Author Topic: Australia vs. America: Where to Invest?  (Read 4492 times)

BurquenaAbroad

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Australia vs. America: Where to Invest?
« on: September 01, 2014, 06:09:47 AM »
Hello,

I've been a lurker for a long time, absorbing as much as I can, but I'm not quite sure where to start with investing, particularly because I'm afraid my situation is a little complicated. I'm American, my fiance is Australian, we currently live and earn in Australia, but we're not sure which country will become our home base.

I would like to start stashing in something better than a savings account (the interest rates, which have been great the last two years, dropped this past month), but I don't know whether it would be better to stash Australian dollars through an Australian company, or to send money back to my American bank account and invest in the States. Fiance started an Australian account with Vanguard last year, but I want my own set up for the learning experience and because I'm younger (more years to accumulate).

So my question is: How do you pick a country in which to invest when you have two options?

I figure if I can pick either America or Australia, then I can start researching companies without being doubly overwhelmed by my options.


In case it helps:
Ages: 25 and 30
Earning: .... very little right now; we are living on savings whilst Fiance finishes the PhD and I look for a job (we planned for this).
Amount to invest today: 3,000AUD




superannuationfreak

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Re: Australia vs. America: Where to Invest?
« Reply #1 on: September 01, 2014, 07:29:43 AM »
You'll need to be a little careful as a US citizen. The US will treat most Australian etfs/funds as passive foreign investment companies, with punitive tax treatment.

Best bet is to use US-domiciled ETFs such as VTI (US total stock market) and VXUS (total international stock market, ex-us) and your fiancée can do more of the Australian investing if desired.

BurquenaAbroad

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Re: Australia vs. America: Where to Invest?
« Reply #2 on: September 02, 2014, 11:35:42 PM »
Thanks Superannuationfreak! That's exactly the kind of information to help send me in the right general direction.

Do you know if Australian Super accounts are taxed like passive foreign investment companies by the US?

superannuationfreak

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Re: Australia vs. America: Where to Invest?
« Reply #3 on: September 02, 2014, 11:56:41 PM »
I'm not a tax expert buy my understanding is usually yes.  Here's a thread discussing some options if you have a substantial balance (note that ING Direct in Australia stopped serving US persons but something similar could be done with Australian Super using iShares ETFs):
http://forums.whirlpool.net.au/archive/2237020

A simpler approach, particularly if you don't have much super, is either find a retirement savings account (there aren't many individual accounts out there these days, here's the list of providers: http://www.apra.gov.au/super/pages/list-of-institutions-offering-retirement-savings-accounts.aspx ) which should be treated by the US as a savings account, strangely enough, or just put it in a cash option in your super fund in which case it may be treated like a PFIC but the tax and risk implications are minimised (PFICs  are particularly annoying as my understanding is you can't use capital losses, so if your fund drops 10% one year and then increases 10% another tax year you'll be taxed on the unrealised increase but not have been able to claim the loss.  If it is in cash it should at least never lose money in nominal terms).

AustralianMustachio

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Re: Australia vs. America: Where to Invest?
« Reply #4 on: September 03, 2014, 12:20:24 AM »
I'm certainly no expert, but perhaps because of the high AUD, it could be a good idea for you or your fiancee to buy VTS. This is the Vanguard ETF available in Australia which indexes total US stock market. You might buy more for your buck than simply investing in USD back home, especially if the AUD falls in the future as is predicted by some.

No idea of the tax treatment of this with two separate citizenship statuses. Purely an idea that might be worth exploring

mmmkyle

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Re: Australia vs. America: Where to Invest?
« Reply #5 on: September 13, 2014, 02:44:26 AM »
@BurquenaAbroad  I am in a very similar situation as you and have been struggling with the same issue. By the way, I'm in Sydney, where are you?

I don't know where to invest my money when over here. I obviously have the super contributions from my job but have money left over. The exchange rate was decent but I don't know if you noticed it dropping by nearly 5 cents over the past couple of days!

My original plan was to hoard the cash and then bring it back over to the states when I went back (about a year) and then invest that money in the US. But the volatility and uncertainty of currency confuses the hell out of me! Idk if it's a better idea to invest AUD here and then convert somehow after or just exchange to USD when back and do it that way. The reason I am weary of the latter option is that the actual exchange rate is about .90 now (rates from XE) but my bank exchanges at a much lower rate (about .86 at NAB). How do you avoid taking a massive hit on exchange rate? I already will be taking a hit on the money because of Australia's weaker dollar but then the banks shave even more off the top- how do i avoid that!?

swestache

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Re: Australia vs. America: Where to Invest?
« Reply #6 on: September 13, 2014, 05:15:38 AM »
How do you avoid taking a massive hit on exchange rate? I already will be taking a hit on the money because of Australia's weaker dollar but then the banks shave even more off the top- how do i avoid that!?

Don't try to time the market.

Check this out, it works the other way too of course.

http://forum.mrmoneymustache.com/welcome-to-the-forum/transferring-$$$-to-australia-help!/msg383757/#msg383757

mmmkyle

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Re: Australia vs. America: Where to Invest?
« Reply #7 on: September 24, 2014, 08:18:43 AM »
I get that trying to time the market is a useless game you're bound to lose but with currency, specifically, fiscal policy has a bigger influence in my opinion. It seems that there is a concerted effort to lower the AUD value here as gov't feels it's too high and at the same time the USD will continue to improve as the Fed tapers it money printing policy. You can argue I am being too presumptuous and I probably am, but if anything it seems like the exchange rate won't get better and it's getting worse every day.

With that said, I guess my real question is still this: Do you think it is a better idea to invest AUD here and then convert somehow after or just exchange to USD when back in the US and do it there?

Also @swestache I read the thread you linked to. While it is really helpful, there was a lot of it I didn't understand- Sorry! I'm not up on all the exchange rate lingo as an American I assume we deal with currency fluctuations uhhh...differently(?) Idk. Because everything is based on USD it seems I've never had to think about these issues until now and I assume Australians probably have a better familiarity with it- I could be wrong or just presumptuous again!