Should I worry with my 2K or 10K in the future?

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Topic Author
fjanos
Posts: 16
Joined: Mon May 23, 2022 8:08 pm

Should I worry with my 2K or 10K in the future?

Post by fjanos »

I'm a non-US investor. I learned that they tax internationals 30% on dividends, but that no capital gains taxes apply. The broker will apply this withholding to dividends paid to me as an investor. Withholding does not apply to capital gains or to interest payments. Right now I only have 2K invested in a 3 fund portfolio VTI/VXUS/BND. I'm planning to invest more, max. 10K, but first I want to test the portfolio and check out the fees, taxes and everything to see if it is worth to invest more. I checked the already paid dividends, and they're like some cents. Am I missing something? And it is going to grow more to hundreds? Should I worry about my 2K invested or 10K invested in the future?
HKexpat
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Joined: Thu Dec 24, 2020 4:21 pm

Re: Should I worry with my 2K or 10K in the future?

Post by HKexpat »

What country are you investing from? Just because the US doesn't tax you on dividends or capital gains doesn't mean your home country will not. In many cases, it's better for international investors to choose a fund based in Ireland. You can still invest in US companies that way, but you may end up with more favorable tax treatment. Plus, you will not be subject to US inheritance taxes once your portfolio grows more.

For example, you could replace VTI and VXUS with VWRA, and replace BND with VAGP.
TedSwippet
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Location: UK

Re: Should I worry with my 2K or 10K in the future?

Post by TedSwippet »

fjanos wrote: Mon May 23, 2022 8:26 pm I'm a non-US investor. I learned that they tax internationals 30% on dividends, but that no capital gains taxes apply. ... Right now I only have 2K invested in a 3 fund portfolio VTI/VXUS/BND. ... Am I missing something?
Yes, you are missing something. Your current holdings are US domiciled ETFs, and for you this is not tax-efficient.

Expanding a little on what HKExpat said above ... you can reduce that 30% US tax on dividends to 15% on ETFs that hold US stocks, and 0% on ETFs that hold non-US stocks, by instead using equivalent Ireland domiciled ETFs. Also, if your current portfolio reaches $60,000 you will be at risk of US estate tax of 26-40% of the balance above that amount. Using equivalent Ireland domiciled ETFs removes that risk as well.

Full details in the wiki:
- Nonresident alien taxation - Bogleheads
- Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
Topic Author
fjanos
Posts: 16
Joined: Mon May 23, 2022 8:08 pm

Re: Should I worry with my 2K or 10K in the future?

Post by fjanos »

TedSwippet wrote: Tue May 24, 2022 2:54 am
fjanos wrote: Mon May 23, 2022 8:26 pm I'm a non-US investor. I learned that they tax internationals 30% on dividends, but that no capital gains taxes apply. ... Right now I only have 2K invested in a 3 fund portfolio VTI/VXUS/BND. ... Am I missing something?
Yes, you are missing something. Your current holdings are US domiciled ETFs, and for you this is not tax-efficient.

Expanding a little on what HKExpat said above ... you can reduce that 30% US tax on dividends to 15% on ETFs that hold US stocks, and 0% on ETFs that hold non-US stocks, by instead using equivalent Ireland domiciled ETFs. Also, if your current portfolio reaches $60,000 you will be at risk of US estate tax of 26-40% of the balance above that amount. Using equivalent Ireland domiciled ETFs removes that risk as well.

Full details in the wiki:
- Nonresident alien taxation - Bogleheads
- Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
I've heard about the Irish domiciled ETFs (copy US ETFs). The same broker I'm signed up with (Interactive Brokers) offers those, and Google says that Interactive Brokers is the best (fees and such) to buy Irish domiciled ETFs. My question is: So can I change my 3 fund portfolio to the Irish ones? How do I do that strategically?
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samsoes
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Re: Should I worry with my 2K or 10K in the future?

Post by samsoes »

fjanos wrote: Mon May 23, 2022 8:26 pm Should I worry about my 2K invested or 10K invested in the future?
You should never worry. Worrying is pointless.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
TedSwippet
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Location: UK

Re: Should I worry with my 2K or 10K in the future?

Post by TedSwippet »

fjanos wrote: Tue May 24, 2022 7:57 pm ... My question is: So can I change my 3 fund portfolio to the Irish ones? How do I do that strategically?
Assuming no local capital gains tax or other local tax issues, easiest is to simply sell all the US domiciled ETFs you hold, and use that cash to replace them with Ireland domiciled ones.

HKExpat gave an example, but it uses a bond fund that is hedged to GBP, which would not be appropriate for your situation. Replacing VTI and VXUS with a single holding of VWRA and BND with either VAGU (USD hedged) or IGLA (unhedged) would be my suggestion. All these trade in USD in London, so no currency conversions to worry about.

Note that you do not have to stick to Vanguard ETFs. iShares is one alternative popular, reliable and useful Ireland domiciled ETF provider. You can find other ETF suggestions for two and three fund portfolios in this wiki article:

Simple non-US portfolios - Bogleheads
Topic Author
fjanos
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Joined: Mon May 23, 2022 8:08 pm

Re: Should I worry with my 2K or 10K in the future?

Post by fjanos »

TedSwippet wrote: Wed May 25, 2022 3:00 am
fjanos wrote: Tue May 24, 2022 7:57 pm ... My question is: So can I change my 3 fund portfolio to the Irish ones? How do I do that strategically?
Assuming no local capital gains tax or other local tax issues, easiest is to simply sell all the US domiciled ETFs you hold, and use that cash to replace them with Ireland domiciled ones.

HKExpat gave an example, but it uses a bond fund that is hedged to GBP, which would not be appropriate for your situation. Replacing VTI and VXUS with a single holding of VWRA and BND with either VAGU (USD hedged) or IGLA (unhedged) would be my suggestion. All these trade in USD in London, so no currency conversions to worry about.

Note that you do not have to stick to Vanguard ETFs. iShares is one alternative popular, reliable and useful Ireland domiciled ETF provider. You can find other ETF suggestions for two and three fund portfolios in this wiki article:

Simple non-US portfolios - Bogleheads
Thanx
Topic Author
fjanos
Posts: 16
Joined: Mon May 23, 2022 8:08 pm

Re: Should I worry with my 2K or 10K in the future?

Post by fjanos »

HKexpat wrote: Tue May 24, 2022 1:52 am What country are you investing from? Just because the US doesn't tax you on dividends or capital gains doesn't mean your home country will not. In many cases, it's better for international investors to choose a fund based in Ireland. You can still invest in US companies that way, but you may end up with more favorable tax treatment. Plus, you will not be subject to US inheritance taxes once your portfolio grows more.

For example, you could replace VTI and VXUS with VWRA, and replace BND with VAGP.
Citizenship: Hungarian (they have some treaty to avoid double taxation)

Permanent residence but not citizen: Panama. A US – Panama Tax Treaty does not exist. They signed a tax-information agreement in 2010 to allow tax transparency between the two countries, but this does not impact dual-taxation, unfortunately.
Tellurius
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Re: Should I worry with my 2K or 10K in the future?

Post by Tellurius »

Why don’t you use Degiro as a broker? It’s based in Europe and owned by Europeans
“And how shall I think of you?' He considered a moment and then laughed. 'Think of me with my nose in a book!” | ― Susanna Clarke, Jonathan Strange & Mr Norrell
Topic Author
fjanos
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Re: Should I worry with my 2K or 10K in the future?

Post by fjanos »

Tellurius wrote: Fri May 27, 2022 2:32 am Why don’t you use Degiro as a broker? It’s based in Europe and owned by Europeans
error.registration.forbidden.country.HU

They left Hungary
Tellurius
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Re: Should I worry with my 2K or 10K in the future?

Post by Tellurius »

fjanos wrote: Sat May 28, 2022 6:30 pm
Tellurius wrote: Fri May 27, 2022 2:32 am Why don’t you use Degiro as a broker? It’s based in Europe and owned by Europeans
error.registration.forbidden.country.HU

They left Hungary
That’s a shame
“And how shall I think of you?' He considered a moment and then laughed. 'Think of me with my nose in a book!” | ― Susanna Clarke, Jonathan Strange & Mr Norrell
Tellurius
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Re: Should I worry with my 2K or 10K in the future?

Post by Tellurius »

https://www.degiro.hu/

Isn’t this Hungary?
“And how shall I think of you?' He considered a moment and then laughed. 'Think of me with my nose in a book!” | ― Susanna Clarke, Jonathan Strange & Mr Norrell
Topic Author
fjanos
Posts: 16
Joined: Mon May 23, 2022 8:08 pm

Re: Should I worry with my 2K or 10K in the future?

Post by fjanos »

Tellurius wrote: Sun May 29, 2022 3:22 am https://www.degiro.hu/

Isn’t this Hungary?
"
Dear investor,

We are re-evaluating our strategy regarding our services in the Hungarian market. For now, we have decided to stop on-boarding new clients. Our apologies for the inconvenience.

Kind regards,

DEGIRO"
Tellurius
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Re: Should I worry with my 2K or 10K in the future?

Post by Tellurius »

Oh I see. Well, I was a UK resident and opened with Degiro France. Now I am an Italian resident, still with Degiro France. I am a Cypriot citizen. So if you have a foreign ie non-Hungarian bank account, you may be able to open. I used my UK/Italian bank accounts
“And how shall I think of you?' He considered a moment and then laughed. 'Think of me with my nose in a book!” | ― Susanna Clarke, Jonathan Strange & Mr Norrell
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