On the face of it, the benefits are many for a buy and hold investorgougou wrote: ↑Sun Nov 08, 2020 8:24 pm Because you live in Hong Kong so there's no capital gains tax. So there's a better choice than Irish ETFs available through IB. IB offers S&P 500 E-mini futures contracts which are better than Irish-domiciled ETFs in terms of tax treatment. The futures contract is simply a total return swap on the S&P 500 index and there's no tax withholding and no management fees on futures contract. There's also no risk of an estate tax on a futures contract.
The only drawback is that you have to roll over the contract periodically which has a small transaction cost (less than 0.01% typically), but IB can do that automatically for you. Rolling over the contract also realizes all the capital gains, but since HK has no capital gains tax this won't matter to you.
- No 15-30% dividend withholding tax for non-US persons
- Tracks the benchmark index very well (better than ETFs?)
- High liquidity (low bid/ask spreads)
- Future roll can apparently be automated by the right broker (IB)
- Takes careful maths to buy the right amount of futures to not accidentally get leveraged. And probably need to put your cash margin in treasuries to balance out the futures funding costs.
- There are rollover costs (although cheaper than ETFs), and risks of market mismatch during rollover (how bad can this be?)
- Only available on major indices like the S&P... I don't know if there is one for VT/VTI
- If the broker goes bust, are you stuck with your broker holding your cash? (As opposed to your custodian safely holding your ETFs and shares)
- Could get complicated if you are resident in a country that taxes capital gains
Have I got my list about right?
Any other considerations?
Thanks to all the input below, an outline on how to execute this strategy is on a wiki page at https://www.bogleheads.org/wiki/User:Gl ... ndex_funds awaiting further feedback