For buy and hold of UK-domiciled stocks (not Ireland-domiciled securities), what issues on withholding tax and estate tax are important for an investor to consider? For example, are there hefty taxes like 30% withholding tax and 40% estate tax like for US-domiciled securities bought and held by non-US investor.
BBCW, you want to take this one?
That said, the big tax weirdness for UK equity investors is stamp duty—half a percent on purchases of UK-listed single-names. (This, incidentally, is how CFD brokers became a thing: they sprang up in the UK to cater to degenerate day-traders, because if you buy (say) a share of Barclays, you'll pay half a percent stamp duty, but if you buy an exactly equivalent CFD on a share of Barclays, you'll pay no tax at all.)
Diversification for wealth preservation. Consolidation for wealth accumulation. With new etfs like QQQJ and ARK, people who have time on their side say >10 years are better off consolidating instead of over diversification in IWDA/VWRA. What is your opinion?
My opinion is that this is wrong. It assumes that the people who are making those huge bets on single names are able to predict which stocks will do better than the market; that was wrong in the days of unit trusts, and it's wrong in the days of ETFs.
(Also: Ark are Elon Musk groupies who got lucky. Don't pay attention to them.)
For people that invest 1k monthly,
- using IB and trying to reach the Net Liquidation Value >= USD 100,000;
- doesn't have a separate SC broker account to buy STI ETF;
- wish to have some exposure to STI ETF since it is cheap
Do you think is a good move to buy EWS (iShare MSCI Singapore ETF) using IB which is something similar to STI ETF since it is near to it lowest currently?
No. Just use an IB Singapore account and buy ES3. As BBCW mentioned, EWS is only appropriate for US taxpayers; for Singaporeans, ES3 gets you the same exposure without the 30% tax on dividends.
Hi ST, very Glad to hear you’re planning on a revised book.
Granted both you and BBCwatcher share common fundamentals of concentrating investments into a few main ETFs for long term growth; world index, bonds etc, I would hope to see an exploration into ETFs that could maybe take a 5-10% or total portfolio.
So this is an interesting point; the tricky thing is that you don't want people to run before they walk. The goal of Rich by Retirement is to get people established with a simple three-fund portfolio; going too far beyond that makes things get really complicated, and frankly it'd scare people off.
Also, people have very different preferences and risk tolerances, so those side-pocket bets are going to vary a lot by person. It's a wide space to cover, and I don't think I could really do it justice.
Some things I would hope for in the new book:
1) Options available to investors for SRS and CPF investing, given the recent developments in this area such as new ETFs and CPF fee cuts.
Definitely this.
hi ST, could you explain in layman terms what's behind this options bet? and how people who are interested in copying the bet can follow?
Uh, I'll be honest, there is no way of explaining this in "layman's terms", but I'll have a crack anyway. DISCLAIMER: DON'T DO THIS.
The trade is in midcurve eurodollar options, which pay off based on US interest rates—specifically, the 3mth USD LIBOR interest rate. That's the "eurodollar" bit. (please don't ask why "euro" is in there, it's nothing to do with the currency called the euro, it's to do with the foundations of US dollar money markets way back in the sixties, let's not go down that particular rabbit hole. Anyway.)
The "midcurve" bit means that these are not normal eurodollar options, which expire at roughly the same time as the underlying futures. For example, a normal option on the March 2024 eurodollar futures would expire in mid-March 2024; but these "midcurve" options expire earlier, in March 2021.
The "bet" is as follows. The customer's buying the 99.125 / 99.00 put spread, and selling the 99.75/99.875 call spread, paying about a quarter of a tick to do it (a tick in EDs is $25 per contract). This is in the E3H1 midcurves—options that expire in March 2021, based on the level of the March 2024 eurodollar futures.
When the trade expires in March next year, if March 2024 eurodollar futures have dropped below 99.125, the customer will make money; their maximum payout comes if the futures are below 99.00. If that happens, it'll most likely be because the market has decided the Fed will start hiking earlier than expected and A LOT faster than expected; in this scenario the trade will make 12.5 ticks.
Conversely, the worst case outcome comes if the March 2024 ED futures are above 99.75, because the market has decided interest rates will be lower for longer, the trade starts losing money. (Which is not implausible! if US interest rates stay exactly where they are for the next three-and-a-bit years, those futures will settle at 99.79, which is into worst-case-outcome territory!) The worst case outcome is if those futures end up above 99.875, because the Fed's announced emergency measures or something, and in that scenario the trade loses 12.5 ticks. (Remember, one tick is $25 per contract.)
Firstly, I don't actually think this is a directional bet on when the Fed will lift off; if you want to make that bet, there are much easier ways to do it. (The obvious one: buy Dec 2023 regular-way put spreads, which are a lot more liquid than this midcurve wackiness.)
I think it's a huge bet on the skew in the eurodollar option volatility surface, which is not something laypeople tend to have opinions about. Hell, it's not something
I have opinions about.
And this is a four-legged trade, which means you'll pay truckloads of commissions, in a relatively illiquid market (midcurve options), where someone else has already traded ahead of you in GIGANTIC size and moved the market. Don't do this.
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