A good long term portfolio w/ good expense rations

[ExpatJ]

So if you dont pay capital gains tax why are you looking for US funds that take 15% WHT on dividends?

You seemed to think above dividends are an on top bonus. That's not the case. If the investment pays zero div and you pay zero capital gains......

Has the penny dropped yet

If the stock pays zero dividends but increases in value by say 100$ (so capital gain is 100$) . When I sell the stock I get 100 $ profit because no tax on that cap gain.

Is that right?

Yes excluding tax implications you do.

Now 2 questions as you're on the right track:

1) have you considered whether you bought a US fund with reporting status or not, and whether if you had bought the right version the capital gains might have been higher than $100 in the first place

This would not be something American investors that told you you've got a great portfolio by buying "lowest cost fee no load mutual funds" would have considered for you as a non-American, as they are not affected in the same way

2) You mentioned above some of your US domiciled funds pay say 4% div. So let's say it pays a div before you tax the CG. Instead of a 100% CG you would have 96% CG and 4% income. Dividends are not on top extras simply another form of distributing total returns. These have WHT of 30% without a W8BEN in place for non-Us residents and 15% with a W8BEN in place for a Brit or Thai resident (different rate again for other residents)

So let's assume you know what you're doing and did your homework and the admin and have a W8BEN in place (best case scenario):

The 4% div paid would mean that you receive 4% income with 15% tax deducted and capital gain of 96%. So you now receive 3.4% as a div and 96% as CG.

You've potentially just cost yourself 4% x 15% = 0.6% in tax.

So congratulations on picking the lowest cost TER fund of 0.X%, but how would you have faired picking a slightly higher TER fund which is more tax efficient.

This is where we came in when I added on post #3, #12, etc.

Sorry to say it sounds like you're sold on US style marketing to US residents, which revolves around lowest cost TER. Hence while it may look OK to a US national such as Ludicras, as a Brit AyG's comments are well worth noting and something to read up on

Cheers

Fletch

Phew, you had me worried in your last earlier post as I thought I must have completely misunderstood something. But as I said, those capital gains are tax free.

But you're potentially voluntarily giving away 0.6% in tax charges which totally undermines your lowest cost ETF approach

If I was a day/week trader that would be an issue. But a dividend paid tomorrow will have no impact on the stock price next month let alone in my investment time horizon (i mentioned 10-15 years earlier .

[fletchsmile]

Phew, you had me worried in your last earlier post as I thought I must have completely misunderstood something. But as I said, those capital gains are tax free.

But you're potentially voluntarily giving away 0.6% in tax charges which totally undermines your lowest cost ETF approach

If I was a day/week trader that would be an issue. But a dividend paid tomorrow will have no impact on the stock price next month let alone in my investment time horizon (i mentioned 10-15 years earlier .

You probably need to revisit the concept of dividends and how going xd affects a share price. It's totally incorrect to say a company/unit trust/ETF that goes xd tomorrow will have the same implied stock price next month as a company/unit trust/ETF that doesn't pay a dividend. To prove that pick 2 identical ETFs or unit trusts. One that pays a dividend (distributing units and one that doesn't). Look at their 15 year price differentials. That's the whole point about accumulating and distributing units of a unit trust, individual share, or ETF. Then think about the tax impact on those price differentials.

(BTW As the impact gets compounded it is probably more relevant to a long term investor of 15 years than a day trader )

I also find it bizarre that your opening post is looking for ETFs paying under 0.5% so you save '000 s in fees, yet ignore ETF tax implications that potentially cost you more than 0.6% and by the same token would cost you '000s over time

I think what you really meant in your thread was:

"Seeking: Average market performance of a reasonably diversified long term portfolio, with a low total expense ratio (TER) cost...ignoring anything to do with tax"

Think our ideas of "good" also differ . Tho' I understand where you're trying to come from.

Cheers

Fletch

Edited January 1, 2015 by fletchsmile

[ExpatJ]

Now you are making me feel bad about those monthly dividend payments 555.

But thanks again for the discussion I did have some niggling doubts about the tax situation which you helped put to bed.

[Ludacris]

Fletch, you've sparked my curiosity.

Let's say someone is not an American and is living in Thailand. This person has a choice of investing in an S&P500 ETF that is listed on a US stock exchange or the Singapore stock exchange.

In both cases he would pay 0% tax on capital gains.

If invested in the US listing he would pay 15% withholding tax on dividends.

If invested in the Singapore listing he would pay 0% tax on dividends.

So by investing in the Singapore listing that person saves the 15% tax on dividends, but is now subject to exchange rate risk plus most likely extra fees correct?

Or are those dividends taxed by the US gov't before they're sent over to Singapore?

But overall, you're saying the extra currency risk and fees are better than paying the 15% flat tax?

Is there anything I'm missing?

[ExpatJ]

Fletch, you've sparked my curiosity.

Let's say someone is not an American and is living in Thailand. This person has a choice of investing in an S&P500 ETF that is listed on a US stock exchange or the Singapore stock exchange.

In both cases he would pay 0% tax on capital gains.

If invested in the US listing he would pay 15% withholding tax on dividends.

If invested in the Singapore listing he would pay 0% tax on dividends.

So by investing in the Singapore listing that person saves the 15% tax on dividends, but is now subject to exchange rate risk plus most likely extra fees correct?

Or are those dividends taxed by the US gov't before they're sent over to Singapore?

But overall, you're saying the extra currency risk and fees are better than paying the 15% flat tax?

Is there anything I'm missing?

In the case of non dividend funds then US is better because of the considerably lower fees. In case of dividend funds it is case by case and depends on the dividend payments and the specific level of higher fees of the singapore v US fund. (as I understand it..)

[Ludacris]

I found this website about the tax implications of Canadian ETFs investing in US markets and what an absolute nightmare it could become a full time job.

http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

I think it's important to remember one of the main benefits of a do-it-yourself US based ETF portfolio is it's simple and easy to do.

You need to look at the time and effort required to evaluate similar funds in each domicile for their tax rate, fees, and exchange rate risk.

Of course this would depend on how income oriented your portfolio is and how much a financial advisor would charge to figure all this out for you.

[ExpatJ]

I found this website about the tax implications of Canadian ETFs investing in US markets and what an absolute nightmare it could become a full time job.

http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

I think it's important to remember one of the main benefits of a do-it-yourself US based ETF portfolio is it's simple and easy to do.

You need to look at the time and effort required to evaluate similar funds in each domicile for their tax rate, fees, and exchange rate risk.

Of course this would depend on how income oriented your portfolio is and how much a financial advisor would charge to figure all this out for you.

Completely agree.

[fletchsmile]

Fletch, you've sparked my curiosity.

Let's say someone is not an American and is living in Thailand. This person has a choice of investing in an S&P500 ETF that is listed on a US stock exchange or the Singapore stock exchange.

In both cases he would pay 0% tax on capital gains.

If invested in the US listing he would pay 15% withholding tax on dividends.

If invested in the Singapore listing he would pay 0% tax on dividends.

So by investing in the Singapore listing that person saves the 15% tax on dividends, but is now subject to exchange rate risk plus most likely extra fees correct?

Or are those dividends taxed by the US gov't before they're sent over to Singapore?

But overall, you're saying the extra currency risk and fees are better than paying the 15% flat tax?

Is there anything I'm missing?

To be honest it's a messy area, which is why I recommended googling it, to get an idea of where the issues are, as it's different to cover all the aspects on a forum in a quick post.

There are several aspects to it:

- For the US equity fund you need to consider i) the reporting status of the fund ii) the WHT tax as you mention iii) your own tax implications, including residency DTAs, vehicle you have bought thru. This is because there are several steps in the journey. i) The tax status of the fund itself (eg reporting or not, relationship to US) affects how the fund is taxed itself, ii) then how the distributions are passed on - with or without tax, then iii) whether you can reclaim or not. Note: WHT is deducted, and you suffer it, it isn't paid by you, but the key is how much is deducted before paying to the fund and then when the fund pays to you and whether you can claim back or not

- What is potentially worse is picking say a global fund domiciled in the US. If you went direct to the global source then potentially no WHT, but because you picked a US domiciled global fund (just routed thru US) they take off 15% or more WHT on divs. There may have been no need to suffer this 15% and simply routing it through a US domciled fund wastes money

- Also your concept of exchange rate risk is from a US point of view. You see USD as your core currency, and see something from Singapore as a currency risk because it's not USD. I'd actually argue that living and spending in Thailand USD is the currency risk as you're more interested in THB. So most Americans don't see USD as a currency risk, and living and spend in Thailand is something they under appreciate.

SGD correlates more to THB than USD. So if you live in Thailand and spend in THB and care about your wealth in THB, then the currency risk (defined as vrialibility in returns vs THB) is on USD more than on SGD, if you talk currencies only.

(If you talk equities, it is the underlying currency of the equity that counts, whether say a European fund is denominated in USD or SGD is irrelevant)

The US system for all its admin and faults, sort of takes away many of the choices for US citizens, and in some way makes the decision process easier for them. For other nationalities the system can be a minefield. The key though is for non-US citizens think very carefully and understand what your're doing before touching a US product. You may save a few tenths of a percent in fees, but lose more in tax. It's difficult to be specific because of all the factors.

Imagine though say a Thai living in Thailand investing in a Thai mutual fund in Thai equities. They can elect to suffer a flat 10% WHT or 0% WHT and be taxed at their margingal rate which could also be zero. On the other hand, route the same Thai equity fund thru the US (a US domiciled fund) and they invite 15% WHT which they can't directly get back (30% with no W8BEN). So worst case they suffer 15% or 30% WHT when they could have suffered 0%. On a 4% div that's 0.6%

Cheers

Fletch

[Ludacris]

Actually, I bet most financial advisors would charge a lot more than 0.6% to manage a portfolio.

Option A:

Simple and easy do-it-yourself US-based ETF portfolio with dividends taxed at a flat rate of 15% (extra 0.6% of portfolio based on 4% dividends)

Option B:

Pay an advisor more than 1% to evaluate each ETF in each domicile for taxes, fees, and exchange rate risk, just so you can save 0.6% tax.

Also pray that the advisor doesn't lose all your money in some scam...

[Ludacris]

Thanks for the interesting discussion and well thought out replies.

You guys have definitely raised some important points to think about.

If only most Thai Visa users would see how intelligent, helpful, polite, and compassionate most of the threads are in this forum...

[fletchsmile]

I found this website about the tax implications of Canadian ETFs investing in US markets and what an absolute nightmare it could become a full time job.

http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

I think it's important to remember one of the main benefits of a do-it-yourself US based ETF portfolio is it's simple and easy to do.

You need to look at the time and effort required to evaluate similar funds in each domicile for their tax rate, fees, and exchange rate risk.

Of course this would depend on how income oriented your portfolio is and how much a financial advisor would charge to figure all this out for you.

Yes. Spot on. It can become a nightmare.

Hence the add on: a do-it yourself US based ETF portfolio may be simple and easy to do.... add on: if you're American.

If you're not be very careful at the tax and admin hassles. Do you really want all the admin and tax hassles, with possibly a higher cost to boot?.

Unfortunately 2 things happen:

1) Americans pass on how easy and simple US domiciled funds are (for them) without appreciating the pitfalls for other nationailities, and dole out blanket advice on how great "no load low TER ETFS are".

2) People read US orientated marketing and literature and get caught up in the US orientated marketing

One of the worst by the way can be MLPs in the US. Great for US tax payers, and promoted as excellent income sources with great income yields, as most returns are paid out tax efficiently as distributions (to Americans that is).

As a non-American I found myself suffering 45% WHT at one point !!! On a supposedly 8% yield that was ouch! Not to mention the USD FX risk! Luckily I'd only dipped my toes in to see how they worked and test, but needless to say I've learnt the admin and tax implications since then, and how to reduce the level, and to stay away in most cases

Cheers

Fletch

[fletchsmile]

Actually, I bet most financial advisors would charge a lot more than 0.6% to manage a portfolio.

Option A:

Simple and easy do-it-yourself US-based ETF portfolio with dividends taxed at a flat rate of 15% (extra 0.6% of portfolio based on 4% dividends)

Option B:

Pay an advisor more than 1% to evaluate each ETF in each domicile for taxes, fees, and exchange rate risk, just so you can save 0.6% tax.

Also pray that the advisor doesn't lose all your money in some scam...

Option C buy an easy to do non-US-based ETF portfolio, where you don't lose the 0.6% and don't pay an advisor

Option D trade the 0.6% for a different "style" of fund with potentially higher returns (with perhaps a bit higher fees) in the same market/asset class - possibly even domiciled in Thailand if you're resident here - but don't pick "most funds" and don't pick "the average fund"

etc...

Edited January 1, 2015 by fletchsmile

[AyG]

the tax on dividends in UK is potentially even higher, no?

Yes. That's why many ETFs traded on the LSE are actually Dublin domiciled to avoid tax. You get the same tax advantage with Singapore domiciled ETFs (though there aren't so many of those).

Income from US domiciled ETFs are subject to a 30% or 15% withholding tax. My broker in Singapore withholds at the 30% rate, whilst my Luxembourg broker withholds 15%.

[ExpatJ]

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

Edited January 2, 2015 by ExpatJ

[paddyjenkins]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

[AyG]

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

You're not comparing like with like. You're comparing ETF fees (US) with mutual fund fees (Asia).

What you should be doing is comparing ETF fees (US) with ETF fees (UK, Singapore, etc.) Typically the fees are only fractionally higher than in the US (and are coming down all the time).

For example, the London listing of Vanguard's S&P 500 ETF has a TER of 0.07% compared with the US listing's ER of 0.05%.

[AyG]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

The US/Thailand treaty only covers income taxes and (Thai) petroleum income taxes. See article 2 of http://www.irs.gov/pub/irs-trty/thailand.pdf

So it's going to be the automatic 30% withholding tax here too.

[ExpatJ]

See

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

You're not comparing like with like. You're comparing ETF fees (US) with mutual fund fees (Asia).

What you should be doing is comparing ETF fees (US) with ETF fees (UK, Singapore, etc.) Typically the fees are only fractionally higher than in the US (and are coming down all the time).

For example, the London listing of Vanguard's S&P 500 ETF has a TER of 0.07% compared with the US listing's ER of 0.05%.

My point is valid- fletch vastly underestimates the fee differences between funds between Asian based funds and us/uk funds.

Why pay high fees- 20-50 times higher? It can cost you 10,000$s this difference over 10+ years.

Edited January 2, 2015 by ExpatJ

[dinga]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

The US/Thailand treaty only covers income taxes and (Thai) petroleum income taxes. See article 2 of http://www.irs.gov/pub/irs-trty/thailand.pdf

So it's going to be the automatic 30% withholding tax here too.

Not sure that's correct - given the answer I got to question I posed to Interactive Brokers (both presented below):

Q. Please advise whether or not US Withholding Tax is payable on dividends paid by international ETFs like the following:

* FAX - Aberdeen Asia-Pacific Income Fund

* VGK - Vanguard European ETF

* VPL - Vanguard Pacific ETF

* VWO - Vanguard Emerging MArkets ETF

Also, understand the WHT rate is 30% for a non-US person/resident - pls confirm

IB Answer: Virtually all countries apply withholding taxes when local companies seek to distribute dividends to externally based shareholders. The rate at which IB is obligated to withhold for a given payment depends largely upon whether there is a tax treaty in place between the country where the dividend paying country is based and the country of residence of the dividend recipient. .

Please be advised that as a Thailand resident, for above US ETFs, you will be subject to a 15% withholding tax, and the four ETFs in question are subject to this tax rate

[paddyjenkins]

To Dinga and AyG....I'm confused, one of you Is saying the withholding on US dividends for residents of Thailand is 15% and the other is saying 30%....do you have actual experience of seeing the tax being withheld, as a resident of Thailand? The country of residence is key, because it depends on the details of the treaty that country has with the U.S, if it has one.

Dinga,.,.i must say I had thought it was 15% but the answer AyG gave left me unsure.

AyG...have you actually seen 30% withheld from your account and if so who is your broker?

Thanks for both your answers, this is a difficult subject as it's hard to know the ins and outs of the different treaties and how the brokers interpret them. I think in truth all that matters is what happens in reality in different brokers.

Edited January 2, 2015 by paddyjenkins

[AyG]

AyG...have you actually seen 30% withheld from your account and if so who is your broker?

I have never held US securities in a Thai brokerage account, so no I haven't.

My response was based upon what the tax treaty covers, and it doesn't appear to cover dividends.

If it is actually 15% I'd be curious to know why.

[AyG]

AyG...have you actually seen 30% withheld from your account and if so who is your broker?

I have never held US securities in a Thai brokerage account, so no I haven't.

My response was based upon what the tax treaty covers, and it doesn't appear to cover dividends.

If it is actually 15% I'd be curious to know why.

Actually, I'm now confused myself.

Is it the country of residence of the investor that matters? Or is it the country of the broker?

My residence is Thailand, but I get different withholding rates with my Luxembourg and Singapore brokers. I'd assumed based on this that is was the country of the broker that matters. I could be wrong.

[AyG]

See

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

You're not comparing like with like. You're comparing ETF fees (US) with mutual fund fees (Asia).

What you should be doing is comparing ETF fees (US) with ETF fees (UK, Singapore, etc.) Typically the fees are only fractionally higher than in the US (and are coming down all the time).

For example, the London listing of Vanguard's S&P 500 ETF has a TER of 0.07% compared with the US listing's ER of 0.05%.

My point is valid- fletch vastly underestimates the fee differences between funds between Asian based funds and us/uk funds.

Why pay high fees- 20-50 times higher? It can cost you 10,000$s this difference over 10+ years.

I think you may not know the difference between ETFs and mutual funds. They are very different beasts. ETFs are (usually) managed by computer and have very low expenses. Mutual funds are managed by expensive fund managers and have much higher expenses. The average expense ratio for a US mutual fund is in the region of 1.5%/year. That's the figure you should be comparing with Asian mutual funds - not US ETF expense ratios.

[Ludacris]

AYG, you misread Article 2 in the US-Thailand tax treaty. Article 2 is just saying that Thai petroleum income tax is referred to as just "Thai tax" since the tax treaty also covers double taxation of income tax.

Article 10 (2b) clearly states that normal dividend income is taxed at 15%.

I also had this confirmed by Interactive Brokers like dinga a few years ago.

[ExpatJ]

See

See

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

You're not comparing like with like. You're comparing ETF fees (US) with mutual fund fees (Asia).

What you should be doing is comparing ETF fees (US) with ETF fees (UK, Singapore, etc.) Typically the fees are only fractionally higher than in the US (and are coming down all the time).

For example, the London listing of Vanguard's S&P 500 ETF has a TER of 0.07% compared with the US listing's ER of 0.05%.

My point is valid- fletch vastly underestimates the fee differences between funds between Asian based funds and us/uk funds.

Why pay high fees- 20-50 times higher? It can cost you 10,000$s this difference over 10+ years.

I think you may not know the difference between ETFs and mutual funds. They are very different beasts. ETFs are (usually) managed by computer and have very low expenses. Mutual funds are managed by expensive fund managers and have much higher expenses. The average expense ratio for a US mutual fund is in the region of 1.5%/year. That's the figure you should be comparing with Asian mutual funds - not US ETF expense ratios.

No we were talking about low cost USA funds versus Asia funds (where funds incl etfs and mutual funds - i think everyone understands the difference on this board-very easy to Google it if need be).

And my point remains valid - even a 1.5% fee that you cite is 15 times higher than 0.1% funds in USA - over a few years x15 fee costs ends up probably being greater than any tax you may end up paying!

Note-to be fair- a few years ago I ended paying for a fund with4% fees before I knew better and at the time I fiercely defended high fee funds amoung friends but it was more in denial than any logical reason. So I understand the unwillingness amoung some posters here who are paying high fees to acknowledge that low fee funds save you money- I've been there myself. :-)

Edited January 2, 2015 by ExpatJ

[paddyjenkins]

AyG...have you actually seen 30% withheld from your account and if so who is your broker?

I have never held US securities in a Thai brokerage account, so no I haven't.

My response was based upon what the tax treaty covers, and it doesn't appear to cover dividends.

If it is actually 15% I'd be curious to know why.

Actually, I'm now confused myself.

Is it the country of residence of the investor that matters? Or is it the country of the broker?

My residence is Thailand, but I get different withholding rates with my Luxembourg and Singapore brokers. I'd assumed based on this that is was the country of the broker that matters. I could be wrong.

The country of residence is definitely relevant. The country of domicile of the brokers may matter too I suppose.

But I also suspect certain brokers play a game, withholding at the higher default rate, then either not paying on that amount to the IRS, or paying it all and getting a refund later, but not passing that back to the end investor. I have no evidence of this, but it makes sense. The broker may effectively take a large cut of your dividend and there is almost no way to prove it as everything is reported at the aggregate level.

I know for a fact that certain brokers withhold tax on tax exempt muni bonds, for non US residents. Where does that tax go if it's not in fact due? Or there are certain Yankee bonds in USD but issued by non US countries, like Brazillian companies, whose coupons are supposed to be tax free, and which are even issued through a country such as the Netherlands, not the US, whose coupon is still subject to 30% tax by certain US brokers. Again, where does this tax go if it's not actually due?

So I think the answer is the final judgement should be the actual experience of investors in a specific brokerage, taking note of their actual country of residence according to the broker.

That's why I think it's interesting to ask for people's actual experience if they have thai residence and who their broker is and what class and country of domicile the dividend or coupon was paid from.

Edited January 2, 2015 by paddyjenkins

[AyG]

No we were talking about low cost USA funds versus Asia funds (where funds incl etfs and mutual funds - i think everyone understands the difference on this board-very easy to Google it if need be).

And my point remains valid - even a 1.5% fee that you cite is 15 times higher than 0.1% funds in USA - over a few years x15 fee costs ends up probably being greater than any tax you may end up paying!

You're mixing up a few different points here.

For 0.1% in the US you get a passive investment but you'll pay 15% or 30% withholding tax on any income. That can knock a full 1% off your annual return. By buying fundamentally the same investment in a country that doesn't impose withholding tax you'll get a significantly higher income, and the expenses will only be fractionally more.

For 1.5% in the US you get the skills of an investment manager picking the best stocks for you. And for roughly 2% you can get exactly the same thing in Asia.

Comparing the costs of a passive ETF in the US with an actively managed fund in Asia is ludicrous.

[ExpatJ]

No we were talking about low cost USA funds versus Asia funds (where funds incl etfs and mutual funds - i think everyone understands the difference on this board-very easy to Google it if need be).

And my point remains valid - even a 1.5% fee that you cite is 15 times higher than 0.1% funds in USA - over a few years x15 fee costs ends up probably being greater than any tax you may end up paying!

You're mixing up a few different points here.

For 0.1% in the US you get a passive investment but you'll pay 15% or 30% withholding tax on any income. That can knock a full 1% off your annual return. By buying fundamentally the same investment in a country that doesn't impose withholding tax you'll get a significantly higher income, and the expenses will only be fractionally more.

For 1.5% in the US you get the skills of an investment manager picking the best stocks for you. And for roughly 2% you can get exactly the same thing in Asia.

Comparing the costs of a passive ETF in the US with an actively managed fund in Asia is ludicrous.

We compare of course because if I have money I can put it in an etf or a mutual fund. With an active managed mutual fund you pay 30-50 times more in fees (20 times more in the example you give) - forget about taxes, over a few years the extra fees you are paying will add up to 10,000s$ . That's a simple point.

More broadly there is some merit in buying an active fund with high fees if you have done the research into the fund managers which I know fletch does for example and you are looking at a shorter investment horizon.

[fletchsmile]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

30% is the standard deduction on most US distributions, with no W8BEN in place, although some like MLPs can be higher

You should be able to complete a W8BEN though and have deducted at the rate agreed between your tax residence country and US. For both UK and Thailand the rate is 15%. This is the most common rate for countries with arrangements in place, Australia being another. For Singaporeans though the WHT rate on US stocks will remain at 30%.

Cheers

Fletch

[hhgz]

"expense rations"

Before you invest a single THB, learn the terminology. The phrase is expense RATIOS.