Author Topic: Need help on complicated investment situation / Substitute indexes for VT  (Read 3217 times)

LSK

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Throughout the last year or two I have been trying to get my head around how best to follow the simple investment strategy laid out by MMM and JCollinsNJ, but living in Denmark makes the matter really complicated, and I need help figuring out what to do.

To make a really long story super short, it seems that it might be better for me as a Dane to invest in A rather than B:

Option A:
A Danish fund following the MSCI Global Minimum Volatility index at 0.6% fee, but no fees for buying, only on selling.

Option B:
Buying ETFs of Vanguards (US) VTI/VT fund at 0,06% fee, but with higher taxes on gains, fees on buying and selling

So before diving deeper into the whole fee and tax debacle of investing in Denmark, I would like to ask whether or not you think that a fund following the MSCI Global Minimum Volatility index can be a good substitute for Vanguards VT?


If I have understood everything correctly, then the taxation issue is a bit complicated, but basically my holdings in a non-Danish fund will be taxed every year, even if I do not sell anything. So in years with growth I am taxed on a growth, that I may never see, as they may have fallen again when I sell the shares.
If I buy into a Danish fund I will only be taxed when I sell. That ensures that I will not be taxed on gains that are never realised.

I also get a tax-deduction on losses, but this is a smaller tax-deduction than the tax that incures when I have gains, plus the deduction can only be used on other stocks/shares gains. So if I have 100% in an Index stock fund that goes down, I have nothing gaining value that I can use the tax-deduction on.

On top of this tax issue there is of course also the issue of currency conversion when I use my Danish kroner to buy Vanguard shares in US dollars.

To make things a little more complicated, I use a Scandinavian broker that allows me to buy into the above-mentioned Danish index fund with no fees omce a month. They take 0,10% fees (min. of about $15) on buying Vanguard shares for instance.

All in all, it's a pretty complicated picture, and I cannot figure out what is the best course of action, so I turn to the collective expertise of the MMM-forums for help. What would you advise me to do?

I should mention that so far I have invested in the Danish fund exclusively, but I am more than willing to change tactics.

Many thanks in advance!

matchewed

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There are two differences I see between what VT is based on and what MSCI Global Min. Volatility is based on.

VT will include emerging markets and MSCI Global Min. Volatility has some hand wavy language about putting the companies listed in MSCI Global through an optimizer. This optimizer is meant to reduce the volatility. So ideally the MSCI fund would be less volatile, what that does to returns is unknown.

I'm sorry I can't help with the taxation concerns. What you should do is run the numbers and come to the best financial decision for yourself.

hodedofome

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Are there any other investment options available? Like a MSCI Global index that is not minimum volatility? It sounds like taxes are going to kill a Vanguard option. I don't personally like minimum volatility strategies but if that's all you have, then that's all you have.

clifp

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Are there any other investment options available? Like a MSCI Global index that is not minimum volatility? It sounds like taxes are going to kill a Vanguard option. I don't personally like minimum volatility strategies but if that's all you have, then that's all you have.

I agree paying tax on paper gains is going to more than negate the lower expenses of the vanguard funds. A global fund seems like good way to invest if you live in small country like Denmark.

LSK

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Thank you for the replies and apologies for the late response!

You are right that should run the numbers - I have been thinking that it probably isn't worth investing in Vanguard ETFs with the current taxation system, but I think I lack the skills or tools to actually to do the exact and complex calculations, so if there are any advice on that or recommendations for tools or methods I should go check out or read up on, it would be much appreciated.


On the issue of whether or not there were any alternative World Indecies, then there are none that are both Danish and on the list of funds, that you can buy into for no fee. So either I accept to pay a buyers-fee to the broker, or accept to be taxed on paper gains, if I want to pick another index.
I doubt that it is worth doing so, but it is only my gut-feeling as I don't have the calculation to back it up.


As a small aside, I did buy some Vanguard ETFs (VTI), just to test waters and see what came back on my tax-reports. The VTI have done better than my main investment in the MSCI Global Min. Vol. Index, which made me (once again) start to second guess the decision.

Romlo

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Hej LSK,

How did you end up investing? I am in a similar situation, in Denmark. Also, as an expat, I might be liable for an expat tax the day (if) I leave DK. That would also be roughly half of my realised AND unrealised capital gains on most vehicles.