A good long term portfolio w/ good expense rations

[Orac]

I explained in an earlier post why your 0.6% issue was not relevant in this case and , again, I have less tolerance to accept high fees than you do. But for other points very useful.

On the 0.6% thing reinvesting the dividend negates it.

Are you sure. I have a couple of US ETFs through ETrade Singapore and use DRIP to automatically reinvest dividends but they still take the 15% WHT beforehand.

If I recall Fletch was referring too the price drop in a etf after the associated dividend payment.

I don't think so. Was pretty clear to me he was referring to the WHT. The total return on an ETF is made up of change in value plus dividends paid out minus costs and WHT on the dividend - the 0.6 per cent is an approximation of what 15% of the dividend could be overall and clearly significant.

As a novice investor i am following this closely as i have not really factored the WHT in and it could clearly make a difference to the ETFs i hold that are not US but bought through ETrade.

[ExpatJ]

No

I explained in an earlier post why your 0.6% issue was not relevant in this case and , again, I have less tolerance to accept high fees than you do. But for other points very useful.

On the 0.6% thing reinvesting the dividend negates it.

Are you sure. I have a couple of US ETFs through ETrade Singapore and use DRIP to automatically reinvest dividends but they still take the 15% WHT beforehand.

If I recall Fletch was referring too the price drop in a etf after the associated dividend payment.

I don't think so. Was pretty clear to me he was referring to the WHT. The total return on an ETF is made up of change in value plus dividends paid out minus costs and WHT on the dividend - the 0.6 per cent is an approximation of what 15% of the dividend could be overall and clearly significant.

As a novice investor i am following this closely as i have not really factored the WHT in and it could clearly make a difference to the ETFs i hold that are not US but bought through ETrade.

Ah I see. As I mentioned earlier I wasn't expecting any dividend in this investment play so these have come as an unexpected bonus.

Actually it's choosing a low fee over a higher fee fund that saves you 10,000 $ over a 10 year plus period. This is the point made by me and others.

Edited January 3, 2015 by ExpatJ

[fletchsmile]

Fletch, correct me if I'm wrong but the main reason why it makes sense to invest in an ETF in the UK or Singapore (or anywhere else with 0% WHT for dividends) for someone who is a tax resident of Thailand is because Thailand only taxes foreign income if it is brought into the country in the same year right?

If you were a tax resident of say Canada or the US, even if there's no WHT on the dividend you get in the UK, you would still have to declare it on your income tax forms and pay the normal rate in the country you are a tax resident in?

For example, an American can't get away with not paying any tax on dividends just because he invested in the UK I'm sure.

Any idea what other countries have the same tax structure as Thailand with no capital gains tax on the stock market and no tax on foreign income?

It's a complex area and difficult to generalise, as it depends on various factors: your nationality, where a fund/investment is registered, what countr(ies) it invests in and the tax interaction between them, where you're tax resident, what the actual product/investment is etc. Then also depends on the vehicles you buy thru in some cases, eg pension, trust, ISA, etc.

Rules also change as well, eg when I grew up in UK and did my tax exams, as a UK tax resident you were only taxed on foreign income if brought into the UK. That's no longer the case. So these are things you have to monitor. Unlike the US though, UK doesn't follow you around quite as much, while not tax resident in UK my foreign income is largely out of their net. (Excluding inheritance tax)

The link you posted above highlights well the complexities for a Canadian investing in US. To be honest I know little about Canadian tax so couldn't comment how it works for them

Yes, for Thailand you are only taxed on foreign income if you bring it in during the year earned.

UK isn't 0%, and levies its own tax on dividends/ coupon interest. How you invest, what rate of tax you pay etc affects whether you need to pay more or can reclaim the tax credit. Corporate bonds in an ISA for example you cam reclaim the tax

For Americans, yes Uncle Sam chases you around and taxes you on worldwide income, regardless of where it comes from, so don't think you can legitimately escape as easy as other nationalities. Again for US tax, I'm much more familiar with how it impacts as Brit or a foreign company, and wouldn't like to comment best practice for Americans.

Places like Singapore, Luxembourg are generally favourable for tax.

BTW That's another reason I like Thailand for investments, tax here is simple, and on investments very favourable, with minimal admin. If I were to go back to the UK, I'd pay a lot more tax on investments

Cheers

Fletch

[paddyjenkins]

So, if you are defined as a resident of Thailand, according to your broker, and receive a stream of foreign dividend payments into that account, then is that not counted as having brought income into Thailand during the year it was earned?

Edited January 4, 2015 by paddyjenkins

[fletchsmile]

I don't think so. Was pretty clear to me he was referring to the WHT. The total return on an ETF is made up of change in value plus dividends paid out minus costs and WHT on the dividend - the 0.6 per cent is an approximation of what 15% of the dividend could be overall and clearly significant.

As a novice investor i am following this closely as i have not really factored the WHT in and it could clearly make a difference to the ETFs i hold that are not US but bought through ETrade.

Yes that was one of the key points. Some of the funds mentioned by Expat J had approx 4% dividends, so the WHT would be effectively 15% of 4% = 0.6% as you say.

Also he was under the impression that long term dividends don't affect price (even one month out he wasn't worried about the price change)

If there are 2 investments in an ETF/ fund: (A) Capitalising/Accumulation units, (B ) Distributing/Income units and div is say 4% before tax like some of ExpatJ's, and if you assume the funds are just different unit classes of the same fund, so invest in exactly the same investments, and the fund grows at say 10% p.a with 4% div then (excluding taxes) what happens is:

A) Capital/Accumulation Units: Initial investment 1,000

Yr 1 grows to 1,100

Yr 2 grows to 1,210

Yr 3 grows to 1,331

Yr 4 grows to 1,464

etc, just compounds at say 10% pa.a

B ) income/ distributing units initial investment $1,000

Yr1 grows to 1,100

Then pays 4% div = 44,

so the unit value falls to 1,100 -44 = 1,056 and is carried forward

Yr2 the 1,056 grows to 1,162 (rounded)

Then pays 4% div = 46

so the unit value falls to 1,162 - 46 => 1,115 (rounded)

Yr 3 1,115 grows to 1,227 (rounded)

Then pays 4% div = 49 (rounded)

so unit value falls to 1,178 (rounded)

Yr 4 grows to 1,295

Then pays out 52 div so the unit value falls to $1,244

So:

A) ends up with units worth $1,464

B ) ends up with units worth $1,244 and

has received divs of 44+46+49+52 = $191 (rounded)

if 15% WHT is deducted on divs then $29 has total has been deducted, so:

net is:

units worth $1,244 and net divs received $162 (191-29) = total $1,406 (capital + income) and $29 WHT paid

That WHT of $29 is a 2.9% additional cost on the initial $1,000 if it can't be reclaimed.

If the rate was 30% like Saxo's practice AyG mentioned, or incorrect rate deducted/mess up, then obviously it's higher.

Notice also the impact of the 0.6% compounds over time and isn't just 0.6% x 4

Notice also the lower value of the income/distributing units at the end compared to the accumulation/capital units. 1,464 vs 1,244. This gap keeps compounding. This is why I mentioned it could well be more significant to a long term investor than a day trader, when ExpatJ said he'd be worried if he were a day trader.

This is also why when someone mentioned there were other funds paying a higher div, that's not necessarily the way to go, and you could just be increasing your WHT

Yes the dividends could have been reinvested (after deduction of WHT) to narrow the gap in the unit prices value at the end, but the gap will be there.

There's a few more quirks and principles sometimes like how the original fund itself was taxed (and how that may impact you) what vehicle you hold units thru, whether you can get the tax back, how your home country or country of residence treat the split of returns between income and capital, but the calc above at least gives an idea of the risks.

Worth adding that your "average investor" that ETF trackers are targeted at, will just accept what they receive as dividends, and wouldn't necessarily know how to claim back WHT even if they were entitled to.

So if picking a low cost ETF watch the taxes, as otherwise you're not counting all the real costs. 0.4% may look low on an ETF for EM, but throw in say + 0.6% on tax + throw in the cost of converting USD to THB when you move money here (probably at least 0.5% spread for most people) ....

Might be better to pick accumulation unit/ capitalising units if you pay no CGT or an ETF jurisdiction that won't automatically levy the WHT.

For a non-US citizen buying US domiciled ETFs that pay high divs, I'd seriously question why? Which is pretty much what AyG said.

Cheers

Fletch

Edited January 4, 2015 by fletchsmile

[Ludacris]

Thanks Fletch. Definitely lots to think about.

When dividends are received the money is not brought into Thailand if your brokerage account is outside of Thailand.

Only when you transfer the money into your Thai account is it transferred to Thailand.

Obviously it makes sense to have a brokerage outside of Thailand for this purpose, but remember if you are a tax resident of Thailand and have a Thai brokerage then you claim dividends on your Thai tax return, and the tax rate might be 0% or otherwise very low if you're retired and have a low income level.

[paddyjenkins]

Thanks Fletch. Definitely lots to think about.

When dividends are received the money is not brought into Thailand if your brokerage account is outside of Thailand.

Only when you transfer the money into your Thai account is it transferred to Thailand.

Obviously it makes sense to have a brokerage outside of Thailand for this purpose, but remember if you are a tax resident of Thailand and have a Thai brokerage then you claim dividends on your Thai tax return, and the tax rate might be 0% or otherwise very low if you're retired and have a low income level.

But let's say you have an Etrade account and you state your residential address is in Thailand, and receive dividends from a US ETF or stock that you hold in that account. If that dividend is paid into an account with a Thai tax residence why would that Income not be counted as having been brought into Thailand? Is it that the physical location of the money is treated as being the location of the actual brokerage? I don't really know what the definition of bringing money into a country is.

[Ludacris]

You can double check with a tax lawyer if you want, but as far as I'm concerned my tax residency and where my money is are two different things.

The money is where the actual account is, and you are where you actually are.

If your brokerage account is in Luxembourg, why would you think your money has been brought into Thailand? It doesn't matter where you actually are.

What if you're on vacation at the time somewhere else?

Another example, say you're living in the US and have a bunch of money in your US accounts. You move to Thailand and after 6 months you become a tax resident of Thailand- is all that money you still have back in the US automatically considered as being brought into Thailand just because your tax residency change? I sure hope not because good luck getting it out!

[paddyjenkins]

By the way, on the question of why somebody would buy high dividend US ETFs and thus become subject to high withholding tax, obviously tax hurts returns, that's a given. But the range of ETFs and CEFs available in the US is often so much broader and better than available elsewhere that sometimes there is just nowhere else to go.

I'll give you a specific example from doing some research today. I thought I'd look again for an ETF or CEF that gave good exposure to Asian government bonds. In the US the best I know of is FAX. Without commenting on current valuations, the positives of this ETF is it does what it says it does and it pays a monthly dividend. But I can find no suitable equivalents in the UK or Dublin or Luxembourg. And whether it's Asia government bonds or other sectors, I often find there is really no good alternative to the U.S market, although I'd love to be proved otherwise.

Edited January 4, 2015 by paddyjenkins

[fletchsmile]

So, if you are defined as a resident of Thailand, according to your broker, and receive a stream of foreign dividend payments into that account, then is that not counted as having brought income into Thailand during the year it was earned?

I believe it would be assessable for tax. If assessable, that doesn't necessarily mean there'd be further tax to pay, as you may be able to use DTAs to offset tax and other rules, You could trawl thru the Revenue Departments regulations:

http://www.rd.go.th/publish/37749.0.html#section41

The big accountancy forms like PWC, KPMG, PKF, etc all do tax guides for Thailand which touch on it

On the other hand it's one of those areas that many people don't seem to bother with and ignore, and don't declare, and you don't hear of it being enforced much, so even if you did bring it in same year it's probably unlikely anyone would follow up.

But to be honest, I just wouldn't go there. Just bring it in the following year on Jan 2. Worth keeping separate accounts so you can show the money clearly where and when it came from if need be, so don't "taint" the account with income in the same year in it.

It's also another factor why onshore investing can be useful for at least part of your portfolio.

Cheers

Fletch

[paddyjenkins]

So, if you are defined as a resident of Thailand, according to your broker, and receive a stream of foreign dividend payments into that account, then is that not counted as having brought income into Thailand during the year it was earned?

I believe it would be assessable for tax. If assessable, that doesn't necessarily mean there'd be further tax to pay, as you may be able to use DTAs to offset tax and other rules, You could trawl thru the Revenue Departments regulations:

http://www.rd.go.th/publish/37749.0.html#section41

The big accountancy forms like PWC, KPMG, PKF, etc all do tax guides for Thailand which touch on it

On the other hand it's one of those areas that many people don't seem to bother with and ignore, and don't declare, and you don't hear of it being enforced much, so even if you did bring it in same year it's probably unlikely anyone would follow up.

But to be honest, I just wouldn't go there. Just bring it in the following year on Jan 2. Worth keeping separate accounts so you can show the money clearly where and when it came from if need be, so don't "taint" the account with income in the same year in it.

It's also another factor why onshore investing can be useful for at least part of your portfolio.

Cheers

Fletch

How can you bring it in at a later date. It's paid when it's paid. If your tax address is Thailand then it's surely counted as having been brought in on the dividend pay date, unless the post from Ludacris above is right and it's the address of the actual brokerage that counts. If the latter then it's never brought into Thailand at all, as long as the money stays in the account.

[fletchsmile]

By the way, on the question of why somebody would buy high dividend US ETFs and thus become subject to high withholding tax, obviously tax hurts returns, that's a given. But the range of ETFs and CEFs available in the US is often so much broader and better than available elsewhere that sometimes there is just nowhere else to go.

I'll give you a specific example from doing some research today. I thought I'd look again for an ETF or CEF that gave good exposure to Asian government bonds. In the US the best I know of is FAX. Without commenting on current valuations, the positives of this ETF is it does what it says it does and it pays a monthly dividend. But I can find no suitable equivalents in the UK or Dublin or Luxembourg. And whether it's Asia government bonds or other sectors, I often find there is really no good alternative to the U.S market, although I'd love to be proved otherwise.

Yes true, US does have the widest range in the world. Which can bring things full circle, of what's important to you out of all the above factors.

BTW I remember from another thread a few months back that while we've some common ground on bonds, we've some slightly different views and appetites in other areas. The only 2 ETFS I hold that have Asian bonds are:

iShares Barclays USD Asia High Yield Bond Index ETF - not Govt, but HY Asian Corporate. Ave YTM 7%+, TER 0.5%, pays quarterly in USD. I hold the SGD version.

IEML/ SEML - iShares Emerging Markets Local Government Bond UCITS ETF - broader EM Bonds, but 30%+ is Asia

Ishares also have another one that focuses on govt related bonds

iShares Barclays Asia Local Currency Bond Index ETF

Cheers

Fletch

[fletchsmile]

You can double check with a tax lawyer if you want, but as far as I'm concerned my tax residency and where my money is are two different things.

The money is where the actual account is, and you are where you actually are.

If your brokerage account is in Luxembourg, why would you think your money has been brought into Thailand? It doesn't matter where you actually are.

What if you're on vacation at the time somewhere else?

Another example, say you're living in the US and have a bunch of money in your US accounts. You move to Thailand and after 6 months you become a tax resident of Thailand- is all that money you still have back in the US automatically considered as being brought into Thailand just because your tax residency change? I sure hope not because good luck getting it out!

Yes your tax residency and where your money physically sits are two different things.

As a Thai tax resident for foreign income if you leave your money offshore and it's physically outside Thailand you're OK as regards Thailand Revenue dept, and Thailand doesn't tax it as long as you leave it there.

Some countries aren't as nice, though and will tax you on worldwide income or worldwide assets regardless of whether you physically move them or not. Like you say though, it is not considered as being physically brought into the country if it physically isn't. But they may tax you on worldwide income or assets.

Cheers

Fletch

[fletchsmile]

So, if you are defined as a resident of Thailand, according to your broker, and receive a stream of foreign dividend payments into that account, then is that not counted as having brought income into Thailand during the year it was earned?

I believe it would be assessable for tax. If assessable, that doesn't necessarily mean there'd be further tax to pay, as you may be able to use DTAs to offset tax and other rules, You could trawl thru the Revenue Departments regulations:

http://www.rd.go.th/publish/37749.0.html#section41

The big accountancy forms like PWC, KPMG, PKF, etc all do tax guides for Thailand which touch on it

On the other hand it's one of those areas that many people don't seem to bother with and ignore, and don't declare, and you don't hear of it being enforced much, so even if you did bring it in same year it's probably unlikely anyone would follow up.

But to be honest, I just wouldn't go there. Just bring it in the following year on Jan 2. Worth keeping separate accounts so you can show the money clearly where and when it came from if need be, so don't "taint" the account with income in the same year in it.

It's also another factor why onshore investing can be useful for at least part of your portfolio.

Cheers

Fletch

How can you bring it in at a later date. It's paid when it's paid. If your tax address is Thailand then it's surely counted as having been brought in on the dividend pay date, unless the post from Ludacris above is right and it's the address of the actual brokerage that counts. If the latter then it's never brought into Thailand at all, as long as the money stays in the account.

Yes for foreign income, it's paid when it's paid, but it's brought into Thailand when it's physically brought in. If foreign income and it's paid into Singapore and you leave it there and never bring it here you're fine as regards the Thai Revenue department.

[AyG]

I'll give you a specific example from doing some research today. I thought I'd look again for an ETF or CEF that gave good exposure to Asian government bonds. In the US the best I know of is FAX. Without commenting on current valuations, the positives of this ETF is it does what it says it does and it pays a monthly dividend. But I can find no suitable equivalents in the UK or Dublin or Luxembourg. And whether it's Asia government bonds or other sectors, I often find there is really no good alternative to the U.S market, although I'd love to be proved otherwise.

Singapore offers:

iShares Barclays Capital Asia Local 1-3 Year Currency Bond Index ETF

iShares Barclays Capital Asia Local Currency Bond Index ETF

iShares Barclays Capital USD Asia High Yield Bond Index ETF

iShares J.P Morgan USD Asia Credit Bond Index ETF

ABF Singapore Bond Index Fund

That's not too bad a selection.

I think that outside very narrow sectors of the US market and oddities such as reverse ETFs and leveraged ETFs you can usually find what you want outside the US.

[paddyjenkins]

By the way, on the question of why somebody would buy high dividend US ETFs and thus become subject to high withholding tax, obviously tax hurts returns, that's a given. But the range of ETFs and CEFs available in the US is often so much broader and better than available elsewhere that sometimes there is just nowhere else to go.

I'll give you a specific example from doing some research today. I thought I'd look again for an ETF or CEF that gave good exposure to Asian government bonds. In the US the best I know of is FAX. Without commenting on current valuations, the positives of this ETF is it does what it says it does and it pays a monthly dividend. But I can find no suitable equivalents in the UK or Dublin or Luxembourg. And whether it's Asia government bonds or other sectors, I often find there is really no good alternative to the U.S market, although I'd love to be proved otherwise.

Yes true, US does have the widest range in the world. Which can bring things full circle, of what's important to you out of all the above factors.

BTW I remember from another thread a few months back that while we've some common ground on bonds, we've some slightly different views and appetites in other areas. The only 2 ETFS I hold that have Asian bonds are:

iShares Barclays USD Asia High Yield Bond Index ETF - not Govt, but HY Asian Corporate. Ave YTM 7%+, TER 0.5%, pays quarterly in USD. I hold the SGD version.

IEML/ SEML - iShares Emerging Markets Local Government Bond UCITS ETF - broader EM Bonds, but 30%+ is Asia

Ishares also have another one that focuses on govt related bonds

iShares Barclays Asia Local Currency Bond Index ETF

Cheers

Fletch

I will take a look at the Asia high yield ETF, especially the SGD version. I think I may have previously looked at the EM bond ETF but didn't like the holdings....too much Russia, Romania....Lebanon...Venezuela....any old junk they can find to boost the dividend.

Yes, quite some time ago we discussed bonds and I explained to you the possibility of curve flattening, which you appeared to not understand as opposed to having a different view on. Likewise the concepts of credit and duration risk. I also explained that credit had become very frothy. Since then we have indeed seen massive curve flattening and volatile credit. I've been predominantly a buyer of long end US treasury bonds and so have done extremely well. Front end junk has of course fared worse, but that's the kind of thing I've stayed away from as I prefer to make money rather than losing it or just about breaking even.

Thanks for your ETF ideas. Right now the trouble with Asian or any non US bonds is the denomination, so it's a matter of keeping them on the radar as opposed to buying now as I prefer not to hedge the currency exposure.

Edited January 5, 2015 by paddyjenkins

[ExpatJ]

Fletch.



I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

Edited January 5, 2015 by ExpatJ

[paddyjenkins]

I'll give you a specific example from doing some research today. I thought I'd look again for an ETF or CEF that gave good exposure to Asian government bonds. In the US the best I know of is FAX. Without commenting on current valuations, the positives of this ETF is it does what it says it does and it pays a monthly dividend. But I can find no suitable equivalents in the UK or Dublin or Luxembourg. And whether it's Asia government bonds or other sectors, I often find there is really no good alternative to the U.S market, although I'd love to be proved otherwise.

Singapore offers:

iShares Barclays Capital Asia Local 1-3 Year Currency Bond Index ETF

iShares Barclays Capital Asia Local Currency Bond Index ETF

iShares Barclays Capital USD Asia High Yield Bond Index ETF

iShares J.P Morgan USD Asia Credit Bond Index ETF

ABF Singapore Bond Index Fund

That's not too bad a selection.

I think that outside very narrow sectors of the US market and oddities such as reverse ETFs and leveraged ETFs you can usually find what you want outside the US.

Yes, there are a few, in fact I looked at one or two of the above when I did some research last night.

In the US markets there are interesting areas such as munis and prefs which I like to trade. But I treat the dividend as icing on the cake, not the sole reason to buy. With the type of bid asks and commissions that the Asian brokers charge my profits would be damaged if I attempted the same strategies, as the trading ranges are usually quite small. So in addition to the points I made about breadth of offerings, it's also the case that the U.S markets offer much better value and liquidity. Granted though, for the buyer and holder type there are at least some possibilities to consider outside the U.S.

[paddyjenkins]

Fletch.

I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

There is a proven anti-correlation between fund performance and fees. So in general you are correct to be wary of paying high fees. Likewise, dividend withholding tax also damages performance, that's undeniable and obvious. But I am sure there are also certain exceptions where the managers can justify charging a couple of percent or so in fees. Mostly not though.

[ExpatJ]

Fletch.

I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

There is a proven anti-correlation between fund performance and fees. So in general you are correct to be wary of paying high fees. Likewise, dividend withholding tax also damages performance, that's undeniable and obvious. But I am sure there are also certain exceptions where the managers can justify charging a couple of percent or so in fees. Mostly not though.

Fair response!

[fletchsmile]

Fletch.

I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

ExpatJ,

Why do you keep posting such inaccuracies? You've:

- Frequently linked me to 5% on fees - completely untrue. I've told you run from anything like that

- Said my brokers love me for the fees I pay. Completely untrue. I do the opposite and use discount brokers to reduce fees, not in addition! Don't know why you can't grasp that

- Said I'm heavily invested in higher fee funds mentally and financially which clouds my judgement - untrue

Please google the phrase "horses for courses" and understand what it means:

I select the appropriate structure for my cases according to factors. eg whether I buy from within Thailand, Singapore or UK, and the vehicles I use. Where the money comes from. Tax (including not just income tax, WHT and capital gains tax but also inheritance tax). Who's name I buy in. FX risk. Currencies.Convenience. Availablity of Products. Type of products. My knowledge/ expertise in the area. Short term trade or long term investment. Likelihood of value add or not. etc etc. etc

Even leaving those aside, on the subject of fees, I pay:

- no ongoing fees and wouldn't use a fund

- low fee ETFs

- slightly higher fee ETFs in specialised areas

- higher fee active funds, where I can identify out performance.

But never anything like 5%. Ongoing fees are typically in the range of 0% to 1.75%

Part of your problem is you put fees first and foremost, and don't get other people are more interested in return and value add. For me I'm most interested in what ends up in my pocket, and fees are just one part of the equation

If we let the facts speak for themselves, and I generalise over some of the areas I invest (which vary because of all the factors above) and compare to the approach you adopted, it might help you grasp the reality, as well as give an idea for other people the choices out there, and how we all differ:

- REITS I pay zero ongoing fee and don't use any funds or ETFs. I research may own specific needs and goals. You opt for low cost fee ETFs and ignore tax

- US equities generally, I would be more inclined to a low cost ETF and consider carefully tax. This is a specific example where higher fees are usually not worth it, and I can't identify consistent outperformance so use ETF. You opt for low cost fee ETFs and ignore tax

- Emerging Market Equities I seek and have achieved significantly superior performance more often than not over the last couple of decades and 16+ years for Thailand. Note: I don't seek high fees, for the sake of it I am prepared to pay a bit more for superior outperformance. You opt for low cost ETFs and ignore tax

- UK equities I prefer to to invest in quality names such as Neil Woodford, who I've followed for a couple of decades, and has an excellent track record of out performance. Similarly in the past Anthony Bolton for many years. This costs a few tenths of a % more, but who cares when you buy quality like that? You opt for low cost ETFs and ignore tax

- Smaller company equities is a sector that a good fund manager adds value. I've identified consistent out performance, so don't mind paying a little extra

- For global developed markets invested in large companies, I don't really hold many, as it doesn't fit the way I invest, but would tend towards low cost ETF considering all factors offshore, but if bought onshore would likely go for a unit trust for convenience, and limited range. You opt for low cost fee ETFs and ignore tax on both

- USD High yield Asian bonds, as above in the one I highlighted, I'm happy to use a relatively low cost ETF, mindful of tax. You opt for low cost fee ETFs and ignore tax.

In none of the above do I actively seek to pay higher fees. I just pay a little more when it makes sense to me

Mate, looks to me like if anyone has their judgement clouded and dogmatic about a particular style it's you

Remember when you point a finger there are 3 pointing back at you

I think you've hit the nail on the head about clouded judgement. You haven't just "been there". You're still there . Sounds like you are indeed mentally and heavily invested in low cost ETFs, to the extent you can't or don't want to see why others do otherwise

Very happy to disagree on approach. But if you're going to refer to my approache(s), please describe them correctly

Cheers

Fletch

[fletchsmile]

Fletch.

I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

There is a proven anti-correlation between fund performance and fees. So in general you are correct to be wary of paying high fees. Likewise, dividend withholding tax also damages performance, that's undeniable and obvious. But I am sure there are also certain exceptions where the managers can justify charging a couple of percent or so in fees. Mostly not though.

Yes agree, all those generalisations hold for averages and most funds if you take the whole investment universe.

Yes agree, there are also exceptions, and for me that's where sometimes/often I will invest time and research and money (via a little extra fees if need be as you allude) to get them.

To put into context as an example:

In the UK I have used Hargreaves Lansdown in as a discount broker for 20 - 30 years. They currently have over 2,500 funds available. Most of those 2,500 don't outperform and fall in the "mostly not" category. I also leverage their research in addition to my own, and like their Wealth 150 top funds out of their 2,500 as well as their low cost tracker lists.. I invest in less than 1% of these 2,500 funds. I don't always get it right - no one does

In Thailand, the range is more limited, so easier in some ways to filter out the mostly nots.

Cheers

Fletch:)

Edited January 5, 2015 by fletchsmile

[fletchsmile]

I'll give you a specific example from doing some research today. I thought I'd look again for an ETF or CEF that gave good exposure to Asian government bonds. In the US the best I know of is FAX. Without commenting on current valuations, the positives of this ETF is it does what it says it does and it pays a monthly dividend. But I can find no suitable equivalents in the UK or Dublin or Luxembourg. And whether it's Asia government bonds or other sectors, I often find there is really no good alternative to the U.S market, although I'd love to be proved otherwise.

Singapore offers:

iShares Barclays Capital Asia Local 1-3 Year Currency Bond Index ETF

iShares Barclays Capital Asia Local Currency Bond Index ETF

iShares Barclays Capital USD Asia High Yield Bond Index ETF

iShares J.P Morgan USD Asia Credit Bond Index ETF

ABF Singapore Bond Index Fund

That's not too bad a selection.

I think that outside very narrow sectors of the US market and oddities such as reverse ETFs and leveraged ETFs you can usually find what you want outside the US.

Yes as you say will fill the basics for many people's needs. Singapore does have a more limited range.

For anyone interested in more than bonds, there's around a hundred in total listed on SGX, across all providers:

http://www.sgx.com/wps/wcm/connect/cfb2a4004983d70bb8befb2574a59187/ETF+Summary+InfoMar2014.pdf?MOD=AJPERES&CACHEID=cfb2a4004983d70bb8befb2574a59187

iShares do a great website that covers all countries, and someone interested can click thru the different ones in top RH corner

http://www.ishares.com/uk/institutional/en/index?siteEntryPassthrough=true&locale=en_GB

Depending on nationality/ tax, Luxembourg and UK/LSE are worth a look (sometimes Ireland domiciled)

Cheers

Fletch

[ExpatJ]

Fletch.

I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

ExpatJ,

Why do you keep posting such inaccuracies? You've:

- Frequently linked me to 5% on fees - completely untrue. I've told you run from anything like that

- Said my brokers love me for the fees I pay. Completely untrue. I do the opposite and use discount brokers to reduce fees, not in addition! Don't know why you can't grasp that

- Said I'm heavily invested in higher fee funds mentally and financially which clouds my judgement - untrue

Please google the phrase "horses for courses" and understand what it means:

I select the appropriate structure for my cases according to factors. eg whether I buy from within Thailand, Singapore or UK, and the vehicles I use. Where the money comes from. Tax (including not just income tax, WHT and capital gains tax but also inheritance tax). Who's name I buy in. FX risk. Currencies.Convenience. Availablity of Products. Type of products. My knowledge/ expertise in the area. Short term trade or long term investment. Likelihood of value add or not. etc etc. etc

Even leaving those aside, on the subject of fees, I pay:

- no ongoing fees and wouldn't use a fund

- low fee ETFs

- slightly higher fee ETFs in specialised areas

- higher fee active funds, where I can identify out performance.

But never anything like 5%. Ongoing fees are typically in the range of 0% to 1.75%

Part of your problem is you put fees first and foremost, and don't get other people are more interested in return and value add. For me I'm most interested in what ends up in my pocket, and fees are just one part of the equation

If we let the facts speak for themselves, and I generalise over some of the areas I invest (which vary because of all the factors above) and compare to the approach you adopted, it might help you grasp the reality, as well as give an idea for other people the choices out there, and how we all differ:

- REITS I pay zero ongoing fee and don't use any funds or ETFs. I research may own specific needs and goals. You opt for low cost fee ETFs and ignore tax

- US equities generally, I would be more inclined to a low cost ETF and consider carefully tax. This is a specific example where higher fees are usually not worth it, and I can't identify consistent outperformance so use ETF. You opt for low cost fee ETFs and ignore tax

- Emerging Market Equities I seek and have achieved significantly superior performance more often than not over the last couple of decades and 16+ years for Thailand. Note: I don't seek high fees, for the sake of it I am prepared to pay a bit more for superior outperformance. You opt for low cost ETFs and ignore tax

- UK equities I prefer to to invest in quality names such as Neil Woodford, who I've followed for a couple of decades, and has an excellent track record of out performance. Similarly in the past Anthony Bolton for many years. This costs a few tenths of a % more, but who cares when you buy quality like that? You opt for low cost ETFs and ignore tax

- Smaller company equities is a sector that a good fund manager adds value. I've identified consistent out performance, so don't mind paying a little extra

- For global developed markets invested in large companies, I don't really hold many, as it doesn't fit the way I invest, but would tend towards low cost ETF considering all factors offshore, but if bought onshore would likely go for a unit trust for convenience, and limited range. You opt for low cost fee ETFs and ignore tax on both

- USD High yield Asian bonds, as above in the one I highlighted, I'm happy to use a relatively low cost ETF, mindful of tax. You opt for low cost fee ETFs and ignore tax.

In none of the above do I actively seek to pay higher fees. I just pay a little more when it makes sense to me

Mate, looks to me like if anyone has their judgement clouded and dogmatic about a particular style it's you

Remember when you point a finger there are 3 pointing back at you

I think you've hit the nail on the head about clouded judgement. You haven't just "been there". You're still there . Sounds like you are indeed mentally and heavily invested in low cost ETFs, to the extent you can't or don't want to see why others do otherwise

Very happy to disagree on approach. But if you're going to refer to my approache(s), please describe them correctly

Cheers

Fletch

I wrote the post in morning during rush hour and regret it. No call for being snide to anyone here, ( though if I may in my defence you were the first one to mock me and not the other way round (my policy normally being don't say anything online that you wouldn't say to someone's face)

As you rightly say. Horses for courses.

[fletchsmile]

I will take a look at the Asia high yield ETF, especially the SGD version. I think I may have previously looked at the EM bond ETF but didn't like the holdings....too much Russia, Romania....Lebanon...Venezuela....any old junk they can find to boost the dividend.

Yes, quite some time ago we discussed bonds and I explained to you the possibility of curve flattening, which you appeared to not understand as opposed to having a different view on. Likewise the concepts of credit and duration risk. I also explained that credit had become very frothy. Since then we have indeed seen massive curve flattening and volatile credit. I've been predominantly a buyer of long end US treasury bonds and so have done extremely well. Front end junk has of course fared worse, but that's the kind of thing I've stayed away from as I prefer to make money rather than losing it or just about breaking even.

Thanks for your ETF ideas. Right now the trouble with Asian or any non US bonds is the denomination, so it's a matter of keeping them on the radar as opposed to buying now as I prefer not to hedge the currency exposure.

Think you got me mixed up with the other poster you disagreed with I accept yield curve flattening as a risk, and it's something I deal with at work from risk management perspective, more than personal investment

http://www.thaivisa.com/forum/topic/752197-uk-corporate-bonds/

osted 2014-08-21 19:33:21fletchsmile said...

BTW I mentioned spreads as being a factor above. In the same way paddy raised about yield curve flattening. Yes I think they are risks but not ones I'm overly worried about just yet. Meanwhile I'd prefer to collect that extra yield even if it is not as much extra as it used to be. I simply can't accept the yield on gilts in view of the risks, and many investment grades are too low yields for my targets.

BTW2 In terms of yield curves flattening, as Paddy raised, while I expect it to happen, and don't expect it just yet, the point paddy raised will also differ in impact across different curves, eg gilts, HYB and for other factors like spreads, so it won't be as simple in my view as shorter durations fairing worst. It will be a combination of factors pulling as ever in different directions. Where, when and how the curve flattens will impact any decision, and needs to be weighed vs longer term will be affected more by increases in rates than shorter term. Also I don't think the flattening will just happen shortly overnight, in the same way rate rises won't. There'll be time to adjust.

The big difference in our approach is that you're much more active than me in your bond investment/ trading. I am more a buy and hold investor, as fixed income is only around 10% of my total investment portfolio, and I prefer equities. You're more into trading opportunities. You've probably had a better time than me as a result.

AHYGS:SP as an ETF has retained it's value for me, and paid out 2 quarters since that thread, so achieved my objective - I can't ask for more than achieving my objective. I expect you'll have faired better, with the recent volatility, and Russia impact on EM bonds, there would have been some nice opportunities

interesting comment you made about the EM ETF. It's objective is actually to track a specific index, so they can't just put anything in it. As a result as you highlight it has bonds you wouldn't want. This highlights exactly the point of knowing your markets, and the drawbacks sometimes of picking index trackers. You believe you can add value in a different selection.

For me I picked it among other reasons because: it's been beaten up recently, plus the yield, plus EM bond investing is not my real area of expertise. Just a sector I wanted exposure to so I went for a low cost entry ETF index tracker in EM bonds. (bearing in mind tax) ..

Cheers

Fletch

Edited January 5, 2015 by fletchsmile

[fletchsmile]

Fletch.

I have never seen anyone defend high (er) fee funds as much as you. You are obviously, mentally and financially, heavily invested in these higher fee funds and this can cloud one's judgment (i know i have been there myself!) . So perhaps best if we agree to disagree on this issue and let the other forum members decide which is best :-)

ExpatJ,

Why do you keep posting such inaccuracies? You've:

- Frequently linked me to 5% on fees - completely untrue. I've told you run from anything like that

- Said my brokers love me for the fees I pay. Completely untrue. I do the opposite and use discount brokers to reduce fees, not in addition! Don't know why you can't grasp that

- Said I'm heavily invested in higher fee funds mentally and financially which clouds my judgement - untrue

Please google the phrase "horses for courses" and understand what it means:

I select the appropriate structure for my cases according to factors. eg whether I buy from within Thailand, Singapore or UK, and the vehicles I use. Where the money comes from. Tax (including not just income tax, WHT and capital gains tax but also inheritance tax). Who's name I buy in. FX risk. Currencies.Convenience. Availablity of Products. Type of products. My knowledge/ expertise in the area. Short term trade or long term investment. Likelihood of value add or not. etc etc. etc

Even leaving those aside, on the subject of fees, I pay:

- no ongoing fees and wouldn't use a fund

- low fee ETFs

- slightly higher fee ETFs in specialised areas

- higher fee active funds, where I can identify out performance.

But never anything like 5%. Ongoing fees are typically in the range of 0% to 1.75%

Part of your problem is you put fees first and foremost, and don't get other people are more interested in return and value add. For me I'm most interested in what ends up in my pocket, and fees are just one part of the equation

If we let the facts speak for themselves, and I generalise over some of the areas I invest (which vary because of all the factors above) and compare to the approach you adopted, it might help you grasp the reality, as well as give an idea for other people the choices out there, and how we all differ:

- REITS I pay zero ongoing fee and don't use any funds or ETFs. I research may own specific needs and goals. You opt for low cost fee ETFs and ignore tax

- US equities generally, I would be more inclined to a low cost ETF and consider carefully tax. This is a specific example where higher fees are usually not worth it, and I can't identify consistent outperformance so use ETF. You opt for low cost fee ETFs and ignore tax

- Emerging Market Equities I seek and have achieved significantly superior performance more often than not over the last couple of decades and 16+ years for Thailand. Note: I don't seek high fees, for the sake of it I am prepared to pay a bit more for superior outperformance. You opt for low cost ETFs and ignore tax

- UK equities I prefer to to invest in quality names such as Neil Woodford, who I've followed for a couple of decades, and has an excellent track record of out performance. Similarly in the past Anthony Bolton for many years. This costs a few tenths of a % more, but who cares when you buy quality like that? You opt for low cost ETFs and ignore tax

- Smaller company equities is a sector that a good fund manager adds value. I've identified consistent out performance, so don't mind paying a little extra

- For global developed markets invested in large companies, I don't really hold many, as it doesn't fit the way I invest, but would tend towards low cost ETF considering all factors offshore, but if bought onshore would likely go for a unit trust for convenience, and limited range. You opt for low cost fee ETFs and ignore tax on both

- USD High yield Asian bonds, as above in the one I highlighted, I'm happy to use a relatively low cost ETF, mindful of tax. You opt for low cost fee ETFs and ignore tax.

In none of the above do I actively seek to pay higher fees. I just pay a little more when it makes sense to me

Mate, looks to me like if anyone has their judgement clouded and dogmatic about a particular style it's you

Remember when you point a finger there are 3 pointing back at you

I think you've hit the nail on the head about clouded judgement. You haven't just "been there". You're still there . Sounds like you are indeed mentally and heavily invested in low cost ETFs, to the extent you can't or don't want to see why others do otherwise

Very happy to disagree on approach. But if you're going to refer to my approache(s), please describe them correctly

Cheers

Fletch

I wrote the post in morning during rush hour and regret it. No call for being snide to anyone here, ( though if I may in my defence you were the first one to mock me and not the other way round (my policy normally being don't say anything online that you wouldn't say to someone's face)

As you rightly say. Horses for courses.

Apologies if I was OTT mate. I don't have a smiley with an extended handshake, but consider this it

Cheers

Fletch

[paddyjenkins]

I will take a look at the Asia high yield ETF, especially the SGD version. I think I may have previously looked at the EM bond ETF but didn't like the holdings....too much Russia, Romania....Lebanon...Venezuela....any old junk they can find to boost the dividend.

Yes, quite some time ago we discussed bonds and I explained to you the possibility of curve flattening, which you appeared to not understand as opposed to having a different view on. Likewise the concepts of credit and duration risk. I also explained that credit had become very frothy. Since then we have indeed seen massive curve flattening and volatile credit. I've been predominantly a buyer of long end US treasury bonds and so have done extremely well. Front end junk has of course fared worse, but that's the kind of thing I've stayed away from as I prefer to make money rather than losing it or just about breaking even.

Thanks for your ETF ideas. Right now the trouble with Asian or any non US bonds is the denomination, so it's a matter of keeping them on the radar as opposed to buying now as I prefer not to hedge the currency exposure.

Think you got me mixed up with the other poster you disagreed with I accept yield curve flattening as a risk, and it's something I deal with at work from risk management perspective, more than personal investment

http://www.thaivisa.com/forum/topic/752197-uk-corporate-bonds/

osted 2014-08-21 19:33:21fletchsmile said...

BTW I mentioned spreads as being a factor above. In the same way paddy raised about yield curve flattening. Yes I think they are risks but not ones I'm overly worried about just yet. Meanwhile I'd prefer to collect that extra yield even if it is not as much extra as it used to be. I simply can't accept the yield on gilts in view of the risks, and many investment grades are too low yields for my targets.

BTW2 In terms of yield curves flattening, as Paddy raised, while I expect it to happen, and don't expect it just yet, the point paddy raised will also differ in impact across different curves, eg gilts, HYB and for other factors like spreads, so it won't be as simple in my view as shorter durations fairing worst. It will be a combination of factors pulling as ever in different directions. Where, when and how the curve flattens will impact any decision, and needs to be weighed vs longer term will be affected more by increases in rates than shorter term. Also I don't think the flattening will just happen shortly overnight, in the same way rate rises won't. There'll be time to adjust.

The big difference in our approach is that you're much more active than me in your bond investment/ trading. I am more a buy and hold investor, as fixed income is only around 10% of my total investment portfolio, and I prefer equities. You're more into trading opportunities. You've probably had a better time than me as a result.

AHYGS:SP as an ETF has retained it's value for me, and paid out 2 quarters since that thread, so achieved my objective - I can't ask for more than achieving my objective. I expect you'll have faired better, with the recent volatility, and Russia impact on EM bonds, there would have been some nice opportunities

interesting comment you made about the EM ETF. It's objective is actually to track a specific index, so they can't just put anything in it. As a result as you highlight it has bonds you wouldn't want. This highlights exactly the point of knowing your markets, and the drawbacks sometimes of picking index trackers. You believe you can add value in a different selection.

For me I picked it among other reasons because: it's been beaten up recently, plus the yield, plus EM bond investing is not my real area of expertise. Just a sector I wanted exposure to so I went for a low cost entry ETF index tracker in EM bonds. (bearing in mind tax) ..

Cheers

Fletch

Im historically more into equity but over the past few years I've focused as much or more on fixed income. And the more I see equities turning into a simple reaction to reckless central banks, the more I prefer the structure that fixed income offers, even if it doesn't yield what it once did.

Re the Em bond fund, I'd like to see it fall quite a lot before buying,,,it's mostly junk. Yes, it's an index so I suppose the managers aren't just stuffing their losses into it, but when I look at the holdings it doesn't look appetizing to me at all.

[dinga]

Firstly, thanks to the posters (esp Fletch, Paddy and ExpatJ - have greatly enjoyed the opinions, advice and banter).

As noted earlier, I have an account with Interactive Brokers in the US of A and can use that platform to invest in a

number of markets - including Singapore. They have kindly confirmed that NO WithHolding Tax would be deducted by them

from any interest/dividend amount that was earned on Singapore investments and directed into my IB account.

Therefore my question - is there any benefit or otherwise to investing in the Spore market via a locally-based

(say Thai/Spore) broker rather than a US one like IB?

Tks agin!

Edited January 7, 2015 by dinga

[fletchsmile]

Firstly, thanks to the posters (esp Fletch, Paddy and ExpatJ - have greatly enjoyed the opinions, advice and banter).

As noted earlier, I have an account with Interactive Brokers in the US of A and can use that platform to invest in a

number of markets - including Singapore. They have kindly confirmed that NO WithHolding Tax would be deducted by them

from any interest/dividend amount that was earned on Singapore investments and directed into my IB account.

Therefore my question - is there any benefit or otherwise to investing in the Spore market via a locally-based

(say Thai/Spore) broker rather than a US one like IB?

Tks agin!

Given that you're American and the good old US of A taxes you on worldwide income probably not based on what you've posted As mentioned I'm not an expert on US tax or US investments for Americans, so an American might be better placed to comment

For a Thai like my wife it would make a difference whether she held the account in Singapore or Thailand. Similarly it could make a difference for a Brit.

Cheers

Fletch

[fletchsmile]

I'm in the process of reviewing my investments given 2014 has just finished.

For people interested in putting in effort and research on active managed funds, here are some funds that give an idea of how a discount broker in the UK can discount initial and annual charges in the UK (compared to going direct to the fund management house), what the charges would be and returns vs index and sector.

> 2 European funds I hold: Jupiter European, and Threadneedle European Select.

> 1 UK fund I hold - Standard Life UK Equity Unconstrained (no point adding the new Neil Woodford one I own as it's only bee going a few months, although it makes a good start). Googling him gives an idea of past performance

> 2 Global Emerging Markets Funds: First State Global Emerging Markets Leaders (owned via UK) First State Global Emerging Markets (I actually own in Singapore not UK but just used this to compare)

All these funds have significantly outperformed (1) their sectors (2) indices

All can have their initial fees discounted to zero - except the Singapore one I bought years back and paid 1% if I recall after discount

All except 1 have ongoing annual fees which can be reduced via a discount broker that come to 0.X% (under 1% per year). The exception being Jupiter European that costs 1.03% pa.- rare to pay above 1% but the fund is well worth it

For US equities by the way, my preferred fund is Legal and General US Index fund. It has no initial charge. Annual charge is 0.06% after a 0.04% discount from the broker compared to buying direct. Below is a quote from Hargreaves Lansdown:

"Legal & General's fund is our favourite American tracker fund- an area where few active managers outperform. This is a fully replicated tracker fund, investing in a diverse index of over 600 large and medium sized US companies, without stock lending."

For US investors that quote is no doubt very familiar

For Thailand, and the funds I buy here, the same analysis tools aren't as easily available although Morningstar do some. The annual ongoing TER cost is often just under 1% more (usually 1.7% max), but this compensates with convenience, not bearing FX costs transferring in/ out, favourable tax (not counting LTF and RMF tax relief from the kind Thai govt), freedom from IHT, easy for the wife and kids, can buy in THB from onshore money etc etc

Edit: I tried to post the data direct, but the format was messed up so attached the docs I saved for my own use instead. Hopefully gives an idea.

Disc

Cheers

Fletch

Edited January 8, 2015 by fletchsmile