JonathanGiles
29-10-2014, 07:27 AM
Hi all,
I am new to this forum so here's hoping I follow the rules! I've been reading threads in this forum like a madman, but I still have a few questions.
I was hoping people might be able to help me fill in a gap in my knowledge about share trading. I'm 29, married with a 10-month old son, have a newly free-hold house (outside of Auckland), and both my wife and I are working full time in well-paying jobs. We have very low costs of living so are able to save quite effectively.
I've been dabbling with shares recently - I set up a E*Trade account (via their Hong Kong subsidiary) and bought a few shares in companies I like (so far, I've pretty much evened out - some nice gains offset by some ugly losses!). Now that I'm free-hold on my house I've been doing a lot more research. My general conclusion is that I like the look of ETFs - I don't have time to research the market, and I'm happy to be boring when it comes to growing our money.
I appear to have (at least) two options:
1) Buy US-based ETFs via E*Trade. My research has led me to VTI, VXUS, and BND as the likely ETF's that I would invest in in this scenario.
2) Buy NZ-based ETF's via smartshares (or an alternative).
The thing that gets me is the fees and tax calculations. I'm mildly intelligent, but my eyes blur over on tax and accountancy details :-)
With option 1, it seems to me that the ETF fees are miniscule (0.05% for VTI). Of course, I'm risking with the NZD -> USD conversion (but I'm comfortable with that, given my long-term view). The kicker appears to be FIF, and even though I can see a lot of discussion (and contention) on it, to me it seems at least mostly fair (even if you disagree with a capital gains tax on a non-realised capital gain). On the other side, it is entirely unclear to me if I will be taxed in the US, and this is primarily what worries me - I don't know how to determine my likely returns as I don't understand well-enough the tax implications of US-based ETFs.
On the other hand, the NZ-based ETFs have higher fees (0.60 - 0.75% it would seem), but I can ignore the hassle of complexity of international taxation!
I don't know if someone is able to help with an example, but what would be really informative is an example of the kind of maths involved with both options in an idealised case (e.g. $100,000 invested with 10% returns - what do I end up with in both cases)? I know general advice is to not go into a certain investment based on taxes (as they are likely to change over the long term), but I feel too uninformed to even know what is the best option for today.
I'm also (perhaps entirely naively) not a fan of NZ-based markets, just because I seem to think US-based markets are bigger, more exciting, and more likely to have greater growth than NZ-based markets. Can someone please tell me this is a stupid reason to avoid NZ?
Additionally, most advice seems to be to get the US-based ETFs via the ASX, rather than buying them in the US. Why is this?
In short, I'm looking for a place to grow my money over the long term. I am open to suggestions and advice, and would love to see someone clarify the upsides / downsides of options 1 and 2.
Thanks so much!
Jonathan Giles
I am new to this forum so here's hoping I follow the rules! I've been reading threads in this forum like a madman, but I still have a few questions.
I was hoping people might be able to help me fill in a gap in my knowledge about share trading. I'm 29, married with a 10-month old son, have a newly free-hold house (outside of Auckland), and both my wife and I are working full time in well-paying jobs. We have very low costs of living so are able to save quite effectively.
I've been dabbling with shares recently - I set up a E*Trade account (via their Hong Kong subsidiary) and bought a few shares in companies I like (so far, I've pretty much evened out - some nice gains offset by some ugly losses!). Now that I'm free-hold on my house I've been doing a lot more research. My general conclusion is that I like the look of ETFs - I don't have time to research the market, and I'm happy to be boring when it comes to growing our money.
I appear to have (at least) two options:
1) Buy US-based ETFs via E*Trade. My research has led me to VTI, VXUS, and BND as the likely ETF's that I would invest in in this scenario.
2) Buy NZ-based ETF's via smartshares (or an alternative).
The thing that gets me is the fees and tax calculations. I'm mildly intelligent, but my eyes blur over on tax and accountancy details :-)
With option 1, it seems to me that the ETF fees are miniscule (0.05% for VTI). Of course, I'm risking with the NZD -> USD conversion (but I'm comfortable with that, given my long-term view). The kicker appears to be FIF, and even though I can see a lot of discussion (and contention) on it, to me it seems at least mostly fair (even if you disagree with a capital gains tax on a non-realised capital gain). On the other side, it is entirely unclear to me if I will be taxed in the US, and this is primarily what worries me - I don't know how to determine my likely returns as I don't understand well-enough the tax implications of US-based ETFs.
On the other hand, the NZ-based ETFs have higher fees (0.60 - 0.75% it would seem), but I can ignore the hassle of complexity of international taxation!
I don't know if someone is able to help with an example, but what would be really informative is an example of the kind of maths involved with both options in an idealised case (e.g. $100,000 invested with 10% returns - what do I end up with in both cases)? I know general advice is to not go into a certain investment based on taxes (as they are likely to change over the long term), but I feel too uninformed to even know what is the best option for today.
I'm also (perhaps entirely naively) not a fan of NZ-based markets, just because I seem to think US-based markets are bigger, more exciting, and more likely to have greater growth than NZ-based markets. Can someone please tell me this is a stupid reason to avoid NZ?
Additionally, most advice seems to be to get the US-based ETFs via the ASX, rather than buying them in the US. Why is this?
In short, I'm looking for a place to grow my money over the long term. I am open to suggestions and advice, and would love to see someone clarify the upsides / downsides of options 1 and 2.
Thanks so much!
Jonathan Giles