Investing in ETFs: Mexico vs United States Explained for Long Term Investors

[1.] Introduction: Choosing Where to Invest Your ETFs For investors in Mexico, one of the most common questions when starting out is whether it is better to buy ETFs in the Mexican market or directly in the United States. While both options give exposure to similar assets, there are important differences in taxes, liquidity, pricing, and flexibility that can affect long term results. This guide breaks down those differences in a simple and practical way for beginners and long term investors. [2.] How Taxes Actually Work When Trading ETFs A common misunderstanding is that selling ETFs in Mexico automatically triggers a fixed tax deduction. In reality, the tax is 10 percent on real capital gains and is reported in the annual tax declaration. There is no automatic withholding when you sell. Your broker provides an annual statement that helps calculate this amount. The same 10 percent tax applies to ETFs from the United States if they are listed through the international trading system available to Mexican investors. The main difference is that, in this case, the investor must calculate the gain manually. Automatic withholding only applies to: Dividend payments, which are subject to a final 10 percent tax Real estate investment trusts, when distributions come from fiscal results, with a 30 percent withholding Because of this, the tax difference between Mexico and US trading is often smaller than many new investors expect. [3.] Currency Exposure and the Peso vs Dollar Question Many investors believe that buying ETFs in the United States guarantees a benefit from a stronger dollar over time. While currency movements can help returns, they should not be relied on as a strategy by themselves. When you buy a Mexico listed ETF that tracks US assets, you are usually already exposed to the dollar. Only specific instruments are designed to remove currency effects. For long term investors, market performance tends to matter more than exchange rate speculation. [4.] Liquidity Matters More Than It Seems One issue frequently seen in Mexico listed ETFs is low trading volume. This can result in price charts that look flat, wider buy sell spreads, and difficulty exiting positions quickly. Low movement does not mean poor performance. It usually means fewer active buyers and sellers. Checking daily trading volume is essential, especially if you want the freedom to sell part of your position when needed. [5.] The Limitation of Not Having Fractional Shares In the Mexican market, investors must buy full ETF units. Fractional purchases are not available. This can make it harder to invest consistently when ETF prices are high, and it may leave unused cash in the account. US markets often offer more flexibility with pricing and investment amounts, which can be helpful for monthly or gradual investing strategies. [6.] Building a Practical Long Term Strategy Instead of choosing one market exclusively, many investors combine both approaches. Mexico listed ETFs can be useful for simplicity and tax reporting, while US listed ETFs often offer better liquidity and more choices. The key is consistency, understanding risk tolerance, and avoiding investments with low volume or unclear structure. [7.] Final Thoughts Both Mexican and US ETF markets can play a role in a strong long term investment strategy. The best choice depends on understanding taxes, liquidity, and personal investment goals. With proper research and a long term mindset, investors can build a diversified and flexible portfolio without unnecessary complexity.

Investing in ETFs: Mexico vs United States Explained for Long Term Investors

Bitrader VIP

Reading Time

Word Count

Published

Updated

Loading key insights...

Bitrader VIP