My god. You are the only one who has answer to my confusion. So only the dividends get taxed not the capital gains? I invested in VOO and vgt not knowing this.
Nice timing, just about to DCA into S&P 500 with my first paycheck. Will the Fifth Person cover global index funds next? Interested to know which of those options are good.
Hi Adam and thanks for the great and informative video! Maybe you can help me with this question: I have Interactive Brokers set up as Ukraine resident, and I see that Ukraine is on the US Tax Treaty list with values of 15, 5, 0 written in the table. As a novice, it's difficult for me to understand - generally speaking, does this put me on VOO (USA) side of the market, or CSPX (Ireland) side? Can you give your own opinion please? Would love to hear as well from you, fellow RU-vid viewers... Thanks in advance!
Hi Vladi, thanks! This means Ukraine has a tax treaty with the U.S. which reduces the U.S. dividend withholding tax to 15%. If you were to buy VOO, your WHT is 15%.
Really informative video. Question: # What happens if your citizenship status changes from non-resident to resident while you are holding the Irish ETF? # Are there any tax implication for the US resident?
Yes, US tax laws now apply to you. It's best to consult with a professional about the potential tax implications. www.investopedia.com/articles/personal-finance/012214/understanding-taxation-foreign-investments.asp
Thank you, you just saved me from that tax... but that is a Short Term tax? Do you know after a year I understand that the US taxes you less being a non-resident. Greetings from Honduras. Following you after this video. 🙌🏼
I would also look at Nick Doyle's video dealing with the subject. Overall it seems to me that Vanguard's S-P500 ETF is probably the way to go for most investors. I enjoyed your video; thanks.
I noticed in one of the comments below, you mentioned that IBKR charges USD5 minimum for VUSD. To maximize the fees, how much units do you recommend purchasing at one go? Because comparatively, IBKR charges USD 0.35 minimum (tiered pricing) for VOO. There is also VUAA, which is accumulating, but I'm unsure of the brokerage fees makes it worth investing in VUAA. Any thoughts? Thanks
Hi Adam, thanks for this insightful video! there's S27 on the SGX and the trading fees are a fraction of what it cost to buy VUSA. Does it still make sense to go with VUSA because if the difference in with holding tax percentages? Thanks for taking time to read this!
The trading fees depend on the brokerage you are using. Foe example, Interactive Brokers charges US$5 minimum for VUSD (VUSA is denominated in sterling) which is pretty low. Also, if you're not dollar-cost averaging and you only invest in lump sums from time to time at lower valuations, your frequency of trades should be kept to a minimum anyway. Hope this helps!
Hi Guillaume, the gross yields will be the same as they invest in the same underlying assets. Do note that the yields shown in the video are after tax for the Irish ETFs but before tax for the U.S. ETFs.
Hi, what are your thoughts on VUAA? Accumulating version of VUSD? It seems they are pretty much similar in terms of expenses and have the benefit of auto reinvesting dividends.
Thanks for watching! You can purchase the VUSD from a brokerage that has access to the London Stock Exchange. If you already have a brokerage account, you can check with them or you can open an account with Interactive Brokers or Saxo Markets.
@@TheFifthPersonChannel Hi Adam, if I were to buy the VUSD, I would save in tax, but lose out in capital appreciation? looking at the price appreciation of VOO vs VUSD, the former seems to have appreciated much more than the latter in the past 6 months
There is no capitals gains tax on Irish-domiciled ETFs for non-residents of Ireland: guidefinances.com/2021/10/29/withholding-tax-applicable-to-the-principal-residences-of-etfs
Hi Adam, thanks for the great video. Just want to check if the 30% witholding tax applies to chinese companies listed on NYSE like Alibaba n international ETF like Vanguard Total World Stock Index Fund ETF (VT) as well?
Hi Maytha, as far as we know, the withholding tax doesn't apply to Alibaba as its ADR is domiciled in the Cayman Islands. The Vanguard Total World Stock Index Fund ETF is domiciled in the U.S., so the withholding tax applies.
Hi Shayn, if you're referring to the Irish-domiciled ETFs, they are listed on the London Stock Exchange. FSMOne has no access to the LSE at the moment.
Thanks! In terms of cost, their expense ratios are the same at 0.07%. However, the main difference is that VUSD distributes its dividend, while CSPX accumulates and reinvests it.
Hi Adam, I'm just curious, is it possible to actually incur more costs over the long run when investing in an irish domiciled S&P500 ETF on platforms such as interactive brokers? Will it still be more cost effective as compared to investing in US S&P500 on a commission free platform such as TDAmeritrade?
If you're buying very often, then the costs would add up. But if you have a quarterly/annual DCA strategy, then it'd still be cheaper especially for larger portfolios. The other benefit of Irish-domiciled ETFs is that you also avoid the U.S. estate tax which taxes up to 40% of your assets.
Thanks, Huang Suan! Yes, it should be +0.24% instead. Sorry about that! So overall, in this example, you still come out +0.20% ahead with Irish-domiciled ETF and without the risk of U.S. estate tax.
Hi Sarah, the U.S. stock market can be volatile in the short to medium term (2020 was a great example) and I'd prefer to invest my CPF monies -- which is meant for retirement -- in more stable assets. If not, simply keeping it in the CPF Special Account earns you 4% risk-free. You can watch our CPF Investment video to learn more: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-s-TJ2ZtoBhA.html
@@TheFifthPersonChannel thanks for the reply! another quick qn - Is trading in GBP worse than trading in USD? or is there any particular reason why it's better to trade in USD than GBP?
Hi Adam, very simple yet informative. What do you think about the other Ireland Domiciled ETFs such as the VWRD and VHYD? Hope that you can consider comparing some other Ireland Domiciled ETFs with US Domiciled ETFs such as VWRD vs VT and VYHD vs VYMI. Keep up the good content.
Hi! I got several qns. 1) does the 30% tax affect the dividend yield of ONLY S&P or other index funds like QQQ/ Dow Jones? 2) if I’m not gg to focus on the dividend yield, meaning Imma ignore the 30%, do u still recommend buying it? Bcos im focusing on QQQ and I’m investing it for growth reasons since it’s largely tech stocks and hence not focusing on the yield. Thanks!
Hi Jonavan, the 30% dividend withholding tax is for all U.S. stocks and, thereby, stock ETFs. Yes, some investors pick low-yield, high-growth stocks in the U.S. due to the high withholding tax but zero capital gains tax. www.investopedia.com/ask/answers/06/nonusresidenttax.asp
Hi ! Thank you for your email, I finally found my answer. Could u share more about NASDAQ 100, is there an equivalent of Irish Domicile? Thank you very much, hear from u again…
Hi Sevilla, the difference in CAGR you see in the video is due to an arbitrary date at which we recorded the 5-year returns. The CAGR for the U.S. and Irish-domiciled ETFs are essentially the same (before tax) since they own the same basket of S&P 500 stocks.
@@TheFifthPersonChannel Lucky I only bought 1 unit...how about Vanguard S&P 500 UCITS ETF? Is this a dividend type and good to hold for long-term under DCA method?
I am a new investor for just half a month, and currently have some shares each for both SPY and VOO in my portfolio under Tiger since the start of this year. Was wondering if I should just buy CSPX separately under IBKR and start building it up from 1 share, or to sell off my SPY and buy as many CSPX shares? I am currently inclined to do the former but doing that means I would have 3 types of S&P500 ETFs in my portfolio, which I wonder is unnecessary? Are there any disadvantages to doing so or i would be better off just having 2 types of S&P500 ETFs and pump some of my new money into another type of ETF of a different focus but still within US like QQQM? Or look at a more global ETF instead? Sorry for the long series of questions!!
One S&P 500 ETF is enough; there's no need to buy three types of what are essentially the same stocks. Yes, you consider QQQM if you want more tech exposure, and other ETFs if you want exposure to the global markets or China. Hope this helps!
@@TheFifthPersonChannel ohh I see... so in that case, is it advisable for me to make the switch this month to convert all my existing SPY and VOO to CSPX because of ireland domiciled advantages or it doesn't really matter to much after I've already gotten both SPY and VOO, and that i should just keep it as it is and start expanding my portfolio outside of just S&P500? Thanks for the helpful advice!
The ETF itself doesn't go bankrupt -- it is simply a pool of money invested in a basket of assets. But the ETF issuer can go bankrupt. In the case of VUSD, the issuer is Vanguard, one of the largest investment management companies in the world. So that's unlikely. Whether an investment is 'safe' depends on your risk tolerance. With the VUSD, you gain exposure to the S&P 500 -- is that investment safe for YOU?
@@TheFifthPersonChannel tks for clean presentation. Even if vanguard goes bankrupt, I still get my total etf investment back since these etf owns s&p 500 companies instead of vanguard shares. Is this correct or I lose my money in case of vanguard bankruptcy? Tks
Great video Adam. Standard chartered platform does allow trading on LSE Ireland domiciled s&p500. But is it recommended over the other brokerages ( like Saxo or Interactive brokers)? What's your take - Avoid SC or are they ok?
Thanks, Chris! I think using Standard Chartered as your broker is fine if you already have an account and your service experience with them so far has been good.
Hi Adam, no because the amount is below the USD60K threshold. Above that, there is a tiered estate tax on U.S. assets: www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-tax-us-estate-and-gift-tax-rules-for-resident-and-nonresident-aliens.pdf
They both own the same underlying stocks in the S&P 500. The main differences are that VUSD trades in USD and distributes its dividends, while CSPX trades in GBP and accumulates its dividends.
Hi Angie, the Schwab 1000 ETF pays a dividend as the stocks that comprise the ETF themselves pay a dividend. To avoid dividends altogether, you would have to choose an ETF that invests in stocks that don't pay a dividend at all. These ETFs will likely focus on growth/niche areas as most broad-based ETFs would contain the biggest stocks which typically pay a dividend.
Yes, you can definitely consider the CSPX as well. The difference between the CSPX and IUSA is that the former accumulates and reinvests your dividends.
Hi, can I ask in this scenario. The stocks listed on LSE does not have options. In this case, would it be more efficient to get a NYSE traded etf which have options trading (selling covered call) to maximise ur profits? The gains from CC will effectively offset the 30% witholding taxes from dividend?
If I use tiger brokers to buy SPY ETF, how the US tax me 30% as I asked tiger brokers and they said there's no tax that have to be paid, only commissions need to be paid?
Yes, for example, the VUSA accumulates and reinvests its dividend instead of paying it out. Accumulating ETFs are domiciled outside the U.S.; the VUSA is domiciled in Ireland and trades on the London Stock Exchange. However, you still face the withholding tax -- this time at 15% as Ireland has a tax treaty with the USA. In other words, the dividend is already taxed at 15% before it's reinvested. Hope this explains!
Hi Adam great video! Can i check if i invest in VUAA (Vanguard S&P 500 accumulating ETF) which is also Ireland-domiciled LSE- listed and priced in USD do I also pay less tax? I prefer pricing in USD as GBP is more volatile...
@@TheFifthPersonChannel Thanks Adam. Just wondering are there any advantages to investing in the cheaper VUAA (85 USD) vs the more expensive CSPX (478 USD)? Both are Ireland-domiciled S&P500 ETFs and have identical expense ratios and dividends. I understand that CSPX has a higher trading volume therefore lower spread, however as my broker (DBS Vickers) allows limit orders that risk doesnt really apply to me. Thank you so much for your time!
Sorry, I just saw your comment on CSPX in a previous question. May I ask why it was excluded from your video? Is it not comparable to the rest for some reason? Thank you!
Hi Sarah, thanks for asking! We used the IUSA instead of the CSPX in our video as the other two examples (SPY5 and VUSD) also distribute their dividends.
