Accumulating vs Distributing (from Boglebot suggestions)

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Topic Author
Neuralgia
Posts: 46
Joined: Tue Mar 23, 2021 5:26 pm

Accumulating vs Distributing (from Boglebot suggestions)

Post by Neuralgia »

I live in a country with no international capital gains taxes (Costa Rica), and no US-tax Treaty.

I just wanted to know, when using Ireland ETF's, which one are you guys using? Accumulating or Distributing? Why?

I guess rebalancing (besides taxes) is always the key factor to go with one or the other. Am I right?

I'm trying to decide if I go (according to https://www.boglebot.com/) from:



A) VWRA (Vanguard FTSE All World) or VWRD (Vanguard FTSE All World) (again, one is Accumulative, the other is Distributive).
This is just a set and forget option, but has an expense ratio of 0.22%

B) VHVE (Vanguard FTSE Developed World) + VFEA (Vanguard FTSE Emerging Markets UCITS).
Both Accumulating with approx 0.14% TER

C) VDEV (Vanguard FTSE Developed World) + VDEM (Vanguard FTSE Emerging Markets UCITS)
Both Distributing with approx 0.14% TER

B and C, according to the bot, should be balanced 88%/12% to match Global Market Cap Ratios. A obviously doesn't need any balancing.

A, B and C will be combined with Bonds/Fixed Income (probably VAGU to be inside the Vanguard family).



PS: Boglebot has even two more options:

-Most Popular with 0.20% TER> IWDE (iShares Core MSCI World) + EIMI (iShares Core MSCI EM IMI)
-Cheapest with 0.13% TER> SWRD (SPDR MSCI World) + EIMI (iShares Core MSCI EM IMI)

Both options, most popular and cheapest, are Accumulating ETF's
Both options should be balanced 88%/12% to match Global Market Cap Ratios.
TedSwippet
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Location: UK

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by TedSwippet »

Neuralgia wrote: Wed Mar 31, 2021 1:05 am I just wanted to know, when using Ireland ETF's, which one are you guys using? Accumulating or Distributing? Why?
Personally, I use both. Accumulating inside pensions and other tax-sheltered wrappers, and distributing outside. My only reason is tax. The UK will tax accumulated dividends annually even when not paid out to the investor. This creates cash-flow and capital gains tax calculation difficulties that it is simplest to just avoid.
Neuralgia wrote: Wed Mar 31, 2021 1:05 am I guess rebalancing (besides taxes) is always the key factor to go with one or the other. Am I right?
Right. And my experience with (tolerance band) rebalancing is that it is actually a pretty rare event. I have only had to do it twice in around a decade. And that is on a portfolio that is more finely granulated than the ones you're looking at -- seven funds rather than two, for historical reasons.

If you have no tax entanglements, I would think that either accumulating or distributing would be fine, and that you can ignore the distinction and just choose based on other preferences (cost, bid/offer spread, etc).
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galeno
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Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by galeno »

Costa Rica does not tax income which comes from outside the country. No L3 tax.

E.g. the interest income of a CD at BAC CR is subject to a 10% L3 WH tax. That same CD interest income at BAC Panama has 0% L3.

The income from your omnibus funds at BAC are also being hit with this 10% L3 tax. And that's on top of the 30+% L1 and L2 taxes from the high fee USA domiciled funds in which they invest your contributions. In short. They suck.

Accumulating vs distributing is inmaterial. We use the cash generated by our dividend and interest income. Thus we prefer distributing.

Since an accumulating UCITS ETF can re-invest your dividend and interest income at a far better price than you can at IBKR (0.1% commission + 0.1% bid/ask spread) you should use accumulating UCITS ETFs.
KISS & STC.
Topic Author
Neuralgia
Posts: 46
Joined: Tue Mar 23, 2021 5:26 pm

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by Neuralgia »

TedSwippet wrote: Wed Mar 31, 2021 2:58 am If you have no tax entanglements, I would think that either accumulating or distributing would be fine, and that you can ignore the distinction and just choose based on other preferences (cost, bid/offer spread, etc).

Thanks for your opinions.

What do you think about the difference in TER that Boglebots recommend?

One Vanguard Fund 0.22
vs
Most popular 0.2
vs
Cheapest Vanguard 0.14
vs
Cheapest option 0.13

All this options are available at IBKR
galeno wrote: Wed Mar 31, 2021 9:00 am Since an accumulating UCITS ETF can re-invest your dividend and interest income at a far better price than you can at IBKR (0.1% commission + 0.1% bid/ask spread) you should use accumulating UCITS ETFs.
Galeno, in CR, with CDs, aren't we talking now about 15% tax? The L1/2/3 part is really confusing for me.

I have that homework to figure it out and understand it.
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galeno
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Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by galeno »

KISS.

VWRA and VAGU when at IBKR.

VTI and FDIC insured brokered CDs and individual US treasuries while at Schwab International. Both easy and cheap to buy and sell on it's platform.

The brokered CDs give a better yield. The individual US treasuries are very liquid and a great holding place to keep your cash in the MMF below $60k.
KISS & STC.
qorqytata
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Joined: Sat Sep 18, 2021 12:08 am

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by qorqytata »

i'm having the same dilemma.
don't know which one to pick between the 4 of these options
thegreatPY
Posts: 29
Joined: Sun Jan 10, 2021 12:05 pm

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by thegreatPY »

galeno wrote: Wed Mar 31, 2021 9:36 am KISS.

VWRA and VAGU when at IBKR.

VTI and FDIC insured brokered CDs and individual US treasuries while at Schwab International. Both easy and cheap to buy and sell on it's platform.
I’m with VWRA and VAGU actually at T212.

+1 to the combination
glorat
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Joined: Thu Apr 18, 2019 2:17 am

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by glorat »

Boglebot author here... The link isn't obvious in the boglebot (patches welcome) but the accumulating vs distributing question is referred to this link https://www.bogleheads.org/wiki/Compari ... uting_ETFs
tcobogle
Posts: 10
Joined: Mon Oct 11, 2021 9:58 am

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by tcobogle »

galeno wrote: Wed Mar 31, 2021 9:00 am Costa Rica does not tax income which comes from outside the country. No L3 tax.

E.g. the interest income of a CD at BAC CR is subject to a 10% L3 WH tax. That same CD interest income at BAC Panama has 0% L3.

The income from your omnibus funds at BAC are also being hit with this 10% L3 tax. And that's on top of the 30+% L1 and L2 taxes from the high fee USA domiciled funds in which they invest your contributions. In short. They suck.

Accumulating vs distributing is inmaterial. We use the cash generated by our dividend and interest income. Thus we prefer distributing.

Since an accumulating UCITS ETF can re-invest your dividend and interest income at a far better price than you can at IBKR (0.1% commission + 0.1% bid/ask spread) you should use accumulating UCITS ETFs.
Sorry to come late to the discussion, so what is being recommended here? Because I think you mentioned here that you prefer distributing but then suggest to use accumulating? I'm from young from CR as well so I'm holding the same concern and also when is it good time to switch to distributing.
tcobogle
Posts: 10
Joined: Mon Oct 11, 2021 9:58 am

Re: Accumulating vs Distributing (from Boglebot suggestions)

Post by tcobogle »

tcobogle wrote: Mon Oct 18, 2021 8:53 am
galeno wrote: Wed Mar 31, 2021 9:00 am Costa Rica does not tax income which comes from outside the country. No L3 tax.

E.g. the interest income of a CD at BAC CR is subject to a 10% L3 WH tax. That same CD interest income at BAC Panama has 0% L3.

The income from your omnibus funds at BAC are also being hit with this 10% L3 tax. And that's on top of the 30+% L1 and L2 taxes from the high fee USA domiciled funds in which they invest your contributions. In short. They suck.

Accumulating vs distributing is inmaterial. We use the cash generated by our dividend and interest income. Thus we prefer distributing.

Since an accumulating UCITS ETF can re-invest your dividend and interest income at a far better price than you can at IBKR (0.1% commission + 0.1% bid/ask spread) you should use accumulating UCITS ETFs.
Sorry to come late to the discussion, so what is being recommended here? Because I think you mentioned here that you prefer distributing but then suggest to use accumulating? I'm from young from CR as well so I'm holding the same concern and also when is it good time to switch to distributing.
Here's something I found regarding to this topic. If you invest in IBKR, and according to the diagram you should likely do VWRD:

http://imgur.com/a/ae0Kdvr



Please let me know your thoughts.
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