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  • All World ETFs Offer Access to Global Growth Opportunities [View article]
    Seems to me that the tax complexity of investing abroad is likely to play a role in equity selection. A U.S. investor buying U.S. stocks can only be taxed a certain number of times (dividends + capital gains).

    A U.S. investor buying foreign equities may be taxed more than this (dividends + capital gains + foreign taxes).

    Granted, a U.S. investor could recover at least some of the foreign taxes by filing additional forms, but the additional complexity and the possibility that such a recovery will not make them whole raises the cost of foreign equities modestly. Add in currency risks and others, and suddenly you have a rational justification for some degree of home-country bias.

    If all that is true, then the disparate treatment of foreign and U.S. equities for tax purposes would also weigh against the "all world" ETFs and in favor of separate asset location for US and foreign ETFs (of course, tax laws could change, but in this climate, it seems EXTREMELY unlikely that Congress will pass laws favoring investment in foreign equities).
    Jan 08 05:14 am |Rating: 0 0 |Link to Comment
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