Before You Start
- Basic understanding of ETFs and equity investing
- Access to a European brokerage account (e.g., Trade Republic, DEGIRO, Scalable Capital)
- Comfort with using brokerage platforms and setting up savings plans
- Willingness to periodically review and rebalance your portfolio
Time needed: 45–60 minutes for setup, 15 minutes per quarter for review
What you'll need: Internet access, valid ID for broker registration, initial investment (e.g., €1,000+), access to product factsheets
Building a globally diversified equity portfolio as a European investor doesn’t require dozens of funds or complex strategies. With just two UCITS ETFs, you can achieve broad exposure across both European and US markets, capturing the world’s largest and most dynamic economies. This step-by-step guide will show you exactly how to diversify Europe US ETFs—covering ETF selection, allocation logic, platform instructions, and real EUR-based examples.
Step 1: Understand the Rationale for Two-ETF Diversification
What to do: Grasp why using just two ETFs (one global, one regional) can efficiently diversify your equity portfolio.
Why it matters: The US and Europe together account for over 65% of global stock market capitalization, but most “global” ETFs are heavily weighted towards the US. Adding a dedicated European ETF can improve regional balance, reduce concentration risk, and align your portfolio with your home currency exposure.
For a deeper dive into allocation principles, see The Best Portfolio Allocations for European Passive Investors in 2026.
What can go wrong: Relying on a single world ETF (e.g., VWCE) may leave you overexposed to US tech giants and underweight European companies and sectors that behave differently in various economic cycles.
Pro Tip
Most “global” ETFs allocate over 60% to the US. Complementing with a European ETF helps reduce home bias if you prefer more balance.
Step 2: Select Your Two UCITS ETFs
What to do: Choose one global ETF and one regional ETF accessible to European investors. Focus on UCITS-compliant funds for tax efficiency and investor protection.
- Global ETF (All-World): Vanguard FTSE All-World UCITS ETF (VWCE, ISIN: IE00BK5BQT80)
- European ETF: iShares Core MSCI Europe UCITS ETF (IMEU, ISIN: IE00B4K48X80)
Why these ETFs?
- VWCE covers ~3,700 companies across developed and emerging markets, but is 60–65% US stocks.
- IMEU covers ~430 large and mid-cap companies across 15 developed European markets.
Alternatives: For US exposure only, consider iShares Core S&P 500 UCITS ETF (CSPX, ISIN: IE00B5BMR087), but this narrows your diversification versus IMEU.
What can go wrong: Picking non-UCITS ETFs (e.g., US-domiciled) can lead to higher tax drag and may not be available on European brokers.
Pro Tip
Always check the official ETF factsheet for fees, distribution policy, and top holdings before investing.
Step 3: Decide Your Allocation Between the Two ETFs
What to do: Choose how much of your portfolio to allocate to each ETF. Common splits for EUR-based investors are:
- 70% VWCE / 30% IMEU – for global tilt with meaningful European exposure
- 60% VWCE / 40% IMEU – for reduced US bias
- 80% VWCE / 20% IMEU – for maximum global diversification with a nod to Europe
Why it matters: The allocation determines your risk, currency exposure, and performance. Increasing IMEU reduces your US dollar exposure and can smooth volatility if European and US markets diverge.
Example: You invest €10,000. A 70/30 split means €7,000 in VWCE and €3,000 in IMEU.
What can go wrong: Over-allocating to one region can expose you to currency risk (e.g., if the USD weakens against the EUR) or market shocks specific to that region.
Pro Tip
Revisit your allocation annually. As markets move, your split may drift, requiring a simple rebalance to stay on track.
Step 4: Compare ETF Fees and Platform Costs
What to do: Review the ongoing charges (TER) and your broker’s trading/savings plan fees to ensure low-cost investing.
- VWCE TER: 0.22% per year
- IMEU TER: 0.12% per year
Platform fees:
- Trade Republic: €1/month flat fee for unlimited trades and savings plans
- DEGIRO: Free monthly ETFs list (both VWCE and IMEU usually included), otherwise €2 commission + €1 handling fee per trade
- Scalable Capital: Free savings plans on most ETFs with Prime Broker (€2.99/month)
What can go wrong: Frequent trading or using high-fee brokers can erode returns. Double-check that your chosen ETFs are available and commission-free in your broker’s offering.
Pro Tip
Accumulating (ACC) share classes are more tax-efficient for most European investors; dividends are reinvested automatically, saving on transaction costs.
Step 5: Invest via Your European Broker
What to do: Buy your chosen ETFs through a regulated European broker. Here’s how to do it on two popular platforms:
Trade Republic:
- Open the app and tap Search (magnifying glass icon)
- Type “VWCE” and select Vanguard FTSE All-World UCITS ETF
- Tap Savings Plan, enter your monthly amount (e.g., €350 for a €7,000/€3,000 split over 20 months)
- Repeat for IMEU
- Confirm and set the execution date
DEGIRO:
- Log in and go to Products → ETFs
- Search for “VWCE” and “IMEU”
- Click Buy, enter your investment amount, and review the commission
- Repeat for the second ETF
Expected outcome: You should now see both ETFs in your portfolio, with allocations matching your chosen split. For example, after investing €1,000 with a 70/30 split, you’ll hold €700 in VWCE and €300 in IMEU.
What can go wrong: Buying the wrong ISIN or distribution class, or accidentally investing in a non-UCITS fund. Always double-check product details before confirming.
Pro Tip
Set up automated monthly savings plans to smooth out market timing risk and build your portfolio gradually.
Step 6: Rebalance and Monitor Your Portfolio
What to do: Check your portfolio allocation every 6–12 months. If one ETF grows to more than 5% above or below your target percentage, rebalance by buying more of the underweight ETF or selling some of the overweight ETF.
Why it matters: Market movements can cause your allocation to drift. Rebalancing keeps your risk profile consistent and helps you “buy low, sell high.”
Example: After a year, your €10,000 portfolio is now €7,800 VWCE (78%) and €2,700 IMEU (22%). To return to 70/30, sell €800 of VWCE and buy €800 of IMEU.
What can go wrong: Ignoring rebalancing can lead to unintended risk, especially if one region strongly outperforms the other.
Pro Tip
Some brokers (like Scalable Capital) allow automatic rebalancing in managed portfolios, but for DIY investing, set a calendar reminder to review quarterly or annually.
Common Mistakes
- Using non-UCITS or US-domiciled ETFs, which may not be available to European investors and can have tax drawbacks
- Overlooking platform fees or minimum investment requirements
- Letting allocation drift far from your plan due to lack of rebalancing
- Investing in distributing share classes when you prefer accumulating (ACC) for tax simplicity
- Assuming “all-world” means evenly diversified—most global ETFs are US-heavy
Next Steps
- Read How to Build a Simple All-in-One ETF Portfolio with EUR 1,000 for an even simpler approach
- Compare the pros and cons of this method vs. single-fund solutions in All-in-One ETFs vs. Custom ETF Portfolios: Which Is Better for European Investors?
- Review your investment plan annually and adjust your ETF choices if your goals or market conditions change
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a qualified financial advisor before making investment decisions.