Sell SPY to buy VOO

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Topic Author
nbwealth
Posts: 5
Joined: Fri Feb 14, 2020 9:57 am

Sell SPY to buy VOO

Post by nbwealth » Fri Feb 14, 2020 10:17 am

Good day everyone,

I bought SPY on december 2018 and as today is about 24% unrealized gains. I would like to know your opinions about selling SPY to buy VOO just for the net expense ratio SPY is 0.09% and VOO is 0.03%. For the taxing purposes I'm a not US citizen investor and living outside US.

Thanks in advance.

assyadh
Posts: 153
Joined: Tue Sep 18, 2018 12:44 pm

Re: Sell SPY to buy VOO

Post by assyadh » Fri Feb 14, 2020 3:21 pm

Just take into considerations potential tax bill and brokerage cost. And compute that against the gain in expense ratio.

TedSwippet
Posts: 2738
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Sell SPY to buy VOO

Post by TedSwippet » Fri Feb 14, 2020 3:27 pm

Welcome.
nbwealth wrote:
Fri Feb 14, 2020 10:17 am
I bought SPY on december 2018 and as today is about 24% unrealized gains. I would like to know your opinions about selling SPY to buy VOO just for the net expense ratio SPY is 0.09% and VOO is 0.03%. For the taxing purposes I'm a not US citizen investor and living outside US.
Also, review your tax situation in relation to US dividend tax and US estate tax, to see if you would be better off holding an S&P 500 index ETF that is non-US domiciled, for example VUSD. More in the wiki:

Outline of Non-US domiciles - Bogleheads
Nonresident alien's ETF domicile decision table - Bogleheads

123
Posts: 5671
Joined: Fri Oct 12, 2012 3:55 pm

Re: Sell SPY to buy VOO

Post by 123 » Fri Feb 14, 2020 3:28 pm

Depends on the tax situation in the country you're involved with. Some countries don't have any capital gains taxes. If you country doesn't have capital gains taxes you only have to be concerned with brokerage fees.

As TedSwippet indicates tax situations can be complex. What seems like a good idea, holding US domiciled securities, can be an extraordinary bad idea for some investors who are not US citizens and US residents. Some of those problems don't arise until it is too late to correct them.
Last edited by 123 on Fri Feb 14, 2020 3:30 pm, edited 1 time in total.
The closest helping hand is at the end of your own arm.

UpperNwGuy
Posts: 3324
Joined: Sun Oct 08, 2017 7:16 pm

Re: Sell SPY to buy VOO

Post by UpperNwGuy » Fri Feb 14, 2020 3:29 pm

I would just keep the SPY. Over-optimizing can get to be an obsession.

mhalley
Posts: 8070
Joined: Tue Nov 20, 2007 6:02 am

Re: Sell SPY to buy VOO

Post by mhalley » Fri Feb 14, 2020 4:05 pm

Spy has very similar returns. Not worth it if you have to pay taxes. I would keep it and invest new money in the voo.

Topic Author
nbwealth
Posts: 5
Joined: Fri Feb 14, 2020 9:57 am

Re: Sell SPY to buy VOO

Post by nbwealth » Sat Feb 15, 2020 9:19 am

thanks all for your replies, in fact I get a big 30% tax on dividends (even if I reinvenste them) so for that I try to avoid income securities but after reading your comments I think I will keep SPY since it does not worth the swap.

stan1
Posts: 8182
Joined: Mon Oct 08, 2007 4:35 pm

Re: Sell SPY to buy VOO

Post by stan1 » Sat Feb 15, 2020 9:24 am

Turn off dividend reinvestment. Use the dividends to buy what you would prefer such as VOO or a total market ETF instead (such as VTI, VTOT, or SCHB). Put any new investments into what you want to hold.

If the market ever drops below December 2018 (and it may very well do so) you can tax loss harvest all of it.

TedSwippet
Posts: 2738
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Sell SPY to buy VOO

Post by TedSwippet » Sat Feb 15, 2020 9:54 am

nbwealth wrote:
Sat Feb 15, 2020 9:19 am
thanks all for your replies, in fact I get a big 30% tax on dividends (even if I reinvenste them) so for that I try to avoid income securities but after reading your comments I think I will keep SPY since it does not worth the swap.
What is your home country? If you are paying 30% in US tax on dividends, it sounds like you live somewhere without a US tax treaty, in which case you can reduce that to an effective 15% by holding VUSD instead. VUSD's TER is 0.07%, so not quite as low as VOO, but you reduce your US tax drag from 30% of about 2% to 15% of the same amount. This is equivalent to cutting your cost of investing by around 0.3%, and so is a much larger saving than moving from SPY to VOO.

And as an added bonus, using VUSD completely eliminates any threat you may currently have from US estate tax, a loss of between 26%-40% of your SPY or VOO balance above $60,000.

Again, see the wiki for more. Is there any reason why you stick to US domiciled ETFs rather than using ones that are very likely more tax efficient for you?

Topic Author
nbwealth
Posts: 5
Joined: Fri Feb 14, 2020 9:57 am

Re: Sell SPY to buy VOO

Post by nbwealth » Sat Feb 15, 2020 10:20 am

hello TedSwippet , I like your idea. I'm from Honduras, did search for VUSD on my broker ameritrade and no results found. I guess they do not offer that ETF.

TedSwippet
Posts: 2738
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Sell SPY to buy VOO

Post by TedSwippet » Sat Feb 15, 2020 11:59 am

nbwealth wrote:
Sat Feb 15, 2020 10:20 am
hello TedSwippet , I like your idea. I'm from Honduras, did search for VUSD on my broker ameritrade and no results found. I guess they do not offer that ETF.
Honduras has no US tax treaties, so unless your local (Honduran) tax rate exceeds 30% and Honduras allows you a full credit for all US tax paid on dividends from SPY or VOO, you will benefit from moving to VUSD or any other non-US domiciled S&P 500 index ETF. Also, no US estate tax issues with non-US domiciled ETFs.

You will however need a broker that offers access to non-US exchanges, for example the London Stock Exchange, or Euronext. Or perhaps Mexico, where you can find VUSD under the ticker VUSDN.MX. If Ameritrade only offer US exchanges you will not find VUSD there, because it does not trade in the US.

Maybe look at Interactive Brokers as an alternative broker. It is a nuisance having to move broker, but saving 0.3% of your assets every year in unnecessary US tax and at the same time completely sidestepping any threat of confiscatory US estate taxes could make it worthwhile.

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