5 Mistakes Europeans Make When Investing in US Stocks (and How to Avoid Them)

5 Mistakes Europeans Make When Investing in US Stocks (and How to Avoid Them)

Investing in US stocks can offer European investors global diversification and access to world-leading companies. However, it comes with unique pitfalls that can eat into your returns or even result in compliance issues. In this guide, we’ll break down the five most common mistakes Europeans make with US stocks—and show you exactly how to avoid them.

As we covered in our Beginner’s Blueprint: How to Save, Invest, and Achieve Financial Security in Europe (2026 Edition), international investing requires understanding both the opportunities and the risks. Let’s dig deeper into the specifics for US equities.

Step 1: Don’t Ignore US Dividend Withholding Tax

What to do: Complete a W-8BEN form with your broker to ensure you benefit from reduced US dividend withholding tax rates under EU-US tax treaties.

Why it matters: The US government normally withholds 30% tax on dividends paid to foreign investors. Most EU countries have a tax treaty reducing this to 15%, but only if you submit the correct paperwork.

What can go wrong: If you skip this step, you’ll lose 30% of every dividend payment from US stocks. For example, if you receive €100 in annual dividends from Apple, you’ll get just €70 instead of €85—an unnecessary loss of €15 each year.

• How to do it:
  • Trade Republic: The W-8BEN is filled automatically when you open your account, but check “Profile → Tax Information” to confirm.
  • DEGIRO: Go to “Profile → Tax” and ensure your W-8BEN is completed. If not, follow their official instructions.
  • Scalable Capital: The form is usually handled during onboarding, but verify under “Account → Tax Documents”.

Expected outcome: You should see dividend payments with 15% withholding, not 30%. Cross-check with your broker’s transaction history after your next US dividend payout.

Step 2: Don’t Underestimate Currency Risk

What to do: Always remember that US stocks are priced in USD, so your performance depends not just on the stock’s returns, but also on the EUR/USD exchange rate. Use a broker with low FX fees and monitor the impact of currency swings on your returns.

Why it matters: If the USD weakens against the EUR, your US stock gains can be wiped out (or even turn negative) when converted back to euros. For example, if you invest €5,000 in S&P 500 stocks and the USD falls 10% versus the euro, your investment could lose €500 in value even if US stocks don’t move.

• How to do it:
  • Compare brokers’ FX fees. For example, Trade Republic charges 0.5% FX fee per transaction, while DEGIRO offers “Auto FX” for 0.25% (as of 2024).
  • Consider EUR-hedged ETFs if you want to eliminate currency risk. Example: iShares S&P 500 EUR Hedged UCITS ETF (ISIN: IE00B3ZW0K18).
  • Track your portfolio’s exposure to USD versus EUR using a spreadsheet or portfolio tracker.

For more on minimizing currency costs, see How to Buy US Stocks from Europe Without Paying Hidden Currency Fees.

Expected outcome: You should see lower FX costs and a clear understanding of how exchange rates influence your returns in EUR.

Step 3: Don’t Buy Non-UCITS ETFs

What to do: Only purchase US ETFs that are UCITS-compliant and listed on a European exchange. Avoid direct purchases of US-domiciled ETFs (e.g., those listed only on NYSE or NASDAQ).

Why it matters: Since 2018, European investors are legally barred from buying US-domiciled ETFs due to PRIIPs and KID regulations. Non-UCITS ETFs lack required disclosures and can’t be sold to retail EU investors.

What can go wrong: If you try to buy a US-based ETF (like the original “SPY” S&P 500 ETF), your order will be rejected—or worse, if you manage to buy through a workaround, you may face legal or tax headaches.

• How to do it:
  • On Trade Republic, use the “Search” tab and filter for “UCITS” or “Europe” under ETF options.
  • On DEGIRO, look for ETFs with “IE”, “LU”, or “IE00/DE00” ISIN codes (Ireland/Luxembourg/Germany).
  • Example: iShares Core S&P 500 UCITS ETF (ISIN: IE00B5BMR087) is fully compliant and available across Europe.

Expected outcome: You should only hold UCITS ETFs in your portfolio, ensuring legal compliance and access to investor protections.

Step 4: Don’t Forget Diversification

What to do: Avoid putting all your money into a few US stocks or sector-specific US ETFs. Diversify across regions, sectors, and asset classes.

Why it matters: Concentrating only on US stocks exposes you to “home bias” (for Americans) or “US bias” (for Europeans), sector risk (e.g., tech-heavy S&P 500), and currency risk. If the US market underperforms or the dollar falls, your whole portfolio suffers.

What can go wrong: Investing €10,000 solely in US tech stocks (e.g., Apple, Microsoft, Nvidia) could lead to large losses if the sector corrects—even if the broader global market does well.

• How to do it:
  • Use all-in-one global ETFs, such as Vanguard FTSE All-World UCITS ETF (ISIN: IE00B3RBWM25), which covers US, Europe, and emerging markets.
  • On Trade Republic: Tap “Portfolio → Savings Plan → Select ETF”, then search for “All-World” or “MSCI World”.
  • Review your allocation regularly—aim for no more than 50% in US equities unless you have a specific reason.

Expected outcome: Your portfolio should now include a mix of US and non-US assets, reducing risk from any single market or currency.

Step 5: Don’t Overlook US Corporate Actions and Dividend Schedules

What to do: Familiarize yourself with how US companies handle dividends, stock splits, and special corporate actions. US stocks often pay quarterly dividends and may announce actions that affect your holdings.

Why it matters: US dividend schedules and ex-dividend dates differ from European norms. Missing an ex-dividend date means missing a payout. Corporate actions (like mergers or splits) can change your share count or trigger tax events.

What can go wrong: If you buy a US stock just after its ex-dividend date, you won’t receive the next payment. Or, if a US company merges or spins off a unit, you might receive new shares or cash, sometimes with unexpected tax consequences in your country.

• How to do it:
  • Check dividend calendars on your broker’s platform or financial news sites. Example: On DEGIRO, click “Portfolio → Dividends” for upcoming payments.
  • Read all broker notifications regarding US stock actions. These are often under “Messages” or “Corporate Actions”.
  • Consult your local tax authority regarding the treatment of foreign dividends and cash from US corporate events.

Expected outcome: You’ll receive US dividends and handle corporate actions without surprises, and you’ll be prepared for tax reporting in your country.

Common Mistakes

• Not submitting (or updating) the W-8BEN form, resulting in excess US tax withheld
• Overlooking FX fees or currency risk, shrinking actual EUR returns
• Attempting to buy non-UCITS US ETFs, leading to rejected trades or regulatory trouble
• Over-concentrating in US stocks, missing out on global diversification benefits
• Misunderstanding US dividend schedules and ex-dividend dates, resulting in missed income or tax confusion

Next Steps

By avoiding these mistakes, you’ll be well-positioned to benefit from US stock investing as a European. For a broader overview of building your financial foundation, check out our Beginner’s Blueprint for Financial Security in Europe. If you’re balancing US equities with savings or emergency funds, you may also find our guides on the best EUR savings accounts and how much to save in an emergency fund useful.

Stay proactive, keep learning, and review your investments regularly to maximize your returns and minimize headaches!

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.