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Comment by cissou | Hacker News Reader

100%. European markets are known to pay out more dividends whereas the US market is known to prioritize stock price growth. Return-wise that makes no theoretical difference.

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Makes a huge difference when considering the tax implications.

Many retirement funds are in a tax shelter either way, though.

Problem is, the US-based euro or emerging market fund will have withholding taxes applied to it, unless it’s a retirement-specific fund.

You just won’t see the tax withholdings on your statement because it shows up on theirs.

Many but not all and that is the important detail.

Also I keep money in index funds even if I don't plan on using that money for retirement. (e.g. downpayment on a house, saving for another large purchase, financial buffer, etc.) I also keep money in index funds that are in regular brokerage accounts because 401k + backdoor roth ira isn't sufficient for retirement if you make $200k+/yr. (True for even lower amounts too but whatever)

That largely depends on the tax laws where you live.

That depends on which country you live in. In my country (The Netherlands) you pay a fixed percentage of the value of your portfolio. Dividends are not taxed.

> Dividends are not taxed.

I wish.

But no, dividends are taxed:

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...

What you probably miss is that dividend tax for non substantial holdings (less than 5% of the total stock) is withheld before being paid out.

and you have to care about where the index fund is domiciled. Otherwise you get dividend leakage. Some Vanguards are domiciled in Reland where 30% of dividends are withheld as taxes even though we need to pay just 15%. It might be difficult to get the difference back

Indeed it does. Here in Brazil, for instance, dividends are not taxed, while selling a stock (to take advantage of growing stock prices) has a capital gains tax of 15%.

Don't know why you're being downvoted; everything you've stated is true. I would just add that one should probably account for taxes. When taxes are involved: buybacks >> dividends.

If you hold your stocks in a tax exempt account then you don’t really care about this though.

Pension funds, ISAs in the UK, etc etc; most countries have something similar. The vast majority of individual savers will not exceed the limits placed on these accounts.

In Canada, it’s difficult/expensive to buy euro stocks or euro funds directly, so you end up buying a Canadian-domiciled or US-domiciled euro fund.

I wouldn’t be surprised if US retirement savers have the same issue.

While dividends from the etf are tax-free in a retirement savings, the dividends from the euro company are first paid to the etf, and the euro company still does tax withholding. From their point of view, they’re not paying out to a retirement fund.

Depends on the country. Some countries incentivize long-term ownership by taxing dividends at a lower rate than other capital gains. And in some countries, mutual funds don't pay taxes for (domestic) dividends.

This is due to the fact that European indices are heavily weighted towards stocks in low growth industries: banks, mining, utilities, cars, chemistry insurance. Lack of incentives in Europe has led to poor equity and economic growth versus the United States and this pattern will continue for decades to come.

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