Official Shiny Things thread—Part III

[chrisloh65]

UK impose inheritance tax only for UK-based assets (including UK-domiciled stocks) with total value more than GBP 325,000.
UK has no stock dividend withholding tax (unlike US with 30%).

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.

 

[BBCWatcher]

BBCW, you want to take this one?

I'll try.

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.

UK impose inheritance tax only for UK-based assets (including UK-domiciled stocks) with total value more than GBP 325,000. UK has no stock dividend withholding tax (unlike US with 30%).

There are some important U.K. Inheritance Tax details to relay:

1. The U.K. Inheritance Tax is actually an estate tax, levied on the estate of the deceased person. But it's misleadingly named "Inheritance Tax." No, this doesn't make any sense, but that's the situation.

2. While the usual exemption is £325,000, if you leave U.K. estate taxable assets to your surviving legal spouse or legal civil partner (same or opposite sex), there's no estate tax to pay. If your surviving spouse/partner then disposes of the U.K. assets (makes them not U.K. domiciled), that could be the end of that. For example, you could leave £325,000 worth of shares of Barclays plc stock to your niece and the remainder of your U.K. assets to your spouse, and that should mean zero U.K. IHT owed.

This unlimited marital exemption doesn't really work if you and your spouse die at approximately the same time, if you're intending to pass assets to children or other heirs.

Yes, you can effectively double the exemption by having each spouse hold £325,000 of U.K. estate taxable assets in completely separate accounts. But....

3. There's a "look back" period of 7 years before the date of death. If the decedent gave away U.K. domiciled assets within the 7 year window, those gifts are counted toward the exemption.

4. The U.K. estate tax applies to the worldwide assets of decedents who were official U.K. residents when they died, not just their U.K. domiciled assets.

As a reminder, while the above information is my best understanding (and only a summary), it's nonprofessional. If you need advice from a tax expert, please go get it.

 

[KeytoFreedom]

Hi ST, have you changed your opinion on gold? Is it a good investment to hedge against inflation, do you think the price of gold will keep going up?

 

[chekseng80]

Any estimated timeline for the release pf the new book?

 

[mr_beanz]

Any estimated timeline for the release pf the new book?

Hi ST. In your new book, hope that you will include a hypothetical snapshot of the total and annualised returns thus far if a person were to invest based on your investment strategy. (ie whether it works). Thanks!

 

[xiaonajia]

Since TECH stocks are must have staples now in our growth markets, what are you guys take on tech etfs like QQQ, ARK, etc. How many % diversified are you guys in it?

it depends on your risk/return appetite.

tech is overvalued now so I would not scale in unless it drops alot

 

[swan02]

Well I aim for 30 percent tech+IWDA, 40 percent consumer staples and 30 percent healthcare over long time. The three sectors are usually not highly correlated and overall quite defensive. It’s risk adjusted returns are good.

Tech being scary.. I’m dca over time with it with consumer staples likely to reach goal first. Tech will eventually replace iwda.

it depends on your risk/return appetite.

tech is overvalued now so I would not scale in unless it drops alot

 

[Shiny Things]

Hi all, my current ‘three fund’ portfolio is STI ETF, Syfe equity 100 and Syfe Global ARI. Is there any problem with the approach?
Sorry for the noob question.. I’m still very new in this so I just DCA every month.
Thanks.

Yeah, you're doubling up on things there. The two Syfe funds have a big tilt toward US equities - they own a lot of the same things. (Also, I think Syfe charges quite a lot for what they do - you can save a lot in fees by doing it yourself.)

Hi ST, have you changed your opinion on gold? Is it a good investment to hedge against inflation,

No. If you want an inflation hedge, you don't buy gold; you buy equities. If you want a hyperinflation hedge, you buy overseas equities. Gold is a rock with a negative interest rate.

Hi ST. In your new book, hope that you will include a hypothetical snapshot of the total and annualised returns thus far if a person were to invest based on your investment strategy. (ie whether it works). Thanks!

Good idea!

Any estimated timeline for the release pf the new book?

Depends on how my Actual Job goes, but I'd be aiming to have it out sometime around the Chinese New Year holiday.

 

[Maeda_Toshiie]

(Also: Ark are Elon Musk groupies who got lucky. Don't pay attention to them.)

https://twitter.com/ARKInvest/status/1316483578189012992

 

[Project_Xco]

No. If you want an inflation hedge, you don't buy gold; you buy equities. If you want a hyperinflation hedge, you buy overseas equities. Gold is a rock with a negative interest rate.

Hey Shiny, you have an interesting perspective for Gold. Most articles/videos i encountered advocate Gold especially during a recession as their value is supposed to increase or at least remain stable during troubled times.

 

[BBCWatcher]

If you want an inflation hedge, you don't buy gold; you buy equities.

Or inflation-linked (a.k.a. real return), high quality sovereign bonds, for example U.S. Treasury Inflation Protected Securities (TIPS).

 

[limster]

Hey Shiny, you have an interesting perspective for Gold. Most articles/videos i encountered advocate Gold especially during a recession as their value is supposed to increase or at least remain stable during troubled times.

unfortunately search engines/social media seem to promote confirmation bias.

if the algos see that you are browsing pro-gold webpage and twitter feed, they may be serving up pages where like-minded users frequent, and thats why 'most' of the articles you read say gold is so great.

but hey, if you have 5% of your portfolio in gold, its not going to bankrupt you or make you super-rich but it might be useful in terms of asset allocation strategy + a little bit of diversification. I think my gold holding is about 2-3% of my portfolio.

But if you are thinking of something ridiculous like 50%+ of your portfolio in gold.... maybe stop reading zerohedge.

 

[swan02]

Here's what I've gathered so far. Based on Vanguard articles mainly and observation via holding onto/testing out various portfolios.

Background=USA assets

The more non-USA assets you have, the less inflation hedge you need. So studies are done mainly in the perspective of USA domiciled. Hence the more SGD assets you hold, the less you need to worry of USA inflation.

1. >5 years of hedge- Just buy Equities
2. <5 years aka short term hedge then..

a. Cash (USD)/Treasury bills-highly correlated for expected inflation

b. Short term TIPS-highly correlated to UNexpected inflation but lags inflation beta due to its low volatility.

c. Commodities-highly correlated to unexpected inflation, has high inflation beta due to high volatility feature of its components.

So the above three are reliable hedges, and according to vanguard, 14%-30% commodities and up to 10% allocated to short term TIPs are warranted.
-------------------

1. Gold is an unreliable hedger. Treat it as a currency. In fact, some people hold a mixture of Gold, EUR, AUD, GPB, CHF, JPN etc to give them ample hit rate plus less holding cost due to less fees holding onto gold.

Use the above method (Gold, Foreign currencies of major countries) if you believe in the concept where the FX of the country will affect the performance of the public company thus inflation hence share price.

You can also use international shares (ex-USA) which shares similar features, with greater impact from emerging equities.

..........................

If indeed that your investment horizon is long term i.e. 10 years or more.
I would rather be holding onto USD Cash/short term treasury, because you won't use the USD cash in short term inflation (unexpected). There won't be expected hyperinflation-its illogical.

Plus in an unexpected hyperinflation environment, ya bet, interest rates are gonna rise SOON. Hence USD rises, benefits the SGD investor, but equities may stagnate or dive. Bonds will dive.

also Cash USD also has a dual purpose in the perspective of an overseas investor heavily invested in USA (e.g. IWDA), by also acting as a reliable buffer in events of crisis. More reliable than say A35. So increase your allocation to risk assets should you include greater amounts of USD.

Hi ST, have you changed your opinion on gold? Is it a good investment to hedge against inflation, do you think the price of gold will keep going up?

 

[Athelle]

Hi ST,

I’ve completed ur book. Allocation is 75% stock 25% bond

I’ve started RSP for G3B and MBH via DBS/POSB
Just gotten notice my SCB trade account is ready.
As my sum to invest isn’t that great I planned to go in for IWDA every mid of Dec, Apr and Aug. Total monthly $500 and will slowly work towards $1000 when my finance stabilise.

Rebalance in May n Nov but chance are I need to accumulate for at least 2 years b4 that could make sense as amount is too small.

any issue with the timeline? or I should make the first purchase of IWDA now?

 

[malthead]

I bought 1295 iwda on IBKR but the order was filled at the same price in two tranches of 1267 and 28 lots. The brokerage was 37.31 and 5 respectively. Why was it split and why was the brokerage rate different?

Thanks

 

[kram62]

I bought 1295 iwda on IBKR but the order was filled at the same price in two tranches of 1267 and 28 lots. The brokerage was 37.31 and 5 respectively. Why was it split and why was the brokerage rate different?

Thanks

It's a big order, so to fill it it may have been necessary to match it against more than one bidder.

The commission is a percentage of the trade subject to a minimum depending on your pricing mode (fixed or tiered). The first one is simply the order value multiplied with the commission rate for the type of trade you made (look at the price table on IBKR website for reference, in this case it's a stock trade on the LSE so look at the prices under Europe, UK, LSE).

The one with USD 5 commission looks like it's the min commission when you are on fixed pricing mode. That's because it's a small trade, so the commission computed by multiplying the rate with the value of the trade was probably less than USD 5, so you pay the min commission instead which is USD 5 on fixed pricing.

 

[hwckhs]

I bought 1295 iwda on IBKR but the order was filled at the same price in two tranches of 1267 and 28 lots. The brokerage was 37.31 and 5 respectively. Why was it split and why was the brokerage rate different?

Thanks

I usually bid within the bid/ask spread, so sometimes my order is partially filled while waiting for another seller to sell me the remaining units. They always show up as a single trade with a single commission, if I let the order complete.

Not sure what happened to yours. Did you modify the order when it was partially filled? Even then, it should still be considered as a single order, unless you cancel it and place another order. Maybe you should check with IBKR directly for an official answer. They have your full order/trade details.

 

[Thoreldan]

I bought 1295 iwda on IBKR but the order was filled at the same price in two tranches of 1267 and 28 lots. The brokerage was 37.31 and 5 respectively. Why was it split and why was the brokerage rate different?

Thanks

Wow that's a large purchase.
I would split that amt into 5-6 mths of dca.

 

[malthead]

It's a big order, so to fill it it may have been necessary to match it against more than one bidder.

The commission is a percentage of the trade subject to a minimum depending on your pricing mode (fixed or tiered). The first one is simply the order value multiplied with the commission rate for the type of trade you made (look at the price table on IBKR website for reference, in this case it's a stock trade on the LSE so look at the prices under Europe, UK, LSE).

The one with USD 5 commission looks like it's the min commission when you are on fixed pricing mode. That's because it's a small trade, so the commission computed by multiplying the rate with the value of the trade was probably less than USD 5, so you pay the min commission instead which is USD 5 on fixed pricing.

For that quantum, would I be better off on tiered plan?

I thought I was on tiered

 

[malthead]

Seems like the commission is 0.05% for both fixed and tiered plans. No difference for the trade