Newcomer guidelines [Romanian living in Hong Kong]

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alinm
Posts: 5
Joined: Wed Apr 13, 2016 10:05 am

Newcomer guidelines [Romanian living in Hong Kong]

Post by alinm » Thu Jun 23, 2016 1:31 am

Hi,
I joined this forum few months ago, so far just reading and trying to make sense of things, no real-world action, and this is my first post here.
I'll take this opportunity to say thanks to everyone who provides answers and insights here,
it's invaluable to learn from other's mistakes, since nobody lives enough to learn from their own!

I'm from Romania resident, currently living in Hong Kong, working in finance/tech,
so pretty familiar with lingo and basic mechanisms, not so much with 'financial philosophy'.
I want to start a long term investment plan - ~20 yrs - that will hopefully end up being my (early :) ) retirement nestegg.

What are the important decisions that will have a significant negative impact if I get them wrong when setting my investment plan (portfolio)?

For instance, my current blockers are:
- I'm still undecided if I should go with US based funds (dividend&inheritance tax issues known) or UK, Irish based funds
I take it is not great to find out after couple of years that I need to sell US funds and switch to EU based?

- I'm considering IB as broker (as I might try some other things), and didn't do much research here
will I lose a lot of money if I select my broker wrong now?

Appreciate the help!

TedSwippet
Posts: 2728
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Newcomer guidelines [Romanian living in Hong Kong]

Post by TedSwippet » Thu Jun 23, 2016 1:00 pm

Welcome.
alinm wrote:I'm from Romania resident, currently living in Hong Kong, working in finance/tech.
Romania has a tax treaty with the US but unless there is something ... special about your situation there (you're a diplomat, say!) it will not cover you while you are living in Hong Kong. Hong Kong has no tax treaty with the US; the Chinese treaty doesn't cover Hong Kong. Neither Romania nor Hong Kong have US estate tax treaties. This means you will want to read this wiki page and also this one, if you have not already, that is.
alinm wrote: - I'm still undecided if I should go with US based funds (dividend&inheritance tax issues known) or UK, Irish based funds
I take it is not great to find out after couple of years that I need to sell US funds and switch to EU based?
On dividend tax, some of this comes down to how your home country taxes dividends, and allows credits for US tax. My understanding is that Hong Kong does not tax dividends -- this would suggest that Ireland domiciled ETFs are the likely win here, since the ETF would pay 15% US dividend tax (the US/Ireland treaty rate) internally on dividends from US stocks and pass the remainder on to you, whereas you would have to pay 30% in US tax via broker withholding on dividends from US domiciled ETFs (even those containing no US stocks!).

On US estate tax, I am not sure why you would want to risk that for no compensatory reward. You do not get a better deal on US than on Ireland domiciled ETFs. In fact, you get a worse one, in the form of higher tax on dividends.
alinm wrote: - I'm considering IB as broker (as I might try some other things), and didn't do much research here
will I lose a lot of money if I select my broker wrong now?
You can often transfer share holdings between brokers intact. In the case of Hong Kong, with no capital gains tax, if that feature is not available you could always sell, transfer cash, then re-purchase in a new broker. So broker selection probably is not a large problem, and will come down to costs and service features. For what it is worth, several folk here have reported good experiences with IB in the past.

The one wrinkle with US based brokers is that cash held in a US broker counts as 'US situs' for US estate tax. So you would want to avoid ever holding more than $60k in cash in your brokerage account. Stuff held in non-US ETFs is fine, as is cash held at a US bank -- but cash in a broker is problematic. (Why? Because illogicality is a major component of US tax laws.)

With luck someone with more direct knowledge of investing from Hong Kong will drop by soon...

RadAudit
Posts: 3734
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Newcomer guidelines [Romanian living in Hong Kong]

Post by RadAudit » Thu Jun 23, 2016 1:02 pm

Welcome to the forum.
alinm wrote:What are the important decisions that will have a significant negative impact if I get them wrong when setting my investment plan (portfolio)?
OK. Conventional wisdom would argue that three important decisions would be asset allocation [consistent with your need, ability and willingness to accept risk] , diversification (or the lack thereof.)and costs (including taxes).

Now how that works out in an individual in your situation, I don't have a clue.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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