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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 theoretica

by cissou 5y ago

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.

cosmojg 5y ago
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.
- pja 5y ago
  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.
  - Scoundreller 5y ago
    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.
- jltsiren 5y ago
  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.
someelephant 5y ago
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.
gargarplex 5y ago
Makes a huge difference when considering the tax implications.
- fennecfoxen 5y ago
  Many retirement funds are in a tax shelter either way, though.
  - Scoundreller 5y ago
    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.
  - bradlys 5y ago
    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)
- tut-urut-utut 5y ago
  That largely depends on the tax laws where you live.
- evandijk70 5y ago
  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.
  - jacquesm 5y ago
    > Dividends are not taxed. I wish. But no, dividends are taxed: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/winst/dividendbelasting/dividendbelasting 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.

by cissou 5y ago

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.

cosmojg 5y ago

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.

pja 5y ago
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.
- Scoundreller 5y ago
  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.
jltsiren 5y ago
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.

someelephant 5y ago

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.

gargarplex 5y ago

Makes a huge difference when considering the tax implications.

fennecfoxen 5y ago
Many retirement funds are in a tax shelter either way, though.
- Scoundreller 5y ago
  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.
- bradlys 5y ago
  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)
tut-urut-utut 5y ago
That largely depends on the tax laws where you live.
evandijk70 5y ago
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.
- jacquesm 5y ago
  > Dividends are not taxed. I wish. But no, dividends are taxed: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/winst/dividendbelasting/dividendbelasting 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.