How to start a Mutual Fund for absolute beginners.

[AyG]

Btw did you notice the common theme that all the quotes are US or developed market centric.

And large cap centric.

Aberdeen fees are high relative to what you can buy in the US for the same Asia coverage- e.g. Aberdeen asia small caps has a 1.7 expense ratio, Vanguard has average of 0.15 expense ratios.

What does this mean in English? For $100,000 over a 10 year period at say- 6% returns (unlikely but just for comparison) - you would get at least $24,000 return more on Vanguard compared to Aberdeen because of the higher Aberdeen fees.

It's nonsense to think that Aberdeen won't outperform a Vanguard ETF. (I presume it's an ETF you're referring to.) This is for a number of reasons: Asia small cap stocks are poorly researched, so there are great opportunities to be found. Aberdeen can choose to increase the weight to countries that are expected to outperform others economically. Aberdeen isn't bound to make large investments in individual companies which dominate individual countries. And, most importantly, Aberdeen can avoid companies that are likely to underperform.

Try and open an online account (etrade, vanguard etc) in your home country and then buy asia/thai funds through them- over 15 years you will make a lot more money given the fee differences.

If you're British it's now impossible to open a brokerage account in the UK as an expat living outside Europe. One is limited to offshore accounts.

If you're not American it's generally stupid to buy American ETFs and funds because of the 30% (or 15% in some cases) withholding tax on income. Far better to buy from a country with a more favourable tax regime.

[ExpatJ]

Btw did you notice the common theme that all the quotes are US or developed market centric.

And large cap centric.

Aberdeen fees are high relative to what you can buy in the US for the same Asia coverage- e.g. Aberdeen asia small caps has a 1.7 expense ratio, Vanguard has average of 0.15 expense ratios.

What does this mean in English? For $100,000 over a 10 year period at say- 6% returns (unlikely but just for comparison) - you would get at least $24,000 return more on Vanguard compared to Aberdeen because of the higher Aberdeen fees.

It's nonsense to think that Aberdeen won't outperform a Vanguard ETF. (I presume it's an ETF you're referring to.) This is for a number of reasons: Asia small cap stocks are poorly researched, so there are great opportunities to be found. Aberdeen can choose to increase the weight to countries that are expected to outperform others economically. Aberdeen isn't bound to make large investments in individual companies which dominate individual countries. And, most importantly, Aberdeen can avoid companies that are likely to underperform.

Try and open an online account (etrade, vanguard etc) in your home country and then buy asia/thai funds through them- over 15 years you will make a lot more money given the fee differences.

If you're British it's now impossible to open a brokerage account in the UK as an expat living outside Europe. One is limited to offshore accounts.

If you're not American it's generally stupid to buy American ETFs and funds because of the 30% (or 15% in some cases) withholding tax on income. Far better to buy from a country with a more favourable tax regime.

I'm a brit. I have HSBC premier which I used to open an hsbc account in Singapore (no residency required, I reside in Thailand) - with that account I opened an etrade Singapore account which gives you access to all the USA etrade account low fee funds.

[ExpatJ]

Ay G said "It's nonsense to think that Aberdeen won't outperform a Vanguard ETF."

You should know better than this Ay G- its in fact nonsense to believe that actively managed funds such as Aberdeen out perform passive funds such as a Vanguard etf say- over time passive funds consistently outperform actively managed funds- ESPECIALLY over 10 year + periods, which the OP is concerned with.

Just google passive v active funds and you can find out for yourself. I just did it and found this from a Forbes article:

-The first conclusion should be no surprise to most investors: over extended time periods (15 years, in the case of this study), most actively managed funds have a challenging time beating passively managed index funds after fees. Using Morningstars fund database, we examined the performance of more than 2,000 active equity funds during the 15-year period from July 1, 1998 to June 28, 2013. Result: only 25.6% of the active funds currently in existence outperformed their benchmarks -

Edited September 4, 2014 by ExpatJ

[AyG]

Ay G said "It's nonsense to think that Aberdeen won't outperform a Vanguard ETF."

You should know better than this Ay G- its in fact nonsense to believe that actively managed funds such as Aberdeen out perform passive funds such as a Vanguard etf say- over time passive funds consistently outperform actively managed funds- ESPECIALLY over 10 year + periods, which the OP is concerned with.

My comment was specifically about the Aberdeen fund.

Taking a simple comparison, comparing iShares Asia Pacific Dividend UCITS ETF (GBP) vs. Aberdeen Asia Pacific Equity Fund A Inc.

2007 2008 2009 2010 2011 2012 2013 31/08

iShares 10.15 -40.19 48.89 15.27 -5.33 11.91 -0.23 7.35

Aberdeen 26.70 -25.76 52.27 31.38 -14.78 18.64 -5.18 10.80

The figures are total return in Sterling for each year after fees. YTD for 2014. Data from Morningstar.

(I picked the ETF because it's in Sterling, making the comparison easier. If I'd used the Vanguard ETF and done the currency conversions I'm confident the results would be virtually identical.)

Aberdeen outperformed in 6 out of 8 time periods - often significantly. Note in particular the protective effect of active management in 2008.

From January 2007 to date the ETF has given a total return of 27%. The actively managed fund, 90%. (These figures are approximate since I'm reading the values from a graph.)

There are markets where it's nigh on impossible for active management to add value, these include US large cap equity and virtually all bond funds. However, in smaller, poorly researched markets, it's possible for really good fund managers to add value. The challenge is to identify the good fund managers.

One problem with fund management is that comparisons are usually made between funds within the same sector. To come top you don't need to beat the market, you just need to beat your competitors. Unfortunately, this all too often leads to funds which are closet index trackers with a small overlay of active management. This is why passive funds, with their lower fees, consistently outperform the index in certain markets. It doesn't always have to be the case.

[meand]

I haven't read through all this text explicitly, but if op is still reading, don't let the US data and quotes "fool you". You can't really compare the US stock market with the SET or any other burgeoning market imo. If I was to invest in the US, I would in fact invest very differently. I would just buy a low fee tracker fund there and add to it as often as possible. Here i'd buy a well run mutual fund that does not pay dividends. You pay tax on dividends, so it's ideal not to buy dividend funds here imo.

The short and sweet version for the op is that mutual fund fees here in Thailand you are probably going to get what you pay for. In the US, sure, paying those fees is a terrible idea because the managers so rarely outperform the market.

Anybody who wants to see who is "right", just look at the numbers, although "past performance is never an indicator of future blah blah blah...."

Edited September 4, 2014 by meand

[ExpatJ]

Ay G said "It's nonsense to think that Aberdeen won't outperform a Vanguard ETF."

You should know better than this Ay G- its in fact nonsense to believe that actively managed funds such as Aberdeen out perform passive funds such as a Vanguard etf say- over time passive funds consistently outperform actively managed funds- ESPECIALLY over 10 year + periods, which the OP is concerned with.

My comment was specifically about the Aberdeen fund.

Taking a simple comparison, comparing iShares Asia Pacific Dividend UCITS ETF (GBP) vs. Aberdeen Asia Pacific Equity Fund A Inc.

2007 2008 2009 2010 2011 2012 2013 31/08

iShares 10.15 -40.19 48.89 15.27 -5.33 11.91 -0.23 7.35

Aberdeen 26.70 -25.76 52.27 31.38 -14.78 18.64 -5.18 10.80

The figures are total return in Sterling for each year after fees. YTD for 2014. Data from Morningstar.

(I picked the ETF because it's in Sterling, making the comparison easier. If I'd used the Vanguard ETF and done the currency conversions I'm confident the results would be virtually identical.)

Aberdeen outperformed in 6 out of 8 time periods - often significantly. Note in particular the protective effect of active management in 2008.

From January 2007 to date the ETF has given a total return of 27%. The actively managed fund, 90%. (These figures are approximate since I'm reading the values from a graph.)

There are markets where it's nigh on impossible for active management to add value, these include US large cap equity and virtually all bond funds. However, in smaller, poorly researched markets, it's possible for really good fund managers to add value. The challenge is to identify the good fund managers.

One problem with fund management is that comparisons are usually made between funds within the same sector. To come top you don't need to beat the market, you just need to beat your competitors. Unfortunately, this all too often leads to funds which are closet index trackers with a small overlay of active management. This is why passive funds, with their lower fees, consistently outperform the index in certain markets. It doesn't always have to be the case.

Well this is cherry picking- i could pick some passive funds which outperformed Aberdeen over the last few years. The fact remains that in 3 times out of 4, passive funds beat active funds. Many people assume (including me initially) that actively managed funds- by definition- must outperform passive funds but its not the case. And the fees are a big part of that- the Aberdeen fund fees are almost 9 + times higher than low cost funds available.

[meand]

There is a bualuang fund that earned 76% in 2012. Worth the 2% in fees? That is totally cherry picking, but cherry picking can also prove a point The point being these Thai fund managers obviously know what they are doing.

Here is a good list for the OP to peruse because it is a list of the best performing Thai funds for the last 10 years, which is pretty consistent with op's time frame. Of important note, aberdeen and bualuang totally dominate the top of the list. I tend to see some of those bualuang funds as very very similar, so the fact that they have more top performing options doesn't really mean they are outperforming aberdeen.

http://tools.morningstarthailand.com/th/fundquickrank/default.aspx?Site=th&sortorder=desc&tab=Performance&sortby=ReturnM120&LanguageId=en

Edited September 4, 2014 by meand

[ExpatJ]

There is a bualuang fund that earned 76% in 2012, which doubled the overall SET at 37% that year. Worth the 2% in fees? That is totally cherry picking, but cherry picking can also prove a point

Here is a good list for the OP to peruse because it is a list of the best performing Thai funds for the last 10 years, which is pretty consistent with op's time frame. Of important note, aberdeen and bualuang totally dominate the top of the list. I tend to see some of those bualuang funds as very very similar, so the fact that they have more top performing options doesn't really mean they are outperforming aberdeen.

http://tools.morningstarthailand.com/th/fundquickrank/default.aspx?Site=th&sortorder=desc&tab=Performance&sortby=ReturnM120&LanguageId=en

Yes you have a point, if the OP could travel back in time and invest in that bualong fund in 2011 he would have made a lot of money. Mind you, Related to this, OP could go back to last week and bet money on Chelsea beating Everton 6-3 last Saturday , far higher return than Bualuang! :-)

[meand]

There is a bualuang fund that earned 76% in 2012, which doubled the overall SET at 37% that year. Worth the 2% in fees? That is totally cherry picking, but cherry picking can also prove a point

Here is a good list for the OP to peruse because it is a list of the best performing Thai funds for the last 10 years, which is pretty consistent with op's time frame. Of important note, aberdeen and bualuang totally dominate the top of the list. I tend to see some of those bualuang funds as very very similar, so the fact that they have more top performing options doesn't really mean they are outperforming aberdeen.

http://tools.morningstarthailand.com/th/fundquickrank/default.aspx?Site=th&sortorder=desc&tab=Performance&sortby=ReturnM120&LanguageId=en

Yes you have a point, if the OP could travel back in time and invest in that bualong fund in 2011 he would have made a lot of money. Mind you, Related to this, OP could go back to last week and bet money on Chelsea beating Everton 6-3 last Saturday , far higher return than Bualuang! :-)

My point was that over a long term cycle, he will probably be happy with the performance of those funds. And that, he almost certainly wont be happy if he bets his funds on sports over a long time frame. You brought it up

Although I would actually advise him not to expect those same numbers, as you are saying.

Edited September 4, 2014 by meand

[ExpatJ]

There is a bualuang fund that earned 76% in 2012, which doubled the overall SET at 37% that year. Worth the 2% in fees? That is totally cherry picking, but cherry picking can also prove a point

Here is a good list for the OP to peruse because it is a list of the best performing Thai funds for the last 10 years, which is pretty consistent with op's time frame. Of important note, aberdeen and bualuang totally dominate the top of the list. I tend to see some of those bualuang funds as very very similar, so the fact that they have more top performing options doesn't really mean they are outperforming aberdeen.

http://tools.morningstarthailand.com/th/fundquickrank/default.aspx?Site=th&sortorder=desc&tab=Performance&sortby=ReturnM120&LanguageId=en

Yes you have a point, if the OP could travel back in time and invest in that bualong fund in 2011 he would have made a lot of money. Mind you, Related to this, OP could go back to last week and bet money on Chelsea beating Everton 6-3 last Saturday , far higher return than Bualuang! :-)

My point was that over a long term cycle, he will probably be happy with the performance of those funds. And that, he almost certainly wont be happy if he bets his funds on sports over a long time frame. You brought it up

Although I would actually advise him not to expect those same numbers, as you are saying.

Over the long term, when passive funds outperform active funds in 3 out of 4 cases- why would anyone - especially an amateur investor- invest in active funds with high fees? The only argument i have seen today is that fund X and fund y performed well historically therefore go with them. And as i mentioned earlier over a 15 year period putting 100K into Aberdeen (1.9 cost ration) will result in a 24,000 $ loss in fees compared to a passive fund (0.15 cost ratio).

Having said that, I know some people cannot access online investment websites like etrade, vanguard etc for various reasons and in this case, then of course there is no other alternative to paying the higher fees in aberdeen et al. so its a moot point.

[AyG]

Well this is cherry picking- i could pick some passive funds which outperformed Aberdeen over the last few years. The fact remains that in 3 times out of 4, passive funds beat active funds. Many people assume (including me initially) that actively managed funds- by definition- must outperform passive funds but its not the case. And the fees are a big part of that- the Aberdeen fund fees are almost 9 + times higher than low cost funds available.

I resent the totally unnecessary slur. There was no element of "cherry picking" here.

The discussion was about Aberdeen fund performance. Aberdeen are experts in investing in Asia Pacific.

I selected an Aberdeen Asia Pacific fund (and used a retail class to avoid any accusation of bias).

I selected the closest index I could think of denominated in the same currency to make the comparison simpler.

I did not make any other fund/index comparison whatsoever.

No cherry picking. Nada, zero, zip, zilch.

The simple truth is, in some markets some active managers can consistently outperforms passive management.

Quite frankly, you come across as yet another d**b American who believes USA Number One, America is the greatest country every, and that the rest of the world is an inferior imitation of the Good Ol'USA. It's just not true. You're not in Kansas any more.

The incontrovertible fact is: in some markets some fund managers can consistently outperform passively managed funds.

[ExpatJ]

Well this is cherry picking- i could pick some passive funds which outperformed Aberdeen over the last few years. The fact remains that in 3 times out of 4, passive funds beat active funds. Many people assume (including me initially) that actively managed funds- by definition- must outperform passive funds but its not the case. And the fees are a big part of that- the Aberdeen fund fees are almost 9 + times higher than low cost funds available.

I resent the totally unnecessary slur. There was no element of "cherry picking" here.

The discussion was about Aberdeen fund performance. Aberdeen are experts in investing in Asia Pacific.

I selected an Aberdeen Asia Pacific fund (and used a retail class to avoid any accusation of bias).

I selected the closest index I could think of denominated in the same currency to make the comparison simpler.

I did not make any other fund/index comparison whatsoever.

No cherry picking. Nada, zero, zip, zilch.

The simple truth is, in some markets some active managers can consistently outperforms passive management.

Quite frankly, you come across as yet another d**b American who believes USA Number One, America is the greatest country every, and that the rest of the world is an inferior imitation of the Good Ol'USA. It's just not true. You're not in Kansas any more.

The incontrovertible fact is: in some markets some fund managers can consistently outperform passively managed funds.

Well firstly, no slur implied at all, really. Just friendly debate.

Secondly, im a Brit as i mentioned earlier.

Thirdly, the OP was looking at investment ideas- historically Aberdeen has done well but equally i could have picked out a passive fund or any investment that has done better and said there you go, put your money in that- cherry picking im afraid. One needs to look at the bigger picture- and given that passive funds out perform active AND active funds will cost the OP 1000s/$10,000s in fees over 15 years, the sound advice would be to go passive fund, no?

[GarryP]

If you are paying incoming tax in Thailand, the tax refunds provided on LTF's (not more than 15 percent of your income capped at a max of Baht 500,000) are well worth factoring in. Your money is tied up for 3 to 5 years depending on when you invest and when you withdraw, but the tax refunds can be plowed back into subsequent year's purchases. I look at the tax refund as interest and reinvest it. Unfortunately, the tax refunds will end in 2016.

[AyG]

The incontrovertible fact is: in some markets some fund managers can consistently outperform passively managed funds.

Well firstly, no slur implied at all, really. Just friendly debate.

Secondly, im a Brit as i mentioned earlier.

Thirdly, the OP was looking at investment ideas- historically Aberdeen has done well but equally i could have picked out a passive fund or any investment that has done better and said there you go, put your money in that- cherry picking im afraid. One needs to look at the bigger picture- and given that passive funds out perform active AND active funds will cost the OP 1000s/$10,000s in fees over 15 years, the sound advice would be to go passive fund, no?

Sorry for assuming you were one of our transatlantic cousins. I was confusing you with another poster.

It's not a given that passive funds out perform active funds. They only outperform some fund managers in some markets. It's not a case of one or the other in all cases universally.

Yes, active fund management costs more than passive fund management. However, if the actively managed fund outperforms the passive fund by a significant margin, then those costs are well worth it. So, no, the sound advice is not always to go passive. The sound advice is to consider the market, to consider whether there's a possibility that active management will out perform*. If that's a possibility, then look at the available funds and managers. Are there any that aren't closet trackers and have a proven ability consistently to produce benchmark-beating performance? (Ideally the evidence will cover a complete economic cycle.)

*I have an holding which is contrary to this rule. I'm not a fan of bonds and believe that generally fund managers can not add value after costs, so all my (very limited) bond holdings are via ETFs. There's one exception. I hold Invesco Perpetual Tactical Bond fund. Here it's not the fact that it invests in bonds that matters to me, it's the fact that the fund has a very wide mandate and that the fund managers are exceptionally talented. Very, very occasionally I feel it's worth investing purely based upon proven talent, not upon the asset class. For me it falls into the bucket of "diversification" (akin to hedge funds and other uncorrelated investments), rather than a bond investment.

Edit: trying to sort out the quotes

Edited September 4, 2014 by AyG

[mccw]

Thanks for that.

Hi

Do these funds pay out any dividends or it's all just capital gains targeted?

Thanks

MCCW

All the ones there were accumulation units so no divs. Main reasons for that being:

- As OP was looking 15 years time he's looking for overall return

- Probably doesn't want to bother with the admin of reinvesting the divs given that the intention is to build wealth rather than create income streams

- Dividend paying funds can put you at a bit of a tax disadvantage in Thailand. There's no capital gains on the retail funds mentioned with accumulation units. If you did select dividend paying funds the dividends would be taxed at either a flat 10% or your marginal rate of tax (0% - 35%). So an identical fund paying divs to one that doesn't will always give you a lower total return or at most the same return if zero tax

BTW If you are interested in div paying funds on Thai equities but in Thailand, there are a few ideas on post #365 of this thread

http://www.thaivisa.com/forum/topic/640408-set-index-and-thai-mutual-funds/page-15

BTW2 For dividend paying/ incoming yielding investments bought outside Thailand: there's a few ideas and suggestions on post #366

http://www.thaivisa.com/forum/topic/640408-set-index-and-thai-mutual-funds/page-15

Includes some Singapore REITs, ETFs, fixed income ETF, couple of individual shares

Not saying they're suitable for you or anyone (except me ) But a few ideas

Cheers

Fletch

[fletchsmile]

Quotes:

"... Aberdeen fees are high relative to what you can buy in the US for the same Asia coverage- e.g. Aberdeen asia small caps has a 1.7 expense ratio, Vanguard has average of 0.15 expense ratios.

What does this mean in English? For $100,000 over a 10 year period at say- 6% returns (unlikely but just for comparison) - you would get at least $24,000 return more on Vanguard compared to Aberdeen because of the higher Aberdeen fees.

Try and open an online account (etrade, vanguard etc) in your home country and then buy asia/thai funds through them- over 15 years you will make a lot more money given the fee differences."

....

"The first conclusion should be no surprise to most investors: over extended time periods (15 years, in the case of this study), most actively managed funds have a challenging time beating passively managed index funds after fees. Using Morningstars fund database, we examined the performance of more than 2,000 active equity funds during the 15-year period from July 1, 1998 to June 28, 2013. Result: only 25.6% of the active funds currently in existence outperformed their benchmarks "

"

Well this is cherry picking- i could pick some passive funds which outperformed Aberdeen over the last few years. The fact remains that in 3 times out of 4, passive funds beat active funds. Many people assume (including me initially) that actively managed funds- by definition- must outperform passive funds but its not the case. And the fees are a big part of that- the Aberdeen fund fees are almost 9 + times higher than low cost funds available.

"

"

Yes you have a point, if the OP could travel back in time and invest in that bualong fund in 2011 he would have made a lot of money. Mind you, Related to this, OP could go back to last week and bet money on Chelsea beating Everton 6-3 last Saturday , far higher return than Bualuang! :-)"

"Over the long term, when passive funds outperform active funds in 3 out of 4 cases- why would anyone - especially an amateur investor- invest in active funds with high fees? The only argument i have seen today is that fund X and fund y performed well historically therefore go with them. And as i mentioned earlier over a 15 year period putting 100K into Aberdeen (1.9 cost ration) will result in a 24,000 $ loss in fees compared to a passive fund (0.15 cost ratio).

Having said that, I know some people cannot access online investment websites like etrade, vanguard etc for various reasons and in this case, then of course there is no other alternative to paying the higher fees in aberdeen et al. so its a moot point."

​

Here's my take on these. If you are a US citizen living in the US, buying a US mutual fund because it's less risky than an EM one then fair enough. All the above quotes from Luang would support this. This dumbed down approach will likely yield better results for your average investor who doesn't know much compared to investing in "an average fund" or the "majority of funds" at random

Unfortunately it's only part of the story. You then have to ask: who's pushing this dumbed down approach? and why? and what will it mean going forward and will you ever learn anything?

The answer to the last question BTW is no. Because you'll never learn about investments or when you could easily do much better than a tracker or why. You're always going to slightly under perform the index

Specifically on your points Expat J. I don't have access to a time machine. On the other hand I've been investing in Aberdeen Growth for 15 years+, including when it was under a different fund management company who they took over (who happened to have links to a company I had worked for in the industry: Aberdeen-Nakornthorn-Schroders). I thought timing was right for the Thai market, and around 1999-2000 I started to put a regular lump sum in each month for about 2 years.

For arguments sake I put in 50k a month for that time say THB 1mio rather than USD 100k as I wasn't that well off back then Now you're saying I would have paid THB 240k less in fees with your ETF so my return would be lower.

Absolutely wrong! It's the total return after fees that count. The link Deaconbell provided showed that between its inception in 1997 and today Aberdeen Growth returned THB 10.65mio. Now here's the hypothetical bit rather than what happened. You can trawl the internet and cherry pick the best ETF fund you will ever find with hindsight to boot. You will never have made more than THB 3.57mio in that period. That's what the SET TRI index returned and the best an ETF tracker do will underperform that a little .

Well you can keep your extra THB 0.24mio in fees for your superior hypothetical return, and I'll keep my THB 7mio extra profit - which is real. Maybe I did pay 9x in charges (0.24mio) but you earned 3x less (7mio less). I think that's fair the fund manager earned it. I have to be honest though, I can't vouch for the 1997-today figures as I invested later. My return BTW was actually higher as I decided to start after the crash

I've been invested in the fund for 15 years or so. For many of those years I've had people throwing the passive vs active debate at me, and for many years I've been saying I prefer this fund. Every time I get accused of cherry picking based on history or that won't happen in future. So would you tell me I'm just lucky year after year?

{I even mentioned above that their out performance has slowed, and offered reasons why. Meand knows his Bualuang fund. I know that's top over 10 years I follow it. I read about it on here a few years back. That's another "lucky one year after year". I can't invest in it though as my bank doesn't offer it, and I don't want to open an account specially when there are others out there. Krungrsi Div LTF is another "lucky" one.

The whole point is I'm not picking at random. I'm not picking in a developed/perfect market and haven't been for 15 years+. I'm not picking "most funds" and I'm not picking your "average fund" and not at random either.

I've also been very lucky with Aberdeen's America fund. Every year for years I've NOT been investing in it, and most years it has under performed the market. Boy am I lucky I didn't pick that at random.

So there you have 2 examples: The stats would tell you I'm picking those 2 funds at random so I would likely under perform the index, and the US gurus would write articles how much better I'd hypothetically have been with an ETF tracker instead of the 2 I'm picking at random. The reality is I've been picking 1 for years and not picking the other for years and more years than not it's paid off.

As you're a Brit: Another "lucky" pick by the way used to be Neil Woodford's Perpetual Income fund. I was lucky for a couple of decades picking his fund, and he was lucky for about 25 years, finishing most of them in 1st or 2nd quartile and about 3 in the bottom quartile. He's moved on now to his own company

Another "lucky" Brit pick used to be Anthony Bolton with his Fidelity Fund. I used to pick his fund for years, and he was "lucky enough" to have stellar performance in many years. Not all.

So if I'd been accepting the "dumbed down" approach: 20 years ago if I'd have gone for that tracker (BTW they weren't really around so much then) I wouldn't have gone for Neil Woodford and got lucky, so I wouldn't have gone for Anthony Bolton and got lucky and I wouldn't have gone for Aberdeen Growth and got lucky and I wouldn't have NOT gone for Aberdeen American and got lucky. I also wouldn't have learned anything. On the other hand I'd be sat there happy "knowing" - backed up by the US gurus telling me - I'd have hypothetically done better than "most funds" and the "average" fund and people who pick at random, because I'd saved a bit on fees. {Yes in fairness I do get it wrong sometimes! Then again I'm lucky because it's less than half the time }

One last question: did you bet on Everton to beat Chelsea as there's only 2 teams right, So it's 50/50?

Myself I looked at the form guide, past history, line ups, read the newspapers and sports pages, injury list, weather conditions, compared Martinez to Mourinho and was "lucky" enough to pick Chelsea to win

Cheers

Fletch

Edited: for quotes as I'm not very good at multi-quoting

Edited September 4, 2014 by fletchsmile

[fletchsmile]

Here's a quick list of why taking THB 100k from Thailand and investing it in a US tracker in US equities in USD woudn't have been a realistic recommendation over the last 15 years, and why those risk EM funds might have been easier:

- Not many low cost mutual funds around in Thailand

- Currency exposure if you're looking to end and spend in THB

- Banks fees to send money out of the country + admin/ paperwork

- Bank fees to bring it back + admin/ paperwork

- Exchange rate costs sending out

- Exchange rate costs bringing back

- KYC and AML rules and paperwork cross border

- US regulations and where they might lead in the future

- Currency controls. At times would have struggled to bring money into or out of Thailand if needed in an emergency

- Need to understand the difference between THB and THO (offshore)

- At times the difference bewteen THB and THO has been as wide as 10% in the last 15 years -big loss to get hit with

- Know which is better onshore or offshore rates

- Possible platform fees and other charges

- System and internet problems

- US bureaucracy and admin for non - US citizens

- Filling in W8BEN forms and ensuring correct dividend rates

- General tax issues in US and Thailand

- Specific tax issues eg related to W8BEN and WHT on dividends and resultant loss of returns compared to buying a similar ETF outside the US

- Difficulties if OP dies and his wife and kids are in Thailand. How to get the money back and time taken?

- Support and comments on when to exit an ETF if wanted

- Protection should something untoward happen and the admin hassle dealing with it cross border

I'd hope a decent "stick your money in a US tracker fund outside Thailand cos it's cheaper and less risky" would cover these angles for starters

These are probably the main reason I'd say look for a Thailand solution in OPs case, whether Aberdeen, Bualuang, etc etc

Cheers

Fletch

Edited September 4, 2014 by fletchsmile

[AyG]

- Specific tax issues eg related to W8BEN and WHT on dividends and resultant loss of returns compared to buying a similar ETF outside the US

This is one of the things I really should know about, but haven't looked into. (To be honest, never had the need to.)

I know that if I buy a US ETF, say PowerShares QQQ (tracks Nasdaq-100), as an un-American there's a 15% withholding tax on dividend income (interest too?). (30% withholding tax with some brokers.)

Are you saying if I buy an equivalent ETF from Singapore, such as Lyxor ETF Nasdaq-100, there's no withholding tax on dividends? If so, that seems crazy. Why doesn't Uncle Sam want his share of this pie?

And does it make a difference if the ETF's underlying is physical or (offshore) derivative?

[jindadee]

This is one of the things I really should know about, but haven't looked into. (To be honest, never had the need to.)

Here's something else you may be horrified to hear AyG

I was recently told that if you die with a US brokerage acct the government will take 40%.

It seems hardly believable especially for those who sign a W8 but the informant was very believable, and had heard personally of an instance.

He asked his broker and got everything except the answer which suggestsntheybrealise no foreign clients will stay with them if this is the case.

It's most peculiar in that if you die you lose 40%, but ifnyounwithdraw funds the day before you lose nothing.

Anyone else heard this?

[fletchsmile]

Now you re taking the lid even further off the can of worms AyG

Bear in mind for me my view is long term USD is in decline, US is in decline and I have no natural need for USD.

So I have less than 5% of my investment portfolio in US exposures geographically and a little over 5 % of total assets denominated in USD. Like gold they are there for diversification and for USD for being a functional currency.

As a Brit. The simple rule is dont buy US domiciled ETFs when it comes to tax. Ireland and Luxembourg are more favourable. Yes you can end up paying 15% 30% or even more on dividends when there is no need. If you can buy the same ETF or similar outside the US do so (avoid France too). So only buy a US one if its an area you really cant find an alternative.

I keep my US investments simple. A handful of US shares or funds bought outside US.

Even on shares I ve had admin problems and hassles. Eg W8BEN being rejected for various reasons such as date being 25/3 instead of 3/25 even though its obvious. Then suffering 30% wht instead of 15%. Plus a fair view other hassles to get things set up. Bearing in mind a UK national living in Thailand with Thai wife and sometimes joint accounts dealing thru Singapore adds a couple of layers of hassle from a simple UK guy buying US investments from the UK.

I buy thru Singapore who have no DTA with US so the default is 30%. Unless everything gets aligned and I get the UK rate at 15% and Thai 15% its just hassle. If not set up correctly thats why you could suffer 30% instead of 15% with some brokers.

MLPs is another area. US people will rave over the high yield payouts which can be favourable to them for tax. I ended up with 45% tax deducted as a foreigner as it hadnt been set up right. So 6% yield becomes a little over 3%. I just sold and didnt want to bother with the hassle of correcting things and all the admin There are actually ETFs investing in MLPs too so be particularly careful of those

I stick to Ireland Luxembourg Singapore and UK domiciled ETFs. (If I wasnt from UK I might also drop UK too)

So yes if you can find the same ETF on those stay away from the uncle sam version and potentially unneccessary tax.

So when someone mentions buying a US ETF on a forum without mentioning tax or where someone is resident or from be very careful You cant just look at lowest fees for ETFs to find lowest cost if you re talking expats or cross border in particular

Cheers

Fletch:)

Edited September 5, 2014 by fletchsmile

[AyG]

Now you re taking the lid even further off the can of worms AyG

Thanks for your, as always, illuminating reply.

I gave a bad example. As you say, the withholding tax in Singapore is 30%, and it's with my Luxembourg brokerage account that I get the 15% on US ETFs and funds.

So, just to be 100% clear, if I buy a US stock index ETF on the New York Stock Exchange I pay 15% WHT on dividends. If I buy an Irish-domiciled version on the London Stock Exchange I pay 0% WHT. Is that right?

(My understanding is that Irish WHT is only paid by Irish residents.)

And am I right in thinking that non-US individuals must pay WHT on US investments, but corporations don't have to pay it (i.e. A UK fund investing in American equities doesn't pay any tax to the US authorities)? If so, that seems very odd. After all, in America "corporations are people".

So I have less than 5% of my investment portfolio in US exposures geographically and a little over 5 % of total assets denominated in USD

I'm trying to put those two statements together in my mind and trying to explain the difference. The currency of denomination is only of relevance when the currency of the underlying investments is different from it and the currency risk is hedged. Equity funds are usually not hedged, so I'm guessing it's a bond fund/ETF investing in non-US bonds (probably Emerging Markets). Is that it?

Thanks for your, as always, illuminating reply.

[fletchsmile]

Now you re taking the lid even further off the can of worms AyG

Thanks for your, as always, illuminating reply.

I gave a bad example. As you say, the withholding tax in Singapore is 30%, and it's with my Luxembourg brokerage account that I get the 15% on US ETFs and funds.

So, just to be 100% clear, if I buy a US stock index ETF on the New York Stock Exchange I pay 15% WHT on dividends. If I buy an Irish-domiciled version on the London Stock Exchange I pay 0% WHT. Is that right?

Yes that's the key point the Irish domiciled fund will be lower WHT than the US domiciled fund for a Brit. If you have your W8BEN in place you'll be on 15% for the US fund as a Brit. For a Singaporean you'd be on 30% WHT on the US fund even with a W8BEN - so potentially even worse. There's a lits of all the rates for different nationalities. Thai, UK and Oz are all 15% for US

(My understanding is that Irish WHT is only paid by Irish residents.)

And am I right in thinking that non-US individuals must pay WHT on US investments, but corporations don't have to pay it (i.e. A UK fund investing in American equities doesn't pay any tax to the US authorities)? If so, that seems very odd. After all, in America "corporations are people".

There can be differences. Not something I deal with regularly or am an expert on so would be something I'd look up to be honest case by case.

So I have less than 5% of my investment portfolio in US exposures geographically and a little over 5 % of total assets denominated in USD

I'm trying to put those two statements together in my mind and trying to explain the difference. The currency of denomination is only of relevance when the currency of the underlying investments is different from it and the currency risk is hedged. Equity funds are usually not hedged, so I'm guessing it's a bond fund/ETF investing in non-US bonds (probably Emerging Markets). Is that it?

That statement was just to highlight that partly because of all the US tax issues, I largely tend to stay away from US and USD 5% is low. I know the pitfalls are out there so I just don't want to be bothered dealing with them, as they're often detailed and take time to research fully. So I monitor both currency and geography for all my exposures

1) Amount denominated in USD currency:

That's more a currency limit. If I convert back into THB or GBP which I'm most interested in there's a cost, so I don't want it building up too much. It's the total of equity based investments + bonds + cash held in USD. For the equity investments, as you say, its actually the geography of the underlying that counts more for risk. Although If I sell the investment though it will become USD cash, so is a potential future exposure to USD as well I want on my radar. For cash and bonds the currency is relevant and is a real currency risk vs THB or GBP.

2) Geographical exposure to US:

That recognises as you say I might have a GBP fund that holds US equities. The real risk is therefore both US geography and USD currency rather than GBP currency risk

Hedging affects things again. Some are also mixed funds. These add additional complexity to measuring the true risk as you highlight

So I stick all my equity investments + cash + bonds + other assets in a single Excel workbook and I use these 2 parameters among others for an idea of where my overall exposures. Recognising as you say that its not that simple as just the currency and just the geography.

But short story. Yes just an idea of how much USD exposure and US geography exposure I have, recognising as you say that doesn;'t always reflect where the true risk is. Just gives a ball park idea of all these parameters and where my risks and opportunities may be. Doing this way just means I can slice and dice vs different angles and parameters.

On the other hand, to contrast, around half of all our assets are now in THB and 35%+ is geographically in Thai equities. Thailand obviously being where I live. I'm comfortable with more Thailand and THB exposure that US and USD exposure

I also monitor and analyse by various other parameters: where taxable, asset class, yield, distribution frequency, date vintage, account, owner (me wife or kids) etc, and use pivot tables to get a feel for overall exposures of where I'm under/ over my comfort levels.

Again in short: My comfort level for US is low! Thailand high!

Thanks for your, as always, illuminating reply.

A few notes in blue - as I'm struggling with the multi-quotes again

Cheers

Fletch

Edited September 6, 2014 by fletchsmile