Russell 200 is more about exposure to growth vs. value -- diversification difference between 200 and 2000 is actually surprisingly very small. Russell 200 is available only as IWY - Russell 200 Growth - vs. Russell 2000. And if big tech stops outperforming, nothing says big non-tech will perform well.
I don't know if the implication is that holding all of these in a portfolio is a good thing "now," but I would be careful about the Tech-heavy approach here. With SPY, QQQ, and URTH, you'd be looking at over a combined 30+% of the Mag 7. Lots of exposure there.
People in Europe can buy a (US) ETF (without European passport) - only need to be considered professional/qualified investor. Couple of conditions to be accepted but not overly difficult at e.g. IBKR
Have we looked at that issue with the US estate tax for non-US residents? Upon your passing away, US brokers (such as IBKR) will block your account until you can prove that you have paid this US tax (becoming due when you have > 60k in US securities even if you do not have any other link to the US). I live in a country that has no estate tax and do not have any intention to pay this - unjustified - US estate tax. The US authorities do not even enforce this tax so that is not the problem but the US brokers blocking your account definitely is - they de facto make you pay this tax (btw 40% for amounts > 1M). I'm moving my portfolio away from IBKR (where I was quite happy) to a non-US broker.
Yes this is a risk (in theory). In practice most brokers don't apply it yet. I'm not sure whether you directly invest via IBKR or you use a Belgian broker. I would be very surprised if a Belgian broker applies this US estate tax
I have done some digging and it is a very real risk if you use a US broker like IBKR (even if IBKR Ireland). They will not apply the tax but block your account until such time that you can provide a statement from the US that you "settled your estate tax bill". This will take >9months. Non-US brokers will typically not block your account. I just confirmed this with Saxobank and eToro. Not a clue about the Belgian brokers (I have Belgian nationality but left that place long ago). Thought I would share this since it could apply to a lot of the Members and noticed that you also use IBKR (as did/do I). It took a lot of time and effort making IBKR admit they block your account - understandable since would apply to all their non-US clients and can easily scare them away. Still, IBKR not mentioning this is quite disgusting.
SPY - OEF (S&P 100) has meaningfully outperformed SPY over the long haul. And XLG (S&P 50) has crushed SPY. SPY is only preferable if you have millions in it, due to the capability it allows for with options income.
QQQ - Nope. QQQM is the same exact thing (Nasdaq 100) but is 5 bps cheaper.
Russell 2000 - Nope. Too much diversification. The Russell 200 Growth (IWY) has crushed it and will always crush it.
Russell 200 is more about exposure to growth vs. value -- diversification difference between 200 and 2000 is actually surprisingly very small. Russell 200 is available only as IWY - Russell 200 Growth - vs. Russell 2000. And if big tech stops outperforming, nothing says big non-tech will perform well.
I don't know if the implication is that holding all of these in a portfolio is a good thing "now," but I would be careful about the Tech-heavy approach here. With SPY, QQQ, and URTH, you'd be looking at over a combined 30+% of the Mag 7. Lots of exposure there.
Tend to agree!
Great article, I would consider IEMG > EEM
Thanks for adding, Guy!
People in Europe can buy a (US) ETF (without European passport) - only need to be considered professional/qualified investor. Couple of conditions to be accepted but not overly difficult at e.g. IBKR
Thanks for adding, Patrick!
Excellent read and easily digestible! Also I learned a thing or two about the international ETF alternatives for our friends overseas. Thank you!
It's an honor, Leopard!
Have we looked at that issue with the US estate tax for non-US residents? Upon your passing away, US brokers (such as IBKR) will block your account until you can prove that you have paid this US tax (becoming due when you have > 60k in US securities even if you do not have any other link to the US). I live in a country that has no estate tax and do not have any intention to pay this - unjustified - US estate tax. The US authorities do not even enforce this tax so that is not the problem but the US brokers blocking your account definitely is - they de facto make you pay this tax (btw 40% for amounts > 1M). I'm moving my portfolio away from IBKR (where I was quite happy) to a non-US broker.
Other people in same situation?
Hi Patrick,
Yes this is a risk (in theory). In practice most brokers don't apply it yet. I'm not sure whether you directly invest via IBKR or you use a Belgian broker. I would be very surprised if a Belgian broker applies this US estate tax
I have done some digging and it is a very real risk if you use a US broker like IBKR (even if IBKR Ireland). They will not apply the tax but block your account until such time that you can provide a statement from the US that you "settled your estate tax bill". This will take >9months. Non-US brokers will typically not block your account. I just confirmed this with Saxobank and eToro. Not a clue about the Belgian brokers (I have Belgian nationality but left that place long ago). Thought I would share this since it could apply to a lot of the Members and noticed that you also use IBKR (as did/do I). It took a lot of time and effort making IBKR admit they block your account - understandable since would apply to all their non-US clients and can easily scare them away. Still, IBKR not mentioning this is quite disgusting.
Three of them are inferior ETFs:
SPY - OEF (S&P 100) has meaningfully outperformed SPY over the long haul. And XLG (S&P 50) has crushed SPY. SPY is only preferable if you have millions in it, due to the capability it allows for with options income.
QQQ - Nope. QQQM is the same exact thing (Nasdaq 100) but is 5 bps cheaper.
Russell 2000 - Nope. Too much diversification. The Russell 200 Growth (IWY) has crushed it and will always crush it.
Best of all wasn’t even mentioned: SCHG.
Hi,
Thanks for adding!
SPY - OEF (S&P100): I guess this is a personal preference. When Big Tech would stop outperforming, the performance would be the other way around.
QQQ <-> QQQM: the liquidity is a lot lower for QQM
Russell 2000 <-> Russell 200: It depends on how much diversification you want :)