Saxo vs IB

For residents of the United Arab Emirates.
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chrismues
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Joined: Mon Nov 05, 2018 11:56 pm

Saxo vs IB

Post by chrismues »

Hi, what I understand the differences between Saxo and IB are:

- Saxo is considered less complicated, IB more complex to handle
- Saxo I would pay between 0.2-0.3% fees over and above the TER of the ETFs: 0.12% custody fee + trading fee of (i) 0.08% of the trade or (ii) minimum of EUR 12; since I want to invest first a lump sum but then add to that on a monthly basis, assuming I have 3 ETFs, that would make 3 trades / month; total trade fees + custody fees would equal c. 0.3% p.a. if I invest monthly, and c. 0.2% p.a. if I invest quarterly
- IB costs would only be c. 0.02% p.a. because no a/c fees and substantially lower trading fees
- not much difference in terms of ability to buy Ireland based ETFs (I am a German living in UAE)
- IB has the risk of US estate tax

So it seems to me that the main aspect I need to make up my mind about is: US estate tax risk vs additional costs of 0.2-0.3% p.a.

Do I see this correctly? What do you guys think? Those who invest with IB, how did you get comfortable with the US estate tax risk?

Thanks,

Chris
TedSwippet
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Re: Saxo vs IB

Post by TedSwippet »

chrismues wrote: Tue Feb 12, 2019 9:47 amSo it seems to me that the main aspect I need to make up my mind about is: US estate tax risk vs additional costs of 0.2-0.3% p.a.
Just to be clear, any additional risk with IB would only be on cash holdings above $60k. For you, US domiciled ETFs are at risk from US estate taxes no matter whether held in IB or Saxo, and Ireland domiciled ETFs are insulated from US estate taxes, again no matter whether held in IB or Saxo.

As long as you steer clear of US domiciled ETFs everywhere you avoid tangling with US estate taxes (and also with US dividend withholding taxes) on your investments. It is just a cash holding in a US broker that is a special case for the US estate tax. However, a broker (any broker, US or not) isn't really the place to keep cash anyway.

The only worry would be the short periods between sending money to IB and buying Ireland domiciled ETFs, rebalancing, and short periods between selling and transferring the cash out of IB. And even here, if you keep balances below $60k you should be okay even if the worst happens.

The ideal is always to avoid US brokers, but sometimes that is either impractical or just very expensive. In those cases, provided you are clear on the (insane and entirely random) US estate tax rules, you can still usually still stay relatively safe from them.
DJN
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Re: Saxo vs IB

Post by DJN »

Hi,
assuming that you are EU based, although not sure which country, you may have a few more options: If I were you I would look at the following platforms for costs and for convenience and compare for yourself:
- deGiro They have a list of "free" etfs
- Internaxx Pretty good for expats although not the cheapest, but cheaper than Saxo
- Interactive Brokers they want you to trade as often as possible, if you have more than $100k deposited they give you a deposit interest rate
- Saxo most expensive and I find their layout complicated
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chrismues
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Re: Saxo vs IB

Post by chrismues »

TedSwippet wrote: Tue Feb 12, 2019 10:34 am Just to be clear, any additional risk with IB would only be on cash holdings above $60k. For you, US domiciled ETFs are at risk from US estate taxes no matter whether held in IB or Saxo, and Ireland domiciled ETFs are insulated from US estate taxes, again no matter whether held in IB or Saxo.

As long as you steer clear of US domiciled ETFs everywhere you avoid tangling with US estate taxes (and also with US dividend withholding taxes) on your investments. It is just a cash holding in a US broker that is a special case for the US estate tax. However, a broker (any broker, US or not) isn't really the place to keep cash anyway.
Thank you TedSwippet, so just to make I understand it correctly:
- US estate tax only applies to cash holdings above $60k, not to any securities you have, even if US domiciled securities?
- The risk having US domiciled ETFs would not be on US estate tax, but on dividend withholding tax (not that I want to invest in them, but just for my understanding)?

Chris
Topic Author
chrismues
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Re: Saxo vs IB

Post by chrismues »

DJN wrote: Tue Feb 12, 2019 10:45 am Hi,
assuming that you are EU based, although not sure which country, you may have a few more options: If I were you I would look at the following platforms for costs and for convenience and compare for yourself:
- deGiro They have a list of "free" etfs
- Internaxx Pretty good for expats although not the cheapest, but cheaper than Saxo
- Interactive Brokers they want you to trade as often as possible, if you have more than $100k deposited they give you a deposit interest rate
- Saxo most expensive and I find their layout complicated
DJN
Thanks DJN, I am European (German) but UAE based, and that likely for a long time. And after that I have no clue where I will retire, not necessarily Europe. Regarding your platform comments:
- thanks for pointing out deGiro, need to research them, haven't looked at them so far
- Saxo is actually cheaper for me than Internaxx: while in Saxo custody fees are higher with 0.12% p.a. vs 0.10% at Internaxx, transaction fees are 0.08% with minimum of $11.5 at Saxo (Platinum) vs 0.1% with minimum of $17.25 at Internaxx. That maxes Saxo slightly cheaper overall
- IB is by far the cheapest, also given I want to make monthly add-ons

Chris
DJN
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Re: Saxo vs IB

Post by DJN »

Hi,
If you are going to be abroad and living in UAE for some time, then I would consider just getting a simple UCITS expat folio as indicated in the Wiki under EU investing:
https://www.bogleheads.org/wiki/EU_investing
Look at the two sample folios and I would choose the accumulating one and start investing in there as per your risk profile. If you head back to EU in five or ten years time I would worry about the right portfolio to suit your new tax regime in the year before you return. I am doing just that right now and tax for me is the most important aspect of the return preparations. Otherwise you could build two folios, the simple ideal one and your return home one. Added complexity is a pain though.
good luck
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
TedSwippet
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Re: Saxo vs IB

Post by TedSwippet »

chrismues wrote: Wed Feb 13, 2019 12:08 am- US estate tax only applies to cash holdings above $60k, not to any securities you have, even if US domiciled securities?
No. It applies to any US domiciled securities that you hold anywhere, and also to cash holdings if in a US broker. All subject to a miserly $60k exemption.
chrismues wrote: Wed Feb 13, 2019 12:08 am- The risk having US domiciled ETFs would not be on US estate tax, but on dividend withholding tax (not that I want to invest in them, but just for my understanding)?
The risk for you would be both.

While the dividend tax for nonresidents has some logic behind it, the US estate tax as applied to nonresident aliens is unconscionable. Breaking up huge estates held by people who receive benefits from the US government may serve a US public policy goal, but impoverishing the spouses of non-US citizens who receive no benefits from the US, and whose only connection to it is that their husband or wife bought a modest amount of US domiciled investments, serves no policy goal whatsoever. It is simply confiscation, and you should avoid it.

Follow DJN's advice on UCITS upthread. That way, you avoid both these US tax issues.
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galeno
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Re: Saxo vs IB

Post by galeno »

TedSwippet almost always beats me to the punch.

If you are NOT a USA person you should avoid USA domicled financial assets. They cost a lot (30% tax on all interest and dividend income) and they are subject to draconian USA inheritance laws.
KISS & STC.
TedSwippet
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Re: Saxo vs IB

Post by TedSwippet »

galeno wrote: Wed Feb 13, 2019 7:02 amTedSwippet almost always beats me to the punch.
But only because my timezone is 6 hours ahead of yours. :-)
galeno wrote: Wed Feb 13, 2019 7:02 amIf you are NOT a USA person you should avoid USA domicled financial assets. They cost a lot (30% tax on all interest and dividend income) and they are subject to draconian USA inheritance laws.
Expressed much more succinctly than I managed.
Topic Author
chrismues
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Re: Saxo vs IB

Post by chrismues »

Thanks all,

Saxo in fact provides access to only one ETF in Ireland. So I probably go with IB given they are c. 0.2-0.3% p.a. cheaper than the rest, but follow the guidelines of TedSwippet in his first reply.

have also looked at the EU investing threat on the Wiki suggested from DJN, very helpful.

Thanks all.
DJN
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Re: Saxo vs IB

Post by DJN »

Hi,
just for clarity I thought that you might appreciate a comparison of the various brokers costs, have a look at this website which compares the main brokers: https://brokerchooser.com/broker-reviews
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chrismues
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Joined: Mon Nov 05, 2018 11:56 pm

Re: Saxo vs IB

Post by chrismues »

DJN wrote: Tue Feb 12, 2019 10:45 am Hi,
assuming that you are EU based, although not sure which country, you may have a few more options: If I were you I would look at the following platforms for costs and for convenience and compare for yourself:
- deGiro They have a list of "free" etfs
- Internaxx Pretty good for expats although not the cheapest, but cheaper than Saxo
- Interactive Brokers they want you to trade as often as possible, if you have more than $100k deposited they give you a deposit interest rate
- Saxo most expensive and I find their layout complicated
DJN
DJN, as far as I can see, you cannot open and operate deGiro from UAE. SO I would first need to transfer my cash to Germany, and then from there to deGiro. But I cannot prove my residency in Germany, so unless I am missing something, they seem very cheap and offer a great choice, but won't work for expats in the UAE.

Chris
DJN
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Re: Saxo vs IB

Post by DJN »

I opened a deGiro account online, I was in the UAE at the time. I gave my home (EU) address and details as I will using the deGiro account on my return from the sand dunes. I can only use an EU bank in my home country to transfer funds to my deGiro account. That is without seeking to change the bank details that I first gave deGiro.
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chrismues
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Re: Saxo vs IB

Post by chrismues »

DJN wrote: Wed Feb 13, 2019 12:51 am Hi,
If you are going to be abroad and living in UAE for some time, then I would consider just getting a simple UCITS expat folio as indicated in the Wiki under EU investing:
https://www.bogleheads.org/wiki/EU_investing
I looked at this. I ahve a question re UCITS ETFs. From what I have seen the benefit for UCITS securities is that they can be promoted across Europe witout new regulation, ie European passporting. But what is for example the difference - other than the above - between
Vanguard S&P 500 ETF [VOO], and
Vanguard S&P 500 UCITS ETF [VUSD]

Thanks
DJN
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Re: Saxo vs IB

Post by DJN »

hi,
Vanguard's S&P 500 index is available as VOO off the NYSE and VUSD off the Amsterdam exchange.
Both are based on US dollars but you buy VUSD in euros.
I cannot remember exactly but VUSA and VUSD are the same underlying funds but one is purchased via LSE and one is via Swiss exchange? Not sure.
Both contain exactly the same stocks and use the same investment methodolgy.
Yet day in and day out, the gains and losses are out of sync with each other.
As far as I understand it the difference in price quoted is due to a slight difference in TER and also the effects of dividend withholding taxes.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
FloDubai
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Re: Saxo vs IB

Post by FloDubai »

Dear All,
Do you have any feedback concerning SwissQuote (for a UAE resident looking to buy ETF traded in Ireland)?
Thanks!
msk
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Re: Saxo vs IB

Post by msk »

DeGiro problem I faced was they insisted that my "linked" bank account had an IBAN. Do they use IBAN in Dubai? If yes, then DeGiro is an option. If not, then you have to use your account in Germany (with its IBAN). Are you comfortable with that?

I failed with DeGiro because of the IBAN. So I tried out Baader Bank in Germany. Sent over a million $. They charged a 0.3% commission; $3000 to purchase my ETFs. I did not consider that a killer since I had no intention of selling for decades. But then a year later they decided to impose a custody fee of 0.25%. That's $2500 annually forever. Too much! Sold out everything, paid the 0.3% sales commission and went with IB. Round trip cost over a bit over a year came to over $9000! Expensive lesson, but thankfully my ETFs had gone up by >$200k during the exercise.

Steer away from any broker who wishes to charge ANY custody fees. It sounds tiny when you have little but the reason why you are investing is because of your ambition to one day have a lot :moneybag DeGiro is new, so no clue how it'll fare over the next few decades. IB is a bit older...
Topic Author
chrismues
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Re: Saxo vs IB

Post by chrismues »

DJN wrote: Thu Feb 14, 2019 7:07 am hi,
Vanguard's S&P 500 index is available as VOO off the NYSE and VUSD off the Amsterdam exchange.
Both are based on US dollars but you buy VUSD in euros.
I cannot remember exactly but VUSA and VUSD are the same underlying funds but one is purchased via LSE and one is via Swiss exchange? Not sure.
Both contain exactly the same stocks and use the same investment methodolgy.
Yet day in and day out, the gains and losses are out of sync with each other.
As far as I understand it the difference in price quoted is due to a slight difference in TER and also the effects of dividend withholding taxes.
DJN
Found my own answer: VOO is the Admiral Series version of VUSD. VOO has a TER of 0.04%, while VUSD has 0.07%.

I also spent a bit more time on the platforms and will be going with Internaxx: great fund selection, Luxembourg based and deposits are guaranteed by up to EUR 200k by the Luxembourg Deposit Guarantee Fund for a joint a/c, and trading fees come out lower as for Saxo (don't wanna go with IB since US based).

Now on pretty much all my ETFs I want to invest in (all Vanguard), there are Admiral versions. Does anyone know how it works? Can I buy them directly over the broker /Internaxx, or do I first need to buy the 'normal' ETF, and then contact Vanguard to swap into Admiral?

Many thanks
DJN
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Re: Saxo vs IB

Post by DJN »

Hi,
Admiral funds are a version of mutual fund available in the US to retail customers of Vanguard, I believe that you have to invest in excess of $100,000 to access this version. They have a slightly lower fee level I believe. I am not aware that they are available in EU especially as they are non UCITS. I buy the usual EU UCITS funds via Internaxx with no issues.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chrismues
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Re: Saxo vs IB

Post by chrismues »

Hi DJN,

Admiral is for both, actively managed mutual funds with min. invetsment of USD 50k, and index funds (not actively managed) with investment of minimum USD 3k. For example if you look at the Vanguard S&P 500 ETF (VOO) is the equivalent to the actively managed Vanguard 500 Index Fund Admiral Shares (VFIAX). Both have the same composition, both have a TER of 0.04%

As far as I can see, VOO is traded in NYSE, and it shows up in the Internaxx ETF selector with a 'buy' button, so looks like you can buy it. Guess there must be somewhere a check that you invest the minimum of USD 3k.

The total list of all Vanguard Admiral equivalent ETFs is here: https://investor.vanguard.com/mutual-fu ... nd-returns
TedSwippet
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Re: Saxo vs IB

Post by TedSwippet »

chrismues wrote: Tue Mar 05, 2019 7:35 amAs far as I can see, VOO is traded in NYSE, and it shows up in the Internaxx ETF selector with a 'buy' button, so looks like you can buy it. Guess there must be somewhere a check that you invest the minimum of USD 3k.
Already dealt with in this thread, but just tie up any loose ends for the benefit of possible future readers ...

A resident of the UAE should entirely avoid both VOO and VTIAX. They are US domiciled, and so come with all the US tax grief and nonsense that you avoid by holding EU based UCITS ETFs such as VUSD instead. The lack of US tax drawbacks more than makes up for the slightly higher TER of VUSD relative to VOO.
InvestInPasta
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Re: Saxo vs IB

Post by InvestInPasta »

IB forever
Saxo is more expensive and its custody fee is a portfolio killer.
When I study English I am lazier than my portfolio. Feel free to fix my English and investing mistakes.
samuel
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Re: Saxo vs IB

Post by samuel »

InvestInPasta wrote: Mon May 04, 2020 7:12 pm IB forever
Saxo is more expensive and its custody fee is a portfolio killer.
I agree. I used Saxo bank for two years and the costs are just high especially if transaction is below a certain volume they charge more.
Opening an account is however very easy because all I required was a personal number(norwegian id) and then no submitting other documents.
Loop Until Investment Income is Greater than Salary
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