buy stocks with USD or EUR | VWRA volume | IB trust account

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cafe72
Posts: 23
Joined: Sat Oct 05, 2019 11:41 am

buy stocks with USD or EUR | VWRA volume | IB trust account

Post by cafe72 » Sat Nov 16, 2019 12:12 pm

Fellow Bogleheads,

Would really appreciate some help with the following:

1.) As a EU citizen who has a lot of dollar money, should I convert to euros before buying stock (e.g. SWDA) or just buy with dollars? For tax purposes might be easier to convert everything upfront.

2.) The daily trading volume of VWRA is quite low at around 4K compared to 200K+ in SWDA. Should this deter me at all? The spread of VWRA is still quite low though - 0.1%

3.) Can I open a trust account on IB and make each of my kids a beneficiary to protect them from inheritance/gift tax.

Many thanks and have a great weekend

glorat
Posts: 308
Joined: Thu Apr 18, 2019 2:17 am

Re: buy stocks with USD or EUR | VWRA volume | IB trust account

Post by glorat » Sun Nov 17, 2019 9:06 am

cafe72 wrote:
Sat Nov 16, 2019 12:12 pm
1.) As a EU citizen who has a lot of dollar money, should I convert to euros before buying stock (e.g. SWDA) or just buy with dollars? For tax purposes might be easier to convert everything upfront.
My general recommendation for IB account holders is to convert to USD always within IB first then buy the USD fund. FX cost is near zero on IB. Liquidity in USD etfs should be higher and thus spreads will be narrower, saving money
cafe72 wrote:
Sat Nov 16, 2019 12:12 pm
2.) The daily trading volume of VWRA is quite low at around 4K compared to 200K+ in SWDA. Should this deter me at all? The spread of VWRA is still quite low though - 0.1%
Depends on your fear. If your fear is about paying the spread, you've just quantified it to be a one off 0.1%. iShares tends to be more liquid with spreads like 0.05%. I consider this small money for a multi-year buy and hold and if you still don't like it, it's not difficult to place sensible limit orders or use the IBALGO to get prices within the spread.

If your fear is about liquidity, this is not a problem for the major ETF providers due to the "authorized market participants" making the market. My observation is that they put 10,000 shares at a time on both sides of the bid/ask spread. So unless you're trading that many shares, you'll get a sensible price near that 0.1% spread.
cafe72 wrote:
Sat Nov 16, 2019 12:12 pm
3.) Can I open a trust account on IB and make each of my kids a beneficiary to protect them from inheritance/gift tax.
Technically from an IB point of view, yes. IB has this friends & family account you can open. Legally and tax related, I have no idea the requirements/implications and nor does IB who will ask for all sorts of disclaimers before letting you open this account. I've like to know the answer to this too (I posted a thread about this a while back but noone could give me good answers)

Topic Author
cafe72
Posts: 23
Joined: Sat Oct 05, 2019 11:41 am

Re: buy stocks with USD or EUR | VWRA volume | IB trust account

Post by cafe72 » Sun Nov 17, 2019 11:30 am

My general recommendation for IB account holders is to convert to USD always within IB first then buy the USD fund. FX cost is near zero on IB. Liquidity in USD etfs should be higher and thus spreads will be narrower, saving money
I'm still confused about trading currencies. Since IWDA has EUR and USD trading currencies, can I buy a share of IWDA in USD and then sell it in EUR?
If not, isn't it easier to convert my USD to EUR now so that I don't have to convert to EUR after every-time I make a withdrawal in the future? also doesn't it offer more tax clarity to buy with EUR?

Thanks! :happy

vsquid
Posts: 7
Joined: Sat May 18, 2019 2:24 pm

Re: buy stocks with USD or EUR | VWRA volume | IB trust account

Post by vsquid » Sun Nov 17, 2019 12:18 pm

cafe72 wrote:
Sun Nov 17, 2019 11:30 am
My general recommendation for IB account holders is to convert to USD always within IB first then buy the USD fund. FX cost is near zero on IB. Liquidity in USD etfs should be higher and thus spreads will be narrower, saving money
I'm still confused about trading currencies. Since IWDA has EUR and USD trading currencies, can I buy a share of IWDA in USD and then sell it in EUR?
If not, isn't it easier to convert my USD to EUR now so that I don't have to convert to EUR after every-time I make a withdrawal in the future? also doesn't it offer more tax clarity to buy with EUR?

Thanks! :happy
This depends on which market you trade it. The fund is the same, the contents are the same. However it is listed in different currencies on different stock markets. Transferring your shares from one market to another typically has a fee associated with it. This would allow you to buy and sell in different currencies but it really doesn't make sense because of the fees and bureaucracy.

As the contents of the fund are the same in both cases, whether you buy and sell it in euros does not expose you to any further currency fluctuations. The fund just tallies it assets up in its currency of bookkeeping and this net asset value then gets translated to euros and dollars respectively.

Topic Author
cafe72
Posts: 23
Joined: Sat Oct 05, 2019 11:41 am

Re: buy stocks with USD or EUR | VWRA volume | IB trust account

Post by cafe72 » Sun Nov 17, 2019 2:21 pm

As the contents of the fund are the same in both cases, whether you buy and sell it in euros does not expose you to any further currency fluctuations. The fund just tallies it assets up in its currency of bookkeeping and this net asset value then gets translated to euros and dollars respectively.
Right, so there is no difference in currency risk whether you invest in EUR or USD.

So if I convert to EUR now or later doesn't matter but wouldn't it save me a lot of time to convert everything now instead of converting each time I make a withdrawal?

Are there any drawbacks of converting large amounts of USD (5M+) into EUR now? I will do this through IB's forex trading.

Thanks!

c0nst
Posts: 6
Joined: Mon Aug 05, 2019 8:25 am

Re: buy stocks with USD or EUR | VWRA volume | IB trust account

Post by c0nst » Sun Nov 17, 2019 4:28 pm

3. I had somewhat similar question regarding joint accounts. The simple answer - you are still limited by 60K USD in US assets. Ireland-Domiciled ETFs and ADRs are safe.

c0nst: Interactive Brokers have Joint accounts with three different types. The type I'm interested in is "Tenancy by the Entirety - A form of ownership where the owners are married and each spouse has an equal and undivided interest in the property (e.g., each spouse mutually owns the property). If one spouse was to die, the full title of the property passes to the surviving spouse." Is this type of account eligible for estate tax or not in case I die (assuming I continue to invest in US stocks and my investments exceed 60K USD)?

TedSwippet: You cannot simply use a joint account to easily bypass the US's horrible estate tax rules. If you funded this joint account (or just by default), the US would consider all the US situs parts of the entire joint account as liable for US estate tax on your death:

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