TD Direct International’s Low Fuss Investing For Expats

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There are no secrets to smart investing. 

Best practices are simple.  Diversify your assets and keep costs low.  Low cost funds, over time, beat high cost funds. Don’t look to yesterday’s winners when trying to pick funds. Morningstar, the largest fund rating company in the world, says that a fund’s expense ratio is the best predictor of future performance.

 The lower the expense ratio, the better.

TD Direct International is a brokerage based in Luxembourg.  It’s growing more popular with non-American expats (Americans cannot open accounts with them). Investors can purchase ETFs (exchange traded index funds) at minimal cost. I explained which ETFs investors of different nationalities could buy in my book, The Global Expatriates Guide To Investing.

For investors who don’t want the hassle of ETFs (they charge commissions to buy and sell and the dividends can’t be automatically reinvested) there’s the option of index mutual funds. TD Direct International has a good selection of stock market index funds. 

But they don’t offer any bond market indexes.  That’s a shame.  One day, let’s hope that they do.Those wanting to build a low cost portfolio could opt for an actively managed bond fund, until TD Direct International offers bond index funds.

There are no commissions to buy any of TD Direct International’s funds.  There are no commissions to sell them after a 6-month period. There’s an early redemption fee of 50 euros to sell before six months are up.

Below, I’ve listed two hypothetical investment portfolios that people could build using TD Direct International. Each portfolio assumes a moderate risk profile.

The first is for European investors who may one day repatriate to Europe (if they live abroad).

The second is for investors who don’t know where they’ll eventually retire. 

Portfolio for Europeans

Fund

Invests In

Allocation %

Expense Ratio

Vanguard Eurozone Stock Index Inv EUR

European stocks

25%

0.35%

Vanguard US 500 Stock Index Inv EUR

U.S. stocks

25%

0.25%

Vanguard Emerging Markets Stock Index Investor EUR

Emerging Market stocks

10%

0.40%

Degroof Bonds EMU Quants B Acc

European Government Bond

40%

0.64%

 

Portfolio for Global Citizens

Fund

Invests In

Allocation %

Expense Ratio

Vanguard SRI Global Stock Fund Investor Euro Shares

Global Stocks:  Including U.S., European, Asian Pacific and Emerging Market Stocks

60%

0.30%

Degroof Bonds EMU Quants B Acc

European bonds

20%

0.64%

Fidelity Funds – US Dollar Bond Fund A-Acc-USD

U.S. Bonds

20%

1.15%

 

 







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andrew hallam

andrew hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (Wiley 2011) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use.

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24 Responses

  1. Rudolf says:

    Hello Andrew,
    I like your post on TD direct international. I have been researching there fees and structures and they seem to be the best option if you want to stay away from US brokers. However, do you think it will be wise to rather use interactive brokers until you get to the $60 000 cap before switching to TD direct. Since IB’s annual fees are considerably less than TD. IB’s annual charges are $120 whereas TD’s are 180 euro’s. Moreover, IB only charges a small percentage to buy shares as you know but TD charges commissions of between 15 and 50 euros depending on the exchange.

    Regards

    Rudolf

  2. Jen says:

    Tx for the article Andrew-I am going to go with the 2nd one. I hope I am not being to-diverse-by holding all my ETFs at saxo and then going for index funds with td direct. I plan to contribute to both on alternating months. I also have an ETF/bond portfolio in South Africa which I,ve had there for over 10yrs and have just contributed to monthly via debit order and sort of–forgot about. I am taking your book back on holiday for my family to read.

  3. Janine says:

    Hi Andrew. Just finished reading your book. Thank you for giving us expats some information we can actually use.

    I have about 10,000 euros to invest and I have been procrastinating between opening a TD Waterhouse account in Canada and a TD International account in Luxenburg. I am a Canadian non tax resident living in Spain but have read that it is possible to open an account with TD Waterhouse in Canada to buy ETFs. The only thing that is holding me back from opening the cheaper Canadian account is that it might jeapordize my non resident status. Any thoughts on this?

    • Janine,

      To open the account in Canada, you would be taking (very, very slightly) more risk, as it pertains to your residency status. The extra risk might hardly be measurable. But for my personal money, if I can have it overseas, that’s my personal choice. There’s no risk then. The amount that you save by having it in Canada is very little indeed. Your choice, of course.

      Cheers,
      Andrew

  4. Schalk says:

    Hi Andrew, I have been using TD Direct and your suggested allocation for South African ex-pat investors since reading your book. Thanks! I very concerned about TD Direct’s online security and have not had much luck communicating it to them in an effective manner. Saxo definitely has better login security than TD Direct especially given the optional two-factor authentication. For larger accounts, the improved security Saxo offers may justify the additional fees.

    In summary (from a digital security point of view) we hate the fact that they request specific characters from your password at login and suggest everybody bitterly complains for them to fix this on the following grounds:

    1. It is guaranteed that the financial site is storing passwords incorrectly, in the clear, without hashing or key stretching of any kind. Financial site gets hacked? Your password is out in the wild. For many people who are uninformed about passwords, they reuse passwords, it’s a terrible security practice.

    2. It is always less secure to only give a portion of your password at login.

    3. It’s less convenient for people who are doing the right things like using password managers with complex and non-repeating passwords.

    It’s unacceptable that financial institutions store passwords in the clear.

  5. Schalk says:

    Hi Andrew

    In the article you say “But they don’t offer any bond market indexes. That’s a shame. One day, let’s hope that they do.”

    Using the TD Direct Fund Selector and filtering on “Vangaurd Group (Ireland) Limited” I see the following: Vanguard US Government Bond Index Inv USD

    Why do you prefer the Fidelity Funds – US Dollar Bond Fund A-Acc-USD fund above the Vanguard fund?

    • Hi Schalk,

      These portfolios aren’t for Americans. As such, only (in my opinion) suitable bond funds would be those that don’t hold American bonds, but European bonds or international bonds. The price may or may not be listed in USD. But the entities within each bond that I listed in not American.

      You bond index that you asked about is a U.S. government bond.

      Cheers,
      Andrew

  6. Angela Simpson says:

    Andrew,

    “But they don’t offer any bond market indexes. That’s a shame. One day, let’s hope that they do.”

    Have I read that right?

    As Canadian expats, does this mean that we cannot buy (Canadian) bonds through TD International (Lux)? If not, what should we consider if we would like to have Canadian bond index exposure?

    • Hi Angela,

      I probably shouldn’t have written that article. It seems to be confusing people. I wrote that article about index mutual funds. You can still buy any ETF from TD Direct International, including any bond market ETF that you see listed in my book: Here’s link: http://bit.ly/globalexpat

      Cheers,
      Andrew

  7. Caleb Gibbons says:

    My overall positive experience is overshadowed by the shoddy security protocols which leads me to be “locked out” of my account on a weekly basis. Other solutions are available obviously and they could tier by account size and activity level to justify the higher cost (i.e. security token). No ability to trade or even custody bonds is also a negative I realized after trying to transfer bonds in. FX rates are also pants at 40 pips.Still some wood to chop. Dropped their 50bp charge on assets a while back, but a sharper pencil is required to really make market share strides.

  8. David C. says:

    Hi Andrew,

    Bought both of your books (especially liked Millionaire Teacher), and just got started with TD International as a result. I noticed you say in The Global Expatriate’s Guide to Investing that you owned 3 Horizon Swap-Based ETFs – HXT, HXS and HBB. Is this still the case? I’m interested in what the allocation of your personal portfolio would be exactly, if you’re open about such things. This is coming from a fellow Canadian expat.

  9. Bryan says:

    Hi Andrew.

    After reading many of your articles I was about to sign up for a TD International account, but being a Canadian expat living in the Philippines I was not allowed to open an account due to the country I’m in.

    With TD not an option for me (or is it…?), which of the two (Saxo or DBS) be my next choice?

    • Hi Bryan,

      Here’s an easier option. You could open an account with Interactive Brokers. Once you leave the Phillippines, you could transfer the ETFs to an account at TD Direct International.

      If you don’t like this option, the account with Saxo Capital Markets will likely be easier to open than DBS Vickers.

      Cheers,
      Andrew

  10. Greg says:

    Hi Andrew,
    I’ve enjoyed reading your second book, and look forward to using the advice you’ve given. Being a Canadian non-resident living in China, I was most interested in using TD Direct Int. as my institution of choice. According to their website, they have inactivity fees…
    “€45 per quarter if no trades; €25 per quarter if 1-11 trades in quarter; none if 12+ trades in quarter”
    Am I reading this correctly, because a high number of trades seems to go against the philosophy you write about (and I agree with!).
    Thank you,
    Greg

    • Greg,

      The bank wants you to trade. That’s how they make money.

      But this isn’t about making money for the brokerage. You must exhibit best practices with your money.

      Cheers,
      Andrew

  11. Otto says:

    As a Canadian teaching in China with a TD Waterhouse account– I understand there is a 15% tax on dividends– is this tax deducted from account and submitted by bank or do I have to file income tax return? Also, would I have to pay tax in China on dividends or capital gains tax?

    • Otto,

      The 15% dividend witholding tax would come off at source. No need to file taxes. Nor will you have to pay capital gains taxes if your account is domiciled in a country where such taxes aren’t levied.

      Cheers,
      Andrew

  12. Zori says:

    I am Mexican leaving in Colombia. I currently have Ameritrade account in US, but it has over 60k there and I would like to open non US base account. Please, could you advise if TD direct is the right choice for me?

  13. Valerie says:

    Hi Andrew,
    Thoroughly enjoyed reading your 2nd book and can’t wait to follow the sound advice. Just want to be re-assured that I understood correctly. We’re Canadian expats with an E*TRADE account in the US just shy of $60k. For the past 5 years we have given up 30% in NRWT on our dividends because we didn’t know any better. Transferring our existing US shares from E*TRADE to either of TD Waterhouse or TD Direct would not translate to escaping the US estate tax for our heirs if the market value exceeds $60k, right? We would need to sell-off our E*TRADE holdings and re-purchase the US-shares listed on the TMX. Additionally, we intend to follow the suggested portfolio for a Canadian. We seem to have muddled along all these years with our investments but after reading your book wish I had stumbled upon it sooner. Can’t wait to share it with family. Thank you!

    • Hi Valerine,

      I’m glad you found the book to be helpful. Once you own shares that trade on the Canadian market (as suggested in my book) you can rest easy. Your heirs won’t be saddled with U.S. estate taxes when you die, and your dividend witholding taxes would drop to 15%–– or 0%, if you choose the horizon swap based ETFs (again, listed in my book).

      Cheers,
      Andrew

  14. Chuck Dunlap says:

    Hello Andrew,

    I recently expanded my portfolio from a two fund portfolio consisting of Vanguard Total Stock Market Index Fund (75%) and Vanguard Total Bond Market Index Fund (25%) to a four fund portfolio consisting of Vanguard Total Stock Market Index Fund (60%), Vanguard Total Bond Market Index (20%), Vanguard Total International Stock Index Fund (15%), and Vanguard Total International Bond Index Fund (5%) to improve my global diversification and my overall diversification. Each of these funds are Admiral Shares. I’ve read plenty of articles and books supporting the virtues of a 3 fund portfolio consisting of a domestic stock index fund, a domestic bond index fund, and an international stock index fund. However, I’ve been a bit surprised that there seems to be far fewer proponents of including an international bond fund in our investment portfolios. I am really interested in your thoughts on my 4 fund portfolio, including whether you think it’s reasonable to include the international bond fund in it. I’m a U.S. citizen residing in Austin, Texas.

    Thanks,

    Chuck

  15. toony says:

    Chuck

    The addition of Int bond into a portfolio is definitely a hot topic among some professionals ever since Vanguard added it to their target funds

    After reading the arguments by both sides, I personally believe adding international bonds to your 2/3/4-fund portfolio is not an optimal strategy for several key reasons:
    .
    *Political risk – The US is much more stable than many other countries.
    *higher expense ratios – hedging is required
    *Longer duration – than your TBM
    *Relatively weaker credit quality
    *More complexity – more moving parts to buy/sell/rebalance
    .
    When constructing a portfolio, a golden rule is that you should only add additional funds if it benefits the portfolio by either:
    a) increasing return for same risk/volitility or
    b) reducing volitility while maintaining same return.
    .
    Adding Int equity to a portfolio makes sense as the enormous diversification benefit (higher expected returns for similar risk – the only ‘free’ lunch avail) with only minor increase in costs.
    .
    International bonds diversification benefit has negligible benefits to returns, but actually increase portfolio volitility slightly (opposite to what you want bonds for) and costs more to own and run! Hence most people do not use international bonds – none of the portfolio in Andrew’s books ever includes Int bonds, iirc 🙂

    Ps. Having a 5% Int bond in portfolio is insignificant to returns but adds 25% more workload – consider at least 10% or remove completely is the advice I have read on this topic.

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