Global Equities for Expat Investors

Global Equities in an International Portfolio

Equities — ownership stakes in publicly listed companies — have historically been among the most powerful long-term wealth-building tools available to investors. Over most 20-year periods, global equities have delivered real (inflation-adjusted) returns superior to cash, bonds, and many alternative asset classes, though with significantly higher short-term volatility.

For an internationally mobile investor, accessing global equities involves navigating a set of complications that domestic investors rarely consider: withholding tax on dividend income, US estate tax exposure for non-US persons holding US-listed assets, custodian selection, and the choice between direct shares, ETFs, and managed funds.

Direct Shares vs ETFs vs Managed Funds

International investors can access equity markets through three primary routes, each with distinct characteristics.

Direct shareholdings mean owning individual company shares through a brokerage account. This approach offers transparency and control, and avoids the management fees of collective funds. The drawbacks are meaningful for most investors: achieving adequate diversification requires holding 30–50 stocks across sectors and geographies, which demands either a large capital base or a willingness to accept concentration risk. Direct shareholdings also increase the administrative burden of monitoring corporate actions, dividend reinvestment, and tracking cost bases across multiple holdings.

Exchange-traded funds (ETFs) provide diversified exposure to indices or asset classes through a single traded instrument. For international investors, ETFs — particularly UCITS-domiciled ETFs — are generally the most practical and cost-efficient route to global equity exposure. Total expense ratios (TERs) on core index ETFs are typically 0.05–0.20% per annum for major indices, significantly below managed funds. ETFs trade intraday on exchanges, providing liquidity without notice periods.

Active managed funds — unit trusts, OEICs, and SICAVs — offer professional stock selection with the aim of outperforming their benchmark. The evidence on consistent active outperformance is mixed; the SPIVA report (S&P Indices Versus Active) consistently shows that the majority of active managers in most categories underperform their benchmark over 10-year periods, net of fees. Where active management may add value — particularly in less efficient markets such as smaller-cap equities and emerging markets — the case is stronger, but manager selection risk is real.

For most internationally mobile investors, a core allocation to low-cost UCITS index ETFs, supplemented by active exposure where there is a credible case for it, represents a rational starting point.

Geographic Allocation

A global equity portfolio requires decisions about regional weighting. The main options are:

Market-cap weighted global index: A pure global index (such as the MSCI World or MSCI ACWI) weights countries by their share of total global market capitalisation. As of 2026, this results in roughly 60–65% North America (predominantly US), 15–20% Europe, around 15% Asia-Pacific developed, and 10–12% emerging markets in ACWI terms. This approach is low-cost, broadly diversified, and avoids the need for active country selection.

US equities: US equities have significantly outperformed most other markets over the past decade, driven largely by the dominance of large-cap technology companies. US weighting at or above market-cap weight has rewarded investors in recent years. However, elevated valuations relative to historical norms and the concentration of indices in a small number of mega-cap names are considerations worth monitoring.

European equities: European markets trade at a valuation discount to US equities (by most standard metrics as of 2026), reflecting lower historical growth but also potentially higher dividend yields. For European-based investors, European equity exposure also reduces currency risk relative to the reference currency.

Asia-Pacific: Japan, Australia, South Korea, and other developed Asia-Pacific markets offer diversification away from US-centric portfolios. Japan in particular has seen increased investor interest following corporate governance reforms in recent years.

Emerging Markets (EM): EM equities — principally China, India, Brazil, South Africa, Mexico, and others — offer exposure to economies with higher long-term growth potential. This comes with higher volatility, political risk, and currency risk. EM weightings of 5–15% within a global equity allocation are typical for investors willing to accept the additional risk.

Withholding Tax on Dividends

Dividend income from internationally held equities is subject to withholding tax levied by the country in which the company is resident. Key rates (as of 2026, subject to change):

• United States: 30% standard rate, reduced to 15% under many bilateral tax treaties.
• Germany: 25% (Kapitalertragsteuer), plus solidarity surcharge. Treaty rates typically 15%.
• France: 30%, reduced to 15% under many treaties.
• United Kingdom: 0% withholding tax on dividends for most non-resident shareholders.
• Switzerland: 35% standard; reduced to 15% or 0% under treaties, subject to formal reclaim.
• Australia: 30% franked dividends generally received at 0% withholding; unfranked dividends 30% (treaty reductions apply).

The practical impact depends on the investor's country of residence and the applicable double tax treaty. Withholding tax that cannot be fully offset against the investor's home country tax liability is a genuine cost of investing in high-withholding jurisdictions. This is one reason that dividend-focused strategies can be less efficient for international investors than for domestic ones.

US Estate Tax Risk for Non-US Investors

One of the most significant and widely overlooked risks for non-US investors is US federal estate tax on US-situs assets. US citizens and residents benefit from an estate tax exemption of USD 15 million per person (as of 2026, made permanent and indexed for inflation by the One Big Beautiful Bill Act of 2025). Non-resident aliens (NRAs) — which includes most international investors who are not US citizens or Green Card holders — are granted a US estate tax exemption of only USD 60,000.

US-situs assets include: shares in US-incorporated companies (whether held directly or through US-listed ETFs), US real property, and assets held with US custodians.

A non-US investor holding USD 500,000 in US equities through a standard brokerage account could face a US estate tax liability of up to 40% on assets above USD 60,000 — a potentially devastating outcome. The US has estate tax treaties with a limited number of countries (including the UK, France, Germany, the Netherlands, and a few others) that may provide additional relief.

Strategies to manage this exposure include holding US equities through Irish-domiciled UCITS ETFs (which are not US-situs assets), using offshore investment bond wrappers, or structuring holdings through appropriate trust or corporate structures with professional advice.

Custodian Selection for Equity Investing

Most domestic equity platforms — including popular UK platforms such as Hargreaves Lansdown, AJ Bell, and Vanguard UK — restrict or close accounts for customers who become non-resident. International investors need custodians explicitly designed for cross-border clients.

Platforms frequently used by international investors for equity portfolios include Interactive Brokers (broad market access, competitive pricing, accommodates non-residents in most jurisdictions), Saxo Bank (strong multi-currency account management), and Swissquote (Swiss-regulated, strong for EU and international residents). Private banks add a relationship management dimension for larger portfolios.

Account opening as a non-resident typically requires certified identification, proof of address in the country of residence, and source-of-funds documentation. KYC requirements have become more stringent in recent years under global AML frameworks.

Equity Reporting Requirements

Equity investors in international portfolios face reporting obligations on:

• Dividend income: Reportable in the jurisdiction of tax residence, with credit for withholding tax deducted.
• Capital gains: Taxable on disposal in most jurisdictions, though the rate, exemptions, and timing rules vary significantly (the UAE and some other Gulf states do not levy capital gains tax on individuals as of 2026).
• Foreign account reporting: FATCA for US persons; CRS-based automatic exchange for residents of participating countries.
• Specific fund reporting: UK taxpayers need to distinguish between reporting and non-reporting funds; non-reporting fund gains are treated as income.

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This guide is for general information only and does not constitute regulated investment advice. The value of investments can fall as well as rise and you may get back less than you invest. Past performance is not a guide to future returns. Tax treatment depends on individual circumstances and the laws of multiple jurisdictions, which may change. Always seek independent regulated advice before making investment decisions.

How Global Investments can help

Global Investments works with internationally mobile investors to build equity portfolios structured appropriately for their tax residency, custodian options, and currency needs. We pay particular attention to US estate tax exposure and withholding tax efficiency — issues that domestic advisers rarely address. Contact us to discuss your global equity strategy.