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Mutual Funds and ETFs


Last year, several financial institutions including Fidelity Investment, T.Rowe Price, and Charles Schwab and Company announced that they would no longer allow Americans living abroad to buy US based mutual funds. Due to continually evolving regulations, US clients of these banks living abroad can no longer buy or trade mutual funds in their brokerage accounts.

The Securities and Exchange Commission (SEC) regulates the sale and distribution of mutual funds in the US, and in other countries these sales are regulated by a number of local bodies in place to protect consumers. Foreign jurisdictions are unable to regulate investments that are not registered in their area of jurisdiction, so they ban the sale of foreign mutual funds to residents of their countries, including US citizens buying investment funds in the US.

In the past, financial institutions in the US would allow their clients living in foreign countries to maintain a US mailing address. Now though, as potential fines increase, and because the majority of these institutions’ clients are not abroad, the risk is too great and they’ve decided to be stricter on this loophole.

For Americans living abroad who are prohibited from buying or trading mutual funds, exchange-traded funds (ETFs) are another option. ETFs function like stocks, trading between individual investors instead of through an investment manager. ETFs also often have lower costs.

Of course, there are factors to take into consideration when choosing which ETF is a good fit for your portfolio. There are inverse ETFs, leveraged ETFs, ETFs that track hedge fund strategies, and actively managed ETFs. If you’re seeking a substitute for mutual funds an ETF could be a great option, but don’t dive in without knowing the benefits and risks of each type. Speak with your investment adviser about your short and long-term financial goals to determine the ETF that’s right for you.

Get a complimentary copy of the American expat guide at https://www.omniwealth.eu/american-expat-financial-guide for more information about the financial planning process as an American expat. You can also visit www.dunhillfinancial.be and www.omniwealth.eu.


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