What would you do if ETF was to expensive

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martinlarosa
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What would you do if ETF was to expensive

Post by martinlarosa » Thu May 18, 2017 8:08 am

I can access VT from my broker in Argentina. But the cost for buying and selling is 1.8%. Also I have to pay Income tax for dividends and capital gains.
But if I invest in local assets, I only pay 0.6% for buying and selling and no income tax on anything. The problems is, they are local assets.

Is the 1.8% cost and tax implications worth the diversification? I'm inclined to think so, as the alternative would be to be coupled to my country's risk. :moneybag

Grt2bOutdoors
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Re: What would you do if ETF was to expensive

Post by Grt2bOutdoors » Thu May 18, 2017 8:12 am

martinlarosa wrote:I can access VT from my broker in Argentina. But the cost for buying and selling is 1.8%. Also I have to pay Income tax for dividends and capital gains.
But if I invest in local assets, I only pay 0.6% for buying and selling and no income tax on anything. The problems is, they are local assets.

Is the 1.8% cost and tax implications worth the diversification? I'm inclined to think so, as the alternative would be to be coupled to my country's risk. :moneybag


I would still buy it, knowing that in the long run a 1.8% cost should be negligible. However, if you are a short-term speculator, think twice as the toll cost can make a noticeable impact in your returns.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

martinlarosa
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Re: What would you do if ETF was to expensive

Post by martinlarosa » Thu May 18, 2017 8:25 am

Right, that's what I was thinking. 1.8% is a lot but doing long term investment so.... I hope it washes itself out

rob65
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Re: What would you do if ETF was to expensive

Post by rob65 » Thu May 18, 2017 8:33 am

I'm not an expert on this, but here's a link to an article in the wiki about why non-residents might be better off in Irish domiciled etfs unless their country has a tax treaty with the US:
https://www.bogleheads.org/wiki/Nonresi ... Irish_ETFs

dbr
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Re: What would you do if ETF was to expensive

Post by dbr » Thu May 18, 2017 8:34 am

martinlarosa wrote:Right, that's what I was thinking. 1.8% is a lot but doing long term investment so.... I hope it washes itself out


You don't have to hope it washes itself out. 1.8% is 1.8% after one year, but 0.18% after ten years, and 0.09% after twenty years. That is not a good thing, but it is hardly crippling if you are careful to not sell and buy again too often.

martinlarosa
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Re: What would you do if ETF was to expensive

Post by martinlarosa » Thu May 18, 2017 10:39 am

rob65 wrote:I'm not an expert on this, but here's a link to an article in the wiki about why non-residents might be better off in Irish domiciled etfs unless their country has a tax treaty with the US:
https://www.bogleheads.org/wiki/Nonresi ... Irish_ETFs


Thanks, I know about that but unfortunately I don't have access to those. :?

dbr wrote:
martinlarosa wrote:Right, that's what I was thinking. 1.8% is a lot but doing long term investment so.... I hope it washes itself out


You don't have to hope it washes itself out. 1.8% is 1.8% after one year, but 0.18% after ten years, and 0.09% after twenty years. That is not a good thing, but it is hardly crippling if you are careful to not sell and buy again too often.


Yeah, the idea is retirement, and I'm 29 so... :beer

martinlarosa
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Re: What would you do if ETF was to expensive

Post by martinlarosa » Thu May 18, 2017 11:35 am

What about Bond allocation?
I'm currently investing in Argentinian Bonds as they don't pay income nor wealth tax. Their denomination is USD.
As I know you will ask, yes there are inflation tied bonds in pesos and also dollar linked bonds in pesos ARS (you buy them in pesos, and they give out pesos, but the amount is tied to the exchange rate between the dollar and ARS)
Here the way we protect from inflation, actually devaluation, is buying USD. Or real state which is also valued in USD.
So I think that exchange rate risk in this case would actually be a benefit rather than a risk :confused I'm much more relaxed knowing that fixed income pays in USD rather than pesos. Or that at least it is tied to it.

What concerns me is if Argentina gets another big crisis, my bonds would also be in trouble.

So again cheaper, no tax, but country risk concentration.

imperia
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Re: What would you do if ETF was to expensive

Post by imperia » Thu May 18, 2017 12:59 pm

Why you do not use Interactive Brockers?

martinlarosa
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Re: What would you do if ETF was to expensive

Post by martinlarosa » Thu May 18, 2017 3:01 pm

I have TDAmeritrade, but transfering money outside of the country is really expensive.

imperia
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Re: What would you do if ETF was to expensive

Post by imperia » Thu May 18, 2017 3:16 pm

With Interactive Brokers you can buy irish domicile ETF.
You also can buy accumulation ETF that reinvest dividents,so you do not need to pay dividend tax.

martinlarosa
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Re: What would you do if ETF was to expensive

Post by martinlarosa » Fri May 19, 2017 8:08 am

Ok I'll research that, but each international transfer to them would cost me 105 USD.

What about my bond allocation question?

imperia
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Re: What would you do if ETF was to expensive

Post by imperia » Fri May 19, 2017 8:27 am

I am aware it is expensive, but transfer money once a year, not every month.

I use saving account in bank instead of bonds, but I am thinking to buy
iShares J.P. Morgan $ EM Bond UCITS ETF USD Acc, you can buy distribution ETF, but I prefer accumulation, because I do not pay dividend tax in may country.
If you want some other bond ETF that is more safer, pick one, but thats up to you.
Remember this:
-avoid US domicile ETF
-use irish or luxembourg domicile ETF
Why?
In US you will pay 30% dividend tax, and there is estate tax, and other many things
If you have irish or luxembourg ETF you do not pay nothing, and you can buy accumulation ETF that reinvest the dividend.

Valuethinker
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Re: What would you do if ETF was to expensive

Post by Valuethinker » Sat May 20, 2017 10:00 am

martinlarosa wrote:I can access VT from my broker in Argentina. But the cost for buying and selling is 1.8%. Also I have to pay Income tax for dividends and capital gains.
But if I invest in local assets, I only pay 0.6% for buying and selling and no income tax on anything. The problems is, they are local assets.

Is the 1.8% cost and tax implications worth the diversification? I'm inclined to think so, as the alternative would be to be coupled to my country's risk. :moneybag
If I lived in Argentina I would try very hard to have assets outside the country== investments I mean.

Given the macroeconomic history of the country, I would suggest having say 40% of your portfolio outside of the country-- or at least 33%. Try to do this in the most efficient way possible.

Valuethinker
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Re: What would you do if ETF was to expensive

Post by Valuethinker » Sat May 20, 2017 10:02 am

martinlarosa wrote:What about Bond allocation?
I'm currently investing in Argentinian Bonds as they don't pay income nor wealth tax. Their denomination is USD.
As I know you will ask, yes there are inflation tied bonds in pesos and also dollar linked bonds in pesos ARS (you buy them in pesos, and they give out pesos, but the amount is tied to the exchange rate between the dollar and ARS)
Here the way we protect from inflation, actually devaluation, is buying USD. Or real state which is also valued in USD.
So I think that exchange rate risk in this case would actually be a benefit rather than a risk :confused I'm much more relaxed knowing that fixed income pays in USD rather than pesos. Or that at least it is tied to it.

What concerns me is if Argentina gets another big crisis, my bonds would also be in trouble.

So again cheaper, no tax, but country risk concentration.
You are OK holding these bonds I think. USD linked bonds. And real estate, if you can.

But you want to try to hold some high return assets, ie equities, outside of Argentina. As I suggested perhaps 33-40% of your total portfolio.

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whodidntante
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Re: What would you do if ETF was to expensive

Post by whodidntante » Sat May 20, 2017 2:10 pm

Have you determined that you are unable to be a customer at Interactive Brokers? They won't charge you nearly so much.

martinlarosa
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Re: What would you do if ETF was to expensive

Post by martinlarosa » Fri Jun 23, 2017 9:29 am

Thank you both for your replies.
I checked and Argentina is one of the allowed countries in Interactive Brokers. But I see that the expense would be 120 dollars per year, as you need to pay 10 dollars per month, that might be adding up commissions or in maintenance fees if the commissions don't add up to 10 dollars.
I have to add the cost of transferring the money. Which would be arround the same amount.

So I guess that it would be convenient if the 120 dollars amount is less than the 15% of taxes I'm saving on dividends of the non us assets.

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