broker) I am leaning towards the idea of buying individual stocks (diversifying through buying 6 different stocks yearly at €1500 each).

     

I welcome any advice, recommendations, corrections. The information out there feels really scarce and difficult to navigate for me, so I am just hoping to compile a little bit more here.

 

@Starshollow

I saw in a recent post that you were working on a solution for smaller funds. Please update us as information is available in this regard.

 

Thank you everyone for any additions to the discussion.

 

I invest in BRK Berkshire 
They are well diversified and I think it will work out better than ETFs.

BRK does not pay any dividends. 
So, stay invested until retirement with BRK.

 

PS: Please consult your financial advisor.

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5 hours ago, jeba said:

Yes, that´s true.

I´m not residing in Germany anymore (within the EU though) but am using Lynxbroker.de. I never had a problem buying US funds but had some buying ETNs (bought e. g. FPF a week ago). They said that was because of IRS regulation 871(m) trying to stop non US persons from avoiding withholding tax. Strange thing is that I can buy some ETNs but not all. They couldn´t explain to me why I can buy some but not others. I had have to have myself classified a professional trader to be able to buy ETNs.

 

Edit: looking at the title of this thread it might be noteworthy that I´m not a US citizen.

 

HI Jeba, it is a relatively new development that most US banks/platforms do not allow residents of Germany/the EU anymore to invest directly into US-domiciled funds. In September Charles Schwab informed all their clients in Germany that they will not be allowed anymore to invest in new funds, not even re-investing dividends etc.
Reason is that the fact-sheets for investment funds in the US differ in some parts from the fact sheets that the EU has made obligatory for funds sold within the EU. Since it is too much trouble to put in those extra data (it is mostly about forecasting performance), US investment funds won't go thru with this and rather not sell anymore.
Only way around is if there is a financial advisor in between as "discretionary manager" because then for the US fund industry the client is a professional and not the end-consumer. This is what we are working on right now. We have a good solution for investment capital >250k EUR and shall soon and finally have solutions in place for lower lump-sums as well as investment plans. Only downside - clients will be able to choose only from 7 different portfolios (differing in the balance between stocks and bonds) and have no say in choosing their own funds. There are some offers on the market from third parties with very complex investment products that claim to offer similar investment chances, but they rely heavily on commissions and I have serious doubts about them.
I am also currently negotiating with a German pension insurance company to set up their normal pension plans as commission-free and with a portfolio of US-domiciled ETFs.

And, of course, you can always you Berkshire Hathaway stocks...not a bad idea in general, but not a really world-wide diversification and then you still need to find US-domiciled bonds to go with that.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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7 hours ago, Starshollow said:

HI Jeba, it is a relatively new development that most US banks/platforms do not allow residents of Germany/the EU anymore to invest directly into US-domiciled funds.

While I find that ridiculous at least it is consistent. The fact that I can buy some ETNs but not others however is not.

 

That mania with tax evasion and money laudring is being taken way too far. I´ve been trying for more than 3 months now to get accepted as a client of a US asset manager. Still no result. He says there are regulatory hurdles (because I´m not a US person) which are difficult to overcome and I might have to commission a trust (which doesn´t come for free, after all). So far he has been giving me his advice for free out of loyalty with my sister (who has been his client for more than 30 years). I´d rather pay him and receive full service though.

Another example: My daughter is in the process of buying a US property and needs to transfer funds for downpayment from her German bank account. The US bank refused to accept. She is still trying to figure out why and time is starting to become a bit of an issue. If they have concerns why can´t they simply report it to the IRS or whatever authority and let it pass so that people can fulfill their obligations? They don´t seem to care about potential consequences for their customers (like becoming homeless because the lease contract is terminated and the purchase of a new home can´t be closed because of nonsense like that). Rant over.

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Its a pretty interesting discussion @Starshollow 

Very useful advice in your comments. 

 

As far as global diversification is concerned - I used to think the same way like you. However, if you believe that globalization trends will continue then top Amercian companies have well diversified revenue streams. For example, Tesla, Apple, Mircosoft, J&J etc. - all sell stuff globally. So, to some extent there is global diversification in BRK portfolio as well. Just saynig :) 

 

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5 hours ago, kapil354 said:

Its a pretty interesting discussion @Starshollow 

Very useful advice in your comments. 

 

As far as global diversification is concerned - I used to think the same way like you. However, if you believe that globalization trends will continue then top Amercian companies have well diversified revenue streams. For example, Tesla, Apple, Mircosoft, J&J etc. - all sell stuff globally. So, to some extent there is global diversification in BRK portfolio as well. Just saynig :) 

 

Yep, fully understand. But a wider and more diversified approach is to look at the market capitalisation of the world stock markets and spread your investments via ETFs accordingly. No surprise: you'll still have a major share of investments into US stock markets as you can see from my picture below...but you'll also participate in the other markets and become less dependent on how the US stockmarkets react.

5e3d734c19f52_StockMarkestworldwideperce

 

In the last couple of years, of course, a US-stocks bias worked well enough, but it is a totally random thing as to which  area of the world is doing best and the opposite, hence market-chasing is as senseless as is market-timing in my professional opinion. Having said that: Warren Buffet obviously is from another planet or star-system with his long track record of picking excellent value-stocks and stick with them.

 

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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On 2/6/2020, 12:11:03, Starshollow said:

HI Jeba, it is a relatively new development that most US banks/platforms do not allow residents of Germany/the EU anymore to invest directly into US-domiciled funds. In September Charles Schwab informed all their clients in Germany that they will not be allowed anymore to invest in new funds, not even re-investing dividends etc.

Hi,

 

I am still trying to find a workaround for a US-person residing in Germany. Are there still some US platforms that take US-persons residing in Germany to open an account to directly invest into US-domiciled funds - or do they all deny access to overseas-US-citiziens? Charles Schwab is not the only one out there... On the other hand it seems to be a problem of the fund issuer, not the broker from what I understood from Starshollow...

 

Jeba brought up a good point. What about registering as a professional trader? Would one then have access to US-registered (non-MiFID II compliant) funds from a German broker as MiFID II is trying to protect only private investors. In a way we would become our own "discretionary manager" as Starshollow wrote. Would that be a viable solution?

What would one need to do to become "professional" and what tax implications would that have?

 

It's pretty crazy and I agree with jeba that this tax evasion thing is going too far. You can tighten security so much that you can't move anymore. For US-persons: the US makes it virtually impossible to buy European funds (PFICS), Europe makes it impossible to buy US funds (MiFID II compliance). Result: you cannot buy anything. I am wondering how many US-persons are concerned about this worldwide...

 

Thanks and Cheers

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give up your US citizenship in favor of German citizenship if you want to stay here (or go elsewhere in the EU) and have the freedom to invest, or go back to the US.

 

of course some of us are concerned - I myself have found no solutions aside from that.  Yes, indeed, it's completely fucked.   

 

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7 hours ago, TowerSpire said:

What would one need to do to become "professional" and what tax implications would that have?

You´d need a minimum portfolio value of € 500,000 (or was it US$?) and confirm that you have at least one year of professional experience (which you don´t have to provide proof for). I don´t think there are tax implications - but I haven´t bothered to check as I´m not residing in Germany anymore.

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On 2/10/2020, 12:34:51, jeba said:

You´d need a minimum portfolio value of € 500,000 (or was it US$?) and confirm that you have at least one year of professional experience (which you don´t have to provide proof for). I don´t think there are tax implications - but I haven´t bothered to check as I´m not residing in Germany anymore.

 

Thanks jeba for the info. Ouch, that is a bit beyond our limits...  :-) So, not an option either.

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4 hours ago, TowerSpire said:

 

Thanks jeba for the info. Ouch, that is a bit beyond our limits...  :-) So, not an option either.

Maybe check with a UK broker whether they still apply MIFIF II now that the UK isn´t part of the EU anymore.

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