Why U.S. Expats in Europe End Up Building “DIY ETFs”

For many U.S. expats, the real investing problem does not start with performance or risk. It starts with access.

Once someone living in Europe understands that most local ETFs are treated as PFICs under U.S. tax law, the obvious response is to stop buying them. That feels sensible. The surprise comes afterwards, when avoiding PFICs does not open up better options, but instead shuts most of them down.

At that point, many expats discover that the issue is no longer just tax. It is structural.

In much of Europe, banks and brokers are increasingly unwilling to deal with U.S. citizens at all. Accounts that were opened years ago may remain open, but investment options become restricted. U.S.-listed ETFs are blocked. U.S.-listed shares are often unavailable. In some cases, trading access is limited to a narrow list of local securities.

This is not driven by European tax law. It is driven by compliance risk. FATCA reporting, U.S. withholding rules, and regulatory exposure make U.S. clients expensive and unattractive for many EU institutions. The result is a quiet form of financial exclusion.

The U.S. tax system then makes that exclusion worse. Local funds are off-limits because of PFIC rules. U.S. funds are inaccessible because of brokerage restrictions. The investor is left with very little room to move.

This is where the idea of a “DIY ETF” appears.

Rather than buying a diversified fund, many U.S. expats in Europe start buying individual European stocks instead. Large, well-known companies feel safer. Holding periods are long. Turnover is low. From a U.S. tax perspective, this works. Ordinary shares in operating companies are not PFICs, and capital gains are taxed in the normal way.

On paper, it looks like a reasonable workaround.

In reality, it is a compromise that few investors would choose if better options were available.

Building diversification stock by stock is difficult. Portfolios become concentrated without meaning to be. Certain sectors dominate because they are more visible or more accessible. Rebalancing is awkward. Decisions that are handled automatically inside a fund suddenly require time, confidence, and discipline.

Over time, risk creeps in quietly, not because the investor is reckless, but because the structure itself is fragile.

Dividend taxation adds another layer of friction. Holding individual European shares means dealing with different withholding regimes, different treaty rates, and different reclaim processes. Foreign tax credits do not always line up neatly with U.S. reporting periods. What would have been invisible inside a fund becomes a recurring administrative task.

Crypto often enters these portfolios for similar reasons. It is accessible. It is portable. It is not a PFIC. From a tax classification standpoint, that is correct. From a portfolio standpoint, it is rarely a substitute for broad equity exposure. It fills a gap that should not exist in the first place.

None of this reflects poor planning or lack of sophistication. It reflects a system that forces ordinary investors into distorted choices.

U.S. tax rules were not designed with long-term overseas residents in mind. European banking systems were not designed to accommodate U.S. regulatory reach. Where those two systems collide, the investor absorbs the cost.

The real lesson is not that U.S. expats should build better DIY portfolios. It is that investment decisions have to be made with the tax and access constraints in mind from the very beginning. Once accounts are opened and products are bought, the menu of options narrows quickly.

At Antravia, we see this pattern repeatedly. People do not end up with these portfolios because they want to. They end up with them because the system leaves them little choice.

Helping U.S. expats understand those constraints early is often far more valuable than fixing the consequences later.