ETFs for European investors can be a brilliant tool for diversification, but they also come with quirks that US investors simply don’t deal with. In this episode, we explain what ETFs are, why they’re popular, and—most importantly—what makes ETFs more complicated for Europeans who are building wealth through dividend growth investing.

We also talk through the real-world issues European investors face: regulation, broker access, tax treatment, and why many of us still end up choosing individual dividend stocks even when ETFs look like the “easy button.”

This episode was recorded in 2020. The principles are evergreen, but ETF availability, regulations, taxes, and individual companies can change over time. For current market commentary and recent picks, please check our latest episodes.

What Is an ETF and Why Do Investors Use Them?

An ETF (exchange-traded fund) is a basket of investments you can buy and sell like a stock. Instead of purchasing dozens (or hundreds) of individual companies yourself, an ETF can give you broad exposure in one trade. That’s why ETFs are often recommended for beginners and for anyone who wants instant diversification without spending hours researching individual businesses.

From a dividend growth investing perspective, ETFs can also reduce single-stock risk. If you’re building long-term passive income, spreading your exposure can be sensible—especially early on—because no matter how good a company looks today, the future always carries surprises.

The “Europe Problem”: Why ETFs Are Trickier Here

This is where the conversation gets very real for European investors. We talk about how ETF accessibility varies dramatically depending on where you live and which broker you use. In the episode, we discuss the PRIIPs regulation and the Key Information Document requirement, and how major providers have historically made some funds harder to access for retail investors in Europe.

Even within Europe, availability can be inconsistent. Something that’s easy to buy in one country can be awkward or impossible to buy in another. That uncertainty is frustrating when you’re trying to build a long-term plan that relies on consistent contributions.

We also touch on something many investors don’t consider at the start: even if you can buy an ETF today, there’s a risk your broker may restrict access in the future. That creates planning risk, especially for investors who want to dollar-cost average into the same fund for years.

UCITS, Distributing vs Accumulating, and Why Tax Can Change Everything

We also discuss the practical difference between distributing ETFs (which pay dividends out to you) and accumulating ETFs (which reinvest dividends inside the fund). On paper, both can work, but in real life the “best” option often comes down to your tax situation.

Ireland is a great example of why this matters. In the episode, EMF talks about the Irish “deemed disposal” rule and the reality that you can face a high tax rate on gains even without selling. That makes accumulating ETFs more attractive in certain cases, because you’re not constantly paying tax on distributions along the way.

The big takeaway here is simple: with ETFs, the product itself is only half the story. The other half is what your country’s tax rules do to your returns over time.

Are ETFs Still Worth It for Dividend Growth Investing?

Yes—sometimes. ETFs can be a practical way to diversify when you don’t have the time, capital, or interest to build a wide portfolio of individual companies. They can also help you gain exposure to areas you’re underweight in, or to markets you don’t know well enough yet to stock-pick confidently.

But we’re also honest about the trade-off: if your goal is dividend growth investing with a strong focus on income quality, you may feel limited by the ETF menu available to European investors. In the episode we talk through that tension—the desire for simplicity, and the reality that European investors sometimes have to work harder to get a similar outcome.

One ETF that comes up in the discussion is Vanguard’s dividend growth ETF (VIG), mainly because of its long-term record. The challenge, as we discuss, is that yields can be lower than some dividend investors expect and the holdings can tilt toward lower-yielding sectors.

Dividends, Withholding Tax, and the Reality of Cross-Border Investing

We also answer a few listener questions that touch on a common frustration: withholding tax on dividends, and how much admin European investors can face when buying non-local stocks.

In the episode, we compare how straightforward US withholding tax can be (often handled automatically by brokers) versus the paperwork you may face reclaiming tax from certain European countries. The broader point is that taxes matter—but we don’t want tax to become the only decision-making driver. We’d rather start with business quality and dividend sustainability, then consider the after-tax outcome as part of the full picture.

Companies and Tickers Mentioned in This Episode

A few names come up naturally in the conversation as examples of how European investors think about access, taxes, and dividend investing.

We discuss Bayer in the context of major news at the time, along with the Monsanto/Roundup settlement and what that can mean for shareholders. We also mention T-Mobile in the context of debt management and financial discipline.

On the ADR side, we discuss UK-listed companies that are often accessed through US markets, including British American Tobacco (BTI) and Royal Dutch Shell (referred to as Shell), along with Unilever (UL) and Diageo as examples of global consumer businesses.

For stock picks that week, Derek mentions Wolters Kluwer, and European DGI discusses 3M as a quality dividend grower he watches at specific price levels.

These are mentioned for context from the conversation, not as recommendations.

Chapters From the Episode

0:00–2:55 – Welcome back and a quick life update
3:00–10:40 – Market news: Bayer settlement and airline bailouts
10:40–16:55 – Why ETFs are harder for European investors (PRIIPs/KID)
16:55–20:45 – Pros and cons of ETFs: diversification, access risk, broker changes
20:45–23:55 – Why research matters: not all ETFs perform the way you expect
25:10–34:25 – Listener Q&A: ADRs, withholding tax, and practical tax admin
34:50–40:55 – Stock picks of the week and tools used for research
41:00–44:55 – Week ahead, goals, and closing thoughts

Where to Go Next

If you’re building your investing process from scratch, the next best step is to learn how we think about selecting individual companies and avoiding common traps. Start with EP 05 – How to Find Dividend Growth Stocks, then move to EP 09 – How We Perform Fundamental Analysis to see how we evaluate business quality and dividend sustainability. If you want the behavioural side of investing—the mistakes that almost everyone makes early—EP 08 – Our Dividend Investment Mistakes will save you time and money.

Disclaimer

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