Author Topic: Best online broker for a passive investor from OUTSIDE US?  (Read 9780 times)

ffc2

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Best online broker for a passive investor from OUTSIDE US?
« on: July 24, 2015, 11:30:20 AM »
Hello,

I want to buy and passively hold US index funds (such as VTI) for an extended period of time (say, a decade). For that I am trying to find a broker which does not charge inactivity fees or holding fees, and knows how to withhold the dividend tax correctly.

The cheapest local bank here in Lithuania charges a 0.16% yearly holding fee, but withholds 30% of the dividend (instead of 15% as it should) claiming technical reasons. Also, it refuses to provide the relevant IRS forms which gives me an incentive to look for a cheaper solution.

TD Ameritrade would be an excellent choice, but they do not accept new customers from my country. Places like Interactive Brokers accept European investors, but charge a monthly "inactivity fee" of tens of dollars, so they are not a good choice at all.

Please, recommend me a better broker :)

I have already asked for help on reddit, but so far have gotten none, so thought that maybe this community knows more about that kind of stuff.

Thank you very much in advance!

velocistar237

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #1 on: July 24, 2015, 01:13:52 PM »
How does this one look?

https://www.optionsxpress.com/new_account.asp

I searched for "non-us investor" and dug around.

forummm

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #2 on: July 24, 2015, 01:48:20 PM »
Interactive Brokers waives the inactivity fee (at least in the US) if you have $100k invested.

ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #3 on: July 24, 2015, 03:50:14 PM »
How does this one look?

https://www.optionsxpress.com/new_account.asp

I searched for "non-us investor" and dug around.

Thanks, much appreciated! I am pleasantly surprised, as optionsxpress is owned by Charles Schwab, but it allows me to register (at least the first step) as opposed to Charles Schwab. I will see how it goes and report back :)

ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #4 on: July 24, 2015, 03:51:01 PM »
Interactive Brokers waives the inactivity fee (at least in the US) if you have $100k invested.

Unfortunately, I am more in the ballpark of 10k, so an order of magnitude too little money. Thanks anyway!

screwit

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #5 on: July 24, 2015, 03:54:06 PM »
I'm in Germany and use ebase, which is a German bank but perhaps it works across the EU?

daverobev

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #6 on: July 25, 2015, 11:51:51 AM »
Does Lithuania have a DTA with the US? If NOT, then 30% is the correct amount. If yes, then tell your broker to get with the program... I'm gobsmacked a company that lets you TRADE VTI wouldn't deal with a W-8BEN.

DTA = double taxation agreement.

You might try large international banks - HSBC comes to mind, Deutsche Bank, etc. I'm sure you've tried "Lithuania Discount Brokerage" in duckduckgo or any other search engine??

patrickza

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #7 on: July 27, 2015, 07:56:37 AM »
I'm in the process of opening an account with https://www.keytradebank.lu/

With them you can invest in most major markets. No account or custodian fees, and reasonable transaction fees.

forummm

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #8 on: July 27, 2015, 09:43:05 AM »
If you can find a broker, Vanguard has low-cost ETFs denominated in currencies besides the USD:

https://www.vanguard.co.uk/documents/adv/literature/generic-product-list-adv.pdf

Cathy

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #9 on: July 27, 2015, 10:08:43 AM »
...withholds 30% of the dividend (instead of 15% as it should)...

If you overpay US tax as a nonresident alien (or as a US citizen or resident), the overpaid tax doesn't just disappear. You can request a refund by filing a tax return with the IRS. However, if the broker didn't issue you any US tax documentation of the tax paid through withholding, it might be a bit obnoxious to obtain a refund.

For my 2014 US tax return, a small portion (less than $100) of the US tax I had paid through withholding was through a certain Canadian broker that did not issue me any US tax documentation. Since the amount paid through withholding was small, I simply attached a statement to my paper tax return asserting that I had paid the amount through withholding but that the payor had declined to issue me any documentation of same, and that I did not want to pay the amount again despite the lack of documentation that it had been paid. The IRS paid the refund without holding up my return, but obviously that doesn't mean they accept my statement. They could always write to me later, but given the small amount, it might well be below the thresholds they use to decide whether it's worth bothering.

brainfart

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #10 on: July 27, 2015, 12:27:33 PM »
If you can find a broker, Vanguard has low-cost ETFs denominated in currencies besides the USD:

https://www.vanguard.co.uk/documents/adv/literature/generic-product-list-adv.pdf

Can't speak for the thread starter, but as a fellow European I have to repeat that while this advice might be good intentioned Vanguard isn't any better for us, and in many regards actually worse than the usual and common ETFs available here.

forummm

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #11 on: July 29, 2015, 06:30:02 AM »
If you can find a broker, Vanguard has low-cost ETFs denominated in currencies besides the USD:

https://www.vanguard.co.uk/documents/adv/literature/generic-product-list-adv.pdf

Can't speak for the thread starter, but as a fellow European I have to repeat that while this advice might be good intentioned Vanguard isn't any better for us, and in many regards actually worse than the usual and common ETFs available here.

Can you elaborate as to why that is? We get these kinds of questions a lot and it would be good to have more information for us US-based investors to point European folks to. What are the alternatives you recommend? Why are they better?

orestis

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #12 on: July 29, 2015, 07:54:21 AM »
May I also ask how did you arrive to the "tens of dollars" pricing for IB? I see that if you don't make $20 worth of commissions/month, they would charge $20 dollars, waived for the first 3 calendar months.


ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #14 on: August 10, 2015, 11:40:37 PM »
I would first like to thank everyone for their replies. What a great community!

I have opened my account with optionsXpress and will fund my account today. The opening process was quite smooth (even though it dragged out as I was quite busy lately). The support staff has been very helpful in clarifying various things. I do not have anything bad to say about optionsXpress so far.

For my 2014 US tax return, a small portion (less than $100) of the US tax I had paid through withholding was through a certain Canadian broker that did not issue me any US tax documentation. Since the amount paid through withholding was small, I simply attached a statement to my paper tax return asserting that I had paid the amount through withholding but that the payor had declined to issue me any documentation of same, and that I did not want to pay the amount again despite the lack of documentation that it had been paid. The IRS paid the refund without holding up my return, but obviously that doesn't mean they accept my statement. They could always write to me later, but given the small amount, it might well be below the thresholds they use to decide whether it's worth bothering.

Good to know, I had not heard anything similar before. Other local investors from Lithuania told me that the IRS does not bother to return taxes without proper forms from the broker.

I'm in Germany and use ebase, which is a German bank but perhaps it works across the EU?

Unfortunately, their site seems to be in German only (as far as I could find), which probably means that communicating in English might be problematic.

Does Lithuania have a DTA with the US? If NOT, then 30% is the correct amount. If yes, then tell your broker to get with the program... I'm gobsmacked a company that lets you TRADE VTI wouldn't deal with a W-8BEN.

DTA = double taxation agreement.

You might try large international banks - HSBC comes to mind, Deutsche Bank, etc. I'm sure you've tried "Lithuania Discount Brokerage" in duckduckgo or any other search engine??

Lithuania does have a DTA with the US. HSBC and Deutsche Bank unfortunately do not operate in Lithuania. Our bank market is dominated by the Scandinavian banks (SEB, Swedbank). The only meaningful result that a search for "Lithuania Discount Brokerage" is your post, sir :)

I'm in the process of opening an account with https://www.keytradebank.lu/

With them you can invest in most major markets. No account or custodian fees, and reasonable transaction fees.

I would say their fees are rather large (29.95$ per NYSE trade). Moreover, they always withhold 30% (so no W-8BEN again), even though it is possible to ask for tax-return papers at the end of the year.

May I also ask how did you arrive to the "tens of dollars" pricing for IB? I see that if you don't make $20 worth of commissions/month, they would charge $20 dollars, waived for the first 3 calendar months.

$20 is literally "tens of dollars"! I am a passive (buy and hold) investor, and thus I do not plan to make $20 worth of commissions per month.

Can't speak for the thread starter, but as a fellow European I have to repeat that while this advice might be good intentioned Vanguard isn't any better for us, and in many regards actually worse than the usual and common ETFs available here.

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Can you elaborate as to why that is?

http://forum.mrmoneymustache.com/investor-alley/investment-options-for-european-residents/msg747074/#msg747074

It is a different topic but I will nevertheless post my opinion on it here. I am still not convinced that something better than the dollar-denominated Vanguard Total Stock Market ETF (VTI) exists. The ETFs discussed in the link above (say, LU0392494562) in my opinion are inferior, as they tax the dividends more, even though the dividends are reinvested. The prospect of the LU0392494562 fund reads
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The net dividends reinvested in the index correspond to the respective gross dividends less a notional withholding tax. At present the rate used for this is the maximum withholding tax rate levied on foreign domiciled institutional investors who do not benefit from a double taxation convention.
In my case this would mean 30% dividend taxation, instead of 20%. Of course, one has to optimize the transaction costs in order to exploit this taxation difference, which is requires extra effort.

velocistar237

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #15 on: August 11, 2015, 05:31:37 AM »
Thanks for the update. We've had several people ask this question, and guess what, you're now the expert. Please let us know how the next few steps go.

brainfart

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #16 on: August 11, 2015, 11:48:40 AM »
Well, if you don't mind the dividend taxation nightmare, huge bid/ask spreads when trading relatively rare ETFs like Vanguard in Europe, currency exchange issues, potentially having to deal with the US IRS to get some of your taxes back, idiocies like stamp taxes (when trading in places like London) and all the other inconveniences not yet mentioned then go ahead, buy Vanguard.

I don't know what the situation is like in your country, but be prepared for another potential surprise when you finally decide to sell your dividend-paying ETF. You will most likely have to pay taxes on your capital gains (depending on your location, that's expected), but even funds like those from Vanguard sometimes have accumulated dividend-like gains. This sounds totally idiotic, but I just checked my government's web site, it is true. So your government most likely subtracts what it thinks its theirs in taxes and then YOU, the investor (or your heirs), have to prove to your tax man that you already paid on all these accumulated dividend-like gains for the last 25-50 years to get that money back. I hope your paperwork is in order, complete and spotless if your tax agency decides to disagree with your claim. Otherwise you pay twice.
Institutional investors don't care, they have accountants and tax experts at their disposal, they deal with bigger headache-inducing problems all the time. But the average private investor? Good luck.

That's why investors in my country call some ETFs "tax-simple", while others are rated as being "tax-ugly". Vanguard's ETFs definitely belongs in the latter category, the mentioned LUxxxx ETF is in the former category. LUxxxx was just an example anyway which I mentioned in that other thread. If all that is totally different and no issue in your country, cool. I hope it stays like that, but I wouldn't bet on it.

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The ETFs discussed in the link above (say, LU0392494562) in my opinion are inferior, as they tax the dividends more, even though the dividends are reinvested. The prospect of the LU0392494562 fund reads

   
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The net dividends reinvested in the index correspond to the respective gross dividends less a notional withholding tax. At present the rate used for this is the maximum withholding tax rate levied on foreign domiciled institutional investors who do not benefit from a double taxation convention.

The reason for this is the index this ETF tracks, which happens to be the MSCI Total Return Net World
Index (TRN). That's how the index is calculated, as if the dividends were taxed at a certain rate and then immediately reinvested. Of course there aren't any dividends being reinvested and taxes paid, because there are no taxes on derivative trades. You might be able to find another ETF which tracks another MSCI World index that doesn't pretend to pay taxes, dunno if those exist... probably, somewhere.
I recently saw a post on another forum where someone calculated the difference between those "swappers and dividenders" using real world examples and the synthetic ETF came out ahead. If you have to wait for the money to reinvest and pay trading costs etc. you lose.

If you happen to find a European broker which 1. lets you trade at Wall Street for a few bucks and is 2. kind enough to provide you with all the necessary paperwork so you will get your taxes back in a timely manner (3. for free or a low fee) and 4. happily accepts foreigners then I'm all ears, hope you will let us know about them.

If you are happy to pay taxes on your dividends every single year then there are replicating European ETFs which you can trade literally everywhere, without huge bid/ask spreads, without currency issues, without potential taxation surprises etc.

jaizan

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #17 on: August 11, 2015, 12:38:18 PM »
As I see it,
1 ETFs are not guaranteed to track their index
2 Many of them are synthetic, with swaps and whatever to track the index.
3 The bank or institution offering the ETF is free to make those swaps internally.

I have never liked the combination of 1 and 3.  ie The bank has no contractual obligation to track the index AND at the same time can do internal swaps. 
All this could go very well in good times, but when there is a sudden unexpected movement in the market, whose interests will they put first ?   I expect, as usual it will be their own.
I don't like the potential conflict of interest.

ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #18 on: August 14, 2015, 08:47:25 AM »
First, an update: I have succeeded in transferring some funds to optionsXpress, and also executing a trade. I am slightly disappointed that transferring USD was so expensive - my bank charged 13, and their bank charged $35 (SHA wire). The single trade that I executed costed $15 as expected. I will now wait and see how my dividends are taxed, which should happen on ~1 October.

Well, if you don't mind the dividend taxation nightmare, huge bid/ask spreads when trading relatively rare ETFs like Vanguard in Europe, currency exchange issues, potentially having to deal with the US IRS to get some of your taxes back, idiocies like stamp taxes (when trading in places like London) and all the other inconveniences not yet mentioned then go ahead, buy Vanguard.
I must have not made myself clear - I am buying the Vanguard Total Stock Market ETF on NYSE (VTI, https://finance.yahoo.com/q?s=VTI). I don't mind the currency exchange risk, as most of the companies that I am interested in are global, and it is therefore not so important that their stocks are denominated in USD.

I don't know what the situation is like in your country, but be prepared for another potential surprise when you finally decide to sell your dividend-paying ETF. You will most likely have to pay taxes on your capital gains (depending on your location, that's expected), but even funds like those from Vanguard sometimes have accumulated dividend-like gains. This sounds totally idiotic, but I just checked my government's web site, it is true. So your government most likely subtracts what it thinks its theirs in taxes and then YOU, the investor (or your heirs), have to prove to your tax man that you already paid on all these accumulated dividend-like gains for the last 25-50 years to get that money back. I hope your paperwork is in order, complete and spotless if your tax agency decides to disagree with your claim. Otherwise you pay twice.
Institutional investors don't care, they have accountants and tax experts at their disposal, they deal with bigger headache-inducing problems all the time. But the average private investor? Good luck.

I am genuinely surprised. I will pay 15% to the IRS and another 5% to the tax authorities of my country off the dividends. When selling the units of the fund, I will have to pay an income tax of (selling price - buying price)*0.15 . Since VTI does not reinvest dividends, why  would there be a problem? brainfart, which country are you talking about?

The reason for this is the index this ETF tracks, which happens to be the MSCI Total Return Net World
Index (TRN). That's how the index is calculated, as if the dividends were taxed at a certain rate and then immediately reinvested. Of course there aren't any dividends being reinvested and taxes paid, because there are no taxes on derivative trades. You might be able to find another ETF which tracks another MSCI World index that doesn't pretend to pay taxes, dunno if those exist... probably, somewhere.
Indeed, net is the key word here. As you have explained, as an owner of a LU0392494562 unit one does effectively pay a 30% tax off dividends. I would be very much interested in finding that a fund that tracks  the MSCI World with gross dividends reinvested.

I recently saw a post on another forum where someone calculated the difference between those "swappers and dividenders" using real world examples and the synthetic ETF came out ahead. If you have to wait for the money to reinvest and pay trading costs etc. you lose.
Sounds good and makes sense, as trading fees are typically very high.

If you happen to find a European broker which 1. lets you trade at Wall Street for a few bucks and is 2. kind enough to provide you with all the necessary paperwork so you will get your taxes back in a timely manner (3. for free or a low fee) and 4. happily accepts foreigners then I'm all ears, hope you will let us know about them.
Same here :)

As I see it,
1 ETFs are not guaranteed to track their index
2 Many of them are synthetic, with swaps and whatever to track the index.
3 The bank or institution offering the ETF is free to make those swaps internally.

I have never liked the combination of 1 and 3.  ie The bank has no contractual obligation to track the index AND at the same time can do internal swaps. 
All this could go very well in good times, but when there is a sudden unexpected movement in the market, whose interests will they put first ?   I expect, as usual it will be their own.
I don't like the potential conflict of interest.
As far as I can tell, VTI only has your issue #1, namely, it does not perfectly track the index.

acorn

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #19 on: August 14, 2015, 03:54:40 PM »
I must have missed this thread when it popped up. I'm also a non-US investor, but I've been working in the US for the past 5 years (and paying US taxes). However, I'm leaving next year and going back home for work.

After trying out a couple of brokerages (some truly terrible, some not so terrible), I settled on Interactive Brokers. By the time I figured out what was the best long-term brokerage for me, I was close enough to $100k that a couple months of $10 fee didn't bother me. Doing my own math, the price difference between staying at my old brokerage with their fees, and transferring immediately to IB for $10 for a few months was negligible. So I just bit the bullet and transferred it all to IB.

I like IB because their forex rates has one of the lowest pips I've seen, which helps because I'm funding with both USD and my home currency. Their transaction fees are low, it depends on the size of your order, but it's usually $2-$5 for mine. I buy ETFs monthly where the fees end up being $5, so back when my portfolio was less than $100k, I was paying an additional $5 to keep that account open, which was fine for me. IB doesn't charge any fees for deposits from bank accounts through ACH or wire transfer, and they give you one free withdrawal each month. My bank doesn't charge for transfers through ACH or deposits to IB, so I have to pay zero fees to get my money from banks into IB. Also, IB doesn't have "custodian charges", "dividend processing charges", and other ridiculous fees I've had to put up with.

But I digress, since you've mentioned you're in the 10k range, IB's probably not the best option for you right now.

For the actual funds, I started a few years back with VTI and VXUS, because those were the ones recommended. But I have since switched to VWRD and IWDA.

Keep in mind that the following reasons are specific to my situation, and might not be relevant to you, but hopefully something helps. My funds are all in USD because I plan to do a lot of traveling after FIRE, and there's also a chance that I might want to come back to the US in the future. In any case, I'm sure there are Euro-denominated versions of these funds.

Reasons:
1. Capital gains taxes
My home country has no capital gains tax, so dividends and gains from sale of stocks are not taxed at all. So my primary aim would then be to maximize external taxes (e.g. withheld taxes).

2. Withheld dividend taxes
VTI and VXUS are US-domiciled, and there's a 30% dividend tax directly withheld by the US for sg investors. VWRD and IWDA are Irish-domiciled and there's an internal 15% dividend tax withheld at the fund level by the US to the fund domiciled in Ireland, but there's no tax withholding by Ireland for sg investors.

Effectively, for a sg investor, the 15% withheld dividend tax from VWRD/IWDA results in a higher return than if 30% was withheld with VTI/VXUS. Even though VWRD has a slightly higher ER 0.25% than VTI (0.05%) and VXUS (0.14%), the dividend yield of the VWRD was ~2.3% (ish) in 2014, of which 15% would be 0.345%, which more than makes up for the slightly higher ER.

3. IWDA and VWRD
Practically my entire portfolio is in Vanguard's VWRD, but I started putting new money into BlackRock's IWDA this year when I found that they halved their ER to 0.20%. IWDA is an accumulating fund with all dividends automatically reinvested, which will give the best returns in the long run. Only downside is that IWDA tracks the MSCI world index (which doesn't include emerging markets), but VWRD tracks the FTSE all-world index which does include emerging markets. I don't think it's going to matter in the long run whether I have my holdings in VWRD or IWDA, but I can't decide for now, so I alternate between the two when I put in new money (I should really just decide).

4. Estate taxes
For the US, even for non-resident non-US citizens, you must pay estate taxes if your US-situated holdings (including stocks/ETFs) exceed $60,000. So this was a major turn-off for me. For Irish-domiciled ETFs (Vanguard or Blackrock), there is no inheritance tax if neither of you are Irish or or Irish residents. This is according to an exemption in the Irish tax law specific for ETFs. It's better explained without the legalese in Vanguard's prospectus in page 74 under "Gift and Inheritance Tax". There's still an Irish inheritance tax on stocks though. But not ETFs.

Side note: I saw those comments about index funds with synthetic replication, I'd avoid those like the plague, there's a lot of shenanigans going on under the hood. Stick to funds with physical replication (full or optimized). And I'm perfectly happy with funds with optimized physical replication. Optimization usually helps to reduce fund expenses, and for your example of VTI, I really doubt that VTI having only 3796 stocks instead of 3805 stocks (according to the Dec 2014 annual report) is going to make a huge difference.
« Last Edit: August 29, 2015, 11:16:39 AM by acorn »

ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #20 on: August 15, 2015, 02:07:46 AM »
Thanks for sharing your experience, acorn!

Practically my entire portfolio is in Vanguard's VWRD, but I started putting new money into BlackRock's IWDA this year when I found that they halved their ER to 0.20%. IWDA is an accumulating fund with all dividends automatically reinvested, which will give the best returns in the long run.

Do you know how the dividends are taxed before being reinvested (talking about BlackRock's IWDA here)? I am sure it is discussed somewhere in the prospectus (there even is a "Taxation" section), but penetrating the legalese is extremely time consuming.

acorn

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #21 on: August 15, 2015, 02:36:00 AM »
Practically my entire portfolio is in Vanguard's VWRD, but I started putting new money into BlackRock's IWDA this year when I found that they halved their ER to 0.20%. IWDA is an accumulating fund with all dividends automatically reinvested, which will give the best returns in the long run.

Do you know how the dividends are taxed before being reinvested (talking about BlackRock's IWDA here)? I am sure it is discussed somewhere in the prospectus (there even is a "Taxation" section), but penetrating the legalese is extremely time consuming.

IWDA is taxed 15% internally at the fund level (US-Irish tax rate), similar to VWRD - it's just more efficient with DRIP.

raynor

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #22 on: August 15, 2015, 08:53:17 AM »
I have numerous friends outside the US that utilize Sharebuilder; no inactivity fees.

In many countries outside the US, national pensions are the primary retirement vehicle so individual investing is not as prevalent as the US. Unfortunately that mean not many options for brokers.

brainfart

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #23 on: August 15, 2015, 12:13:21 PM »
Quote
I must have not made myself clear - I am buying the Vanguard Total Stock Market ETF on NYSE (VTI, https://finance.yahoo.com/q?s=VTI). I don't mind the currency exchange risk, as most of the companies that I am interested in are global, and it is therefore not so important that their stocks are denominated in USD.

I don't mind it either. That's not what I meant.

Quote
I am slightly disappointed that transferring USD was so expensive - my bank charged 13, and their bank charged $35 (SHA wire). The single trade that I executed costed $15 as expected.

This ^^^^^ is the currency issue I referred to, and what I consider unnecessary fees. Over 50 bucks per transaction! Ouch.

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Since VTI does not reinvest dividends, why  would there be a problem? brainfart, which country are you talking about?

I was talking about the Vanguard ETFs available in Europe. Which claim they don't reinvest dividends, but several of them also have hidden "dividend-like" internal payments, which are tax-relevant.
If you buy VTI in the US this might not apply to you.

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For the US, even for non-resident non-US citizens, you must pay estate taxes if your US-situated holdings (including stocks/ETFs) exceed $60,000. So this was a major turn-off for me.

Heard that before but totally forgot about it.
Another reason why I avoid foreign investment accounts.

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For Irish-domiciled ETFs (Vanguard or Blackrock), there is no inheritance tax if neither of you are Irish or or Irish residents.

When I hold my investments in my home country then foreign estate/inheritance laws are irrelevant.
A French citizen residing in France inheriting a German Audi and an American Tesla (or their equivalents in stocks) located in France doesn't have to pay inheritance taxes to the American or German government. Neither does a South African, Chinese or Australian heir.

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There's still an Irish inheritance tax on stocks though.

But only for Irish citizens, residents or stocks held in Irish accounts.

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I saw those comments about index funds with synthetic replication, I'd avoid those like the plague, there's a lot of shenanigans going on under the hood. Stick to funds with physical replication (full or optimized).

True, but the same is true for many physically replicating funds (lending etc.). Synthetic funds have advantages, too, I wouldn't totally rule them out.

settlement

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #24 on: August 16, 2015, 12:12:40 AM »
As an Irish citizen, resident in Australia, this means I'll have to pay extra tax on shares with Blackrock?

ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #25 on: August 16, 2015, 12:38:34 AM »
IWDA is taxed 15% internally at the fund level (US-Irish tax rate), similar to VWRD - it's just more efficient with DRIP.

Great! I will definitively consider IWDA now after contacting my tax administrator for advise regarding reinvested dividends.

I have numerous friends outside the US that utilize Sharebuilder; no inactivity fees.

In many countries outside the US, national pensions are the primary retirement vehicle so individual investing is not as prevalent as the US. Unfortunately that mean not many options for brokers.

Do you mean https://www.capitaloneinvesting.com/? Their default registration form does not allow non-resident aliens.


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I am slightly disappointed that transferring USD was so expensive - my bank charged 13, and their bank charged $35 (SHA wire). The single trade that I executed costed $15 as expected.

This ^^^^^ is the currency issue I referred to, and what I consider unnecessary fees. Over 50 bucks per transaction! Ouch.

As a one-off fee, this is quite acceptable. I have wired around $10k, which means that this is a 0.5% fee. My local bank charges 0.16% per year for just keeping the shares. This means that in slightly more than 3 years I am better off transferring the money to optionsXpress.


ffc2

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Re: Best online broker for a passive investor from OUTSIDE US?
« Reply #26 on: October 25, 2015, 01:52:11 PM »
Just checking in to say that everything is going alright.

Initially there was some confusion and optionsXpress withheld 30% of the dividends due to my recent relocation (changing countries inside EU), but after a single email and one week of wait, they have (retroactively!) lowered the withholding ratio to 15%. I am quite satisfied.