As a US based investor, I am admittedly ignorant when it comes to understanding what is involved in trading European stocks. It seems pretty daunting given the number of currencies and exchanges potentially involved. Below is the exchange/country breakout of the P123 free Europe model. Would trading this be as overwhelming to manage as it seems? Thanks
That depends on your broker. I find that both Fidelity and IB make international trading pretty easy to manage. IB charges a percentage commission that varies by country. Fidelity charges a 1% currency exchange fee and a $19 online commission per trade (or $85 for phone trades), which means that IB is significantly cheaper overall. Exchange hours and holidays differ, and not all exchanges accept VWAP orders. The most complex exchange is London's. Prices are in pence rather than pounds and a lot of thinly traded securities have auctions one or more times a day rather than continuous trading. Some countries also charge a stamp tax: the UK and Ireland charge the most. Lastly, don't buy Norwegian stocks with IB: they don't use the main Oslo exchange, but instead one with very limited liquidity. So there's a learning curve, but once you start, you get the hang of it pretty quickly.
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Thanks Yuval. I use IB. Do you find that the European allocation improves your overall results significantly? Trying to get a feel of extending beyond US micro caps is worth the effort.
You can take a look at this thread as well.
For my point of view all European Stocks together are like a paralel Usa market with lower correlation with US. in bull markets around maybe 0.35-0.50 ,and higher in bear ones around 0.80 , less sophisticated and with more smooth stocks. All will depend on your broker and where are you located. De Giro brooker for example have a lot stocks that IB doesn't reach, I don't know if De Giro is available from Usa. And as @yuvaltaylor pointed out each market have their own rules in terms stamp (if there are on it)etc.. . Advice: be more careful with turnover that in Usa or comissions and spreads will kill you
It's difficult to compare results. My average return for European stocks is higher than for US stocks; my median return is lower; my holding period is longer. If you add up all the money I've invested in European stocks, I've gotten an 8.7% return; if you do the same for US stocks, I've gotten a 5.4% return. Again, though, the holding period is longer for European stocks.
It also matters that until Trump 2.0, Europe really lagged the US in terms of returns. Which universe has the better prospects at this point? I'm not a prognosticator but the US has a lot going against it. Stocks are more expensive, less likely to be overlooked, and price movements are dominated by speculators.
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