Concerns investing non us

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tcobogle
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Concerns investing non us

Post by tcobogle »

Hello, I'm getting very frustrated after seeing so many difficulties as a CR investor. So I'll write here all my concerns so any of the CR investors can clarify.


1. I recently moved from Schwab to IBKR in pursue of Irish domiciled funds. Now I do have to sell 300 shares but I noticed there's Fixed and Tier. Is Tier better for doing this operation? What's better for long term holders? Understanding is that tier is better because there aren't many positions that need to be sold


2. Now the next question, how can I DCA? In CR the best fee for transferring funds is about $30 any amount. What I do is I accumulate and lump sum. but I would love to DCA if possible as that is the generalized recommendation.


Next question, would you recommend me distributed or acc funds? VWRD or VWRA? CR doesn't have L3 taxes. From my perspective VWRD sounds beneficial in the sense of giving flexibility. Thoughts?

[Topic title edited for clarity -- mod oldcomputerguy]
Last edited by tcobogle on Mon Oct 25, 2021 5:25 pm, edited 1 time in total.
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galeno
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Re: Concerns [Costa Rica] investing

Post by galeno »

Read this thread.

viewtopic.php?f=22&t=339350
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galeno
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Re: Concerns [Costa Rica] investing

Post by galeno »

And this one.

viewtopic.php?f=22&t=344460&hilit=Neuralgia

If...after reading both threads if you have any questions I can try and help.
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tcobogle
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Re: Concerns investing non us

Post by tcobogle »

@galeno

Ok so I think there's s gap/misinformation in the threads. I called Schwab and the wire transfer for accounts less than 100k is 15$ so, is there any cheaper way that you know for transferring funds from CR to IBKR?

Also Schwab does seem to allow non us banks checks after a couple of calls from my end.
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galeno
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Re: Concerns investing non us

Post by galeno »

Cheaper wire transfers just means LESS frequent wire transfers. Keep the cost < 1%.

We do one wire transfer per month from our Panamanian bank to our CR bank which costs 0.8% of the total amount.

When we moved from Bank of Bermuda to Schwab International 30 years ago we opened a corporate account to avoid the harsh USA inheritance taxes.

When we switched to IBKR 6 years ago we continued with a corporate account.

We've never had any problems wiring money to and from our NON-USA bank accounts with Schwab or IBKR.
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galeno
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Re: Concerns investing non us

Post by galeno »

Our AWR = 4%. Every USD goes thru this before we spend CRC in CR.

Expense Ratio...= 0.14%
L1WT + L2WT....= 0.09%

Sum1.................= 0.23%

Commissions....= 0.01%
Bid/Ask Spread = 0.04%
Wire Tx Fees......= 0.03%
USD 2 CRC.........= 0.08%
IBC......................= 0.20%

Sum2..................= 0.36%

CR VAT...............= 0.52%

Sum3...……….......= 1.11%

It's a 28% tax rate!
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tcobogle
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Re: Concerns investing non us

Post by tcobogle »

Sorry, but I didn't really understand all the acronyms or what you're trying to emphasize in the latest post or even where do the come from or why.

So I'm wondering if there's a cheaper way of transferring money from Costa Rica (in my case BAC) to IBKR? Right now BAC fees seem to be at $30 any amount. So to make it worth it I may want to accumulate a reasonable chunk and transfer with that kind of expensive fee. I want to follow the domiciled Ireland funds route.

Still thanks for sharing all these numbers and recommending to keep the costs under 1%. Guidelines are really helpful for new investors like me.

Based on your reasoning, in other words, if I can invest 2k monthly then for a $30 fee by CR bank then I may want to fund my IBKR account/wire transfer like every quarter or so(when I have accumulated in my savings $6k) to be consistent and keep wire transfer comissions as low as possible or under that 1%.
TedSwippet
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Re: Concerns investing non us

Post by TedSwippet »

galeno wrote: Tue Oct 26, 2021 2:41 pm It's a 28% tax rate!
There is faulty maths in your post. If you fix it, I think you will reach a much lower number.
namajones
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Re: Concerns investing non us

Post by namajones »

Wish I knew what "CR" was. Also wish people would not assume that readers understand all of their acronyms.
TedSwippet
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Re: Concerns investing non us

Post by TedSwippet »

namajones wrote: Wed Oct 27, 2021 5:12 am Wish I knew what "CR" was. Also wish people would not assume that readers understand all of their acronyms.
CR would be Costa Rica. AWR is (presumably) average withdrawal rate. USD and CRC are currencies (US dollar, Costa Rica colón), and "USD 2 CRC" indicates currency conversion between the two. L1WT and L2WT are shorthand for the assorted withholding taxes applied to a non-US domiciled ETF. IBC would I think be International Bank of Commerce (more forex drag?). VAT would presumably represent Costa Rica's 13% sales tax.

I find it faintly depressing that I didn't really have any problem reading through the forest of acronyms here. A sign that I've been around this stuff for too long. :-(
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galeno
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Re: Concerns investing non us

Post by galeno »

I try to make it as ugly as it can be. CR now charges > 2% to exchange USD 2 CRC. It used to be < 1%. The VAT is 13%.
TedSwippet wrote: Wed Oct 27, 2021 2:55 am
galeno wrote: Tue Oct 26, 2021 2:41 pm It's a 28% tax rate!
There is faulty maths in your post. If you fix it, I think you will reach a much lower number.
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tcobogle
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Re: Concerns investing non us

Post by tcobogle »

galeno wrote: Wed Oct 27, 2021 7:29 am I try to make it as ugly as it can be. CR now charges > 2% to exchange USD 2 CRC. It used to be < 1%. The VAT is 13%.
TedSwippet wrote: Wed Oct 27, 2021 2:55 am
galeno wrote: Tue Oct 26, 2021 2:41 pm It's a 28% tax rate!
There is faulty maths in your post. If you fix it, I think you will reach a much lower number.
Not getting where does that 2% come from as well. Comissions by the central bank is 0.20%.

And going back to the root, there isn't any known way to get cheaper wire transfer from CR to US? Just making it a bit less frequent. Trying to understand ways to make it look cheaper than investing through National funds.
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galeno
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Re: Concerns investing non us

Post by galeno »

Banco National today. CRC 2 USD:
Sell = 640.0
Buy = 625.5

Spread = 2.2%

We used CR national omnibus funds for the 1st 2 years when we started investing 35 years ago. Then we found a better (cheaper) deal using a bank in Bermuda. Then to Schwab. Then to IBKR.

Focus like a laserbeam on portfolio costs. That's what I do.
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galeno
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Re: Concerns investing non us

Post by galeno »

Our 35 year history of being Costa Ricans trying to invest like Americans.

1. Two years at Banco Banex. CR bank that no longer exists. Very costly poorly managed opaque omnibus funds. Like BAC. Portfolio costs ~ 3%

2. Three years at Bank of Bermuda. This bank no longer exists. Allowed access to the excellent Frank Russell fund family. Charged a 1% gatekeeper fee to access them. Portfolio costs ~ 1.5%.

3. Twenty four years at Schwab International. Used concentrated equity allocations for the first 11 years. Became Bogleheads in 2006. Used passive indexed USA-domiciled equity ETFs and FDIC insured CDs at US banks and 5 yr US treasury bills for FI. Portfolio costs ~ 0.75%.

4. Six years at IBKR. Access to passive indexed UCITS equity and bond ETFs domiciled in Ireland traded on the LSE. Portfolio costs = 0.29%.
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TedSwippet
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Re: Concerns investing non us

Post by TedSwippet »

galeno wrote: Wed Oct 27, 2021 7:29 am I try to make it as ugly as it can be.
Well, okay. But using worst-case numbers does not fix faulty maths. You cannot just sum up the percentage tax and fee drag, because as you move through this pipeline, each subsequent percentage applies to a lower amount (because the previous ones have reduced it).

Simple example. Taking your numbers, you lose 0.14% to fund TER, and 9% of dividends paid by underlying stocks to withholding tax, leaving you (say) $90.86 out of an initial $100. Exchanging this to CRC might cost 2% of that $90.86, so $89.04 remaining. You didn't mention any Costa Rica income tax on this -- is there none? Spend $89.04 and lose 13% in sales tax gives you an effective $77.47 spendable, so 22.5% total tax and fees drag.

I'm in the UK, and so have no forex to deal with. However, the comparable numbers for me would be £100 of dividend, lose 0.14% to fund TER and 9% to dividends leaves £90.86. I then have to pay 32.5% income tax on that, leaving £61.33. Spend that and lose 20% in VAT gives me an effective £49.06 spendable, so 50.94% total tax and fees drag.

If you are genuinely seeing a total tax drag (including sales tax) of half what I have to endure, that doesn't seem terrible.
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galeno
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Re: Concerns investing non us

Post by galeno »

@TedSwippet

You are correct. I did every cost from a base of $100. Independantly. I should have done it serially like you did.
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galeno
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Re: Concerns investing non us

Post by galeno »

Oh my!

I'm going to stop crying abour our Gov/Wall St costs here in CR.

"I'm in the UK, and so have no forex to deal with. However, the comparable numbers for me would be £100 of dividend, lose 0.14% to fund TER and 9% to dividends leaves £90.86. I then have to pay 32.5% income tax on that, leaving £61.33. Spend that and lose 20% in VAT gives me an effective £49.06 spendable, so 50.94% total tax and fees drag."
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Re: Concerns investing non us

Post by TedSwippet »

galeno wrote: Wed Oct 27, 2021 10:35 am Oh my!

I'm going to stop crying abour our Gov/Wall St costs here in CR.
...
In fairness, I should probably add that like you, I used the ugliest rates I face. That is, my marginal tax rate on the last £100 of dividend income. A reasonable sized chunk of my dividends fall into a UK 7.5% tax bracket, so my average tax loss will be lower than the 50%-odd I came up with. And I do not have to mess about with Panamanian corporations or anything like that, and these will have a cost that I didn't include in the wet-finger-in-the-air numbers I used for your tax drag.

Also, it is probably a bit dishonest of both of us to include sales tax/VAT, I think. I don't know about Costa Rica, but in the UK there are quite a few things that carry no VAT. Food, for example. (Conversely, some things in the UK have their own tax and then VAT on top, so a tax on a tax. :-( ). Or, I could go on holiday, spend money outside the UK, and reduce -- or increase! -- the sales tax I pay.

And then, we would really need to compare what services I get for the tax I pay, compared to yours in Costa Rica. The lesson is probably that these sorts of comparison are simply not useful.
Topic Author
tcobogle
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Re: Concerns investing non us

Post by tcobogle »

TedSwippet wrote: Wed Oct 27, 2021 1:36 pm
galeno wrote: Wed Oct 27, 2021 10:35 am Oh my!

I'm going to stop crying abour our Gov/Wall St costs here in CR.
...
In fairness, I should probably add that like you, I used the ugliest rates I face. That is, my marginal tax rate on the last £100 of dividend income. A reasonable sized chunk of my dividends fall into a UK 7.5% tax bracket, so my average tax loss will be lower than the 50%-odd I came up with. And I do not have to mess about with Panamanian corporations or anything like that, and these will have a cost that I didn't include in the wet-finger-in-the-air numbers I used for your tax drag.

Also, it is probably a bit dishonest of both of us to include sales tax/VAT, I think. I don't know about Costa Rica, but in the UK there are quite a few things that carry no VAT. Food, for example. (Conversely, some things in the UK have their own tax and then VAT on top, so a tax on a tax. :-( ). Or, I could go on holiday, spend money outside the UK, and reduce -- or increase! -- the sales tax I pay.

And then, we would really need to compare what services I get for the tax I pay, compared to yours in Costa Rica. The lesson is probably that these sorts of comparison are simply not useful.
Thanks for sharing all these examples.
So basically to share the costs of my portfolio it would be:
VWRA 0.22%
+ Any future bonds when I get older
+ Wire transfers ($30 from BAC) every quarter, in my case every $6000 (total 24k per year) (emphasizing less frequent wire transfers)

Anually the cost of wire transfers would be 120/24000= 0.005%

So the Annual cost should be of 0.22% + 0.005% = 0.225% + expense ratio of any bonds to be added to the portfolio!

Let me know any thoughts!
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