Best option for exposure to global markets?

[zb3]

I currently have 1/5th of my investment portfolio in Milford's global PIE fund. I am invested in other milford PIE funds and am happy with them, but the milford global fund just invests in other mutual funds from around the world as opposed to all the other Milford funds which actively pick stocks. The returns I am seeing from the global fund are average and the returns are high. I am looking at other options for some global exposure.

I was thinking of investing in the Vanguard Australia US total share market EFT on the ASX or the S&P 500 index offered by ishares.


Questions:


What do you personally invest in for exposure to global markets?
Is 1/5 of total investment enough global investment?, I have heard of some people recommending that 1/2 of your portfolio should be global


Any recommendations or advice would be appreciated.

Thank you.

[OldRider]

Present proportions for us are;

45% NZ
35% Australia
20% rest of world
We are slowly reducing Australia, reinvesting proceeds equally between NZ & rest of world.

We own Ishares,Vanguard, also on ASX PMC,MFF,TGG, plus some British Lic's, not recommending anything, simply
saying what we have.

[Okebw]

Mine is a very similar composition to oldriders.

50% NZ
25% Australia (recently reduced)
25% Global

Similar with regards to the global side of things too. The vanguard and ishare listings on the ASX make for a very convenient diversified investment with relatively low fees. The vanguard instruments having particularly low fees.

[RRR]

Just curious, why are you guys reducing exposure to Australia?

[Arndale]

Oldrider and Okebw, can I ask if you have invested in your global and Australian shares through a NZ broking firm?

I just had a a look at ANZ Securities (formerly direct broking) for their fees and management for holding UK and US shares. I haven't looked at other brokerage rates but you get stung with fees and management costs, so I guess you really need to know what you're doing otherwise your returns are eroded.

As an example investing in UK shares through ANZ Securities:

Brokerage of 0.06%, plus stamp duty of 0.05% (everyone who purchases shares is hit with this as far as I am aware), plus 0.25% per annum custody fee, plus minimum admin fee of $5 / month, all on top of the foreign exchange conversion to purchase your shares in the first place!

Am I right in then saying that you have to pay even more fees on ETF's (if you decide to purchase them) such as the Vanguard FTSE 100 ETF where you pay 0.1% on your holding per annum?

I guess, unless you really know what you're doing or are keen to take a serious punt, foreign investment is not for the feint hearted.

I'd be interested in your thoughts?

[noodles]

Oldrider and Okebw, can I ask if you have invested in your global and Australian shares through a NZ broking firm?

I just had a a look at ANZ Securities (formerly direct broking) for their fees and management for holding UK and US shares. I haven't looked at other brokerage rates but you get stung with fees and management costs, so I guess you really need to know what you're doing otherwise your returns are eroded.

As an example investing in UK shares through ANZ Securities:

Brokerage of 0.06%, plus stamp duty of 0.05% (everyone who purchases shares is hit with this as far as I am aware), plus 0.25% per annum custody fee, plus minimum admin fee of $5 / month, all on top of the foreign exchange conversion to purchase your shares in the first place!

Am I right in then saying that you have to pay even more fees on ETF's (if you decide to purchase them) such as the Vanguard FTSE 100 ETF where you pay 0.1% on your holding per annum?

I guess, unless you really know what you're doing or are keen to take a serious punt, foreign investment is not for the feint hearted.

I'd be interested in your thoughts?
A cheaper option is share cfds. I have used ig markets for london shares. They also do us market.

However, following a stock from abroad can be difficult because you know less about the underlying drivers in the economy.

You can get international exposure by buying local exporters. My fav is comvita.

Noodles

[Arndale]

A cheaper option is share cfds. I have used ig markets for london shares. They also do us market.

However, following a stock from abroad can be difficult because you know less about the underlying drivers in the economy.

You can get international exposure by buying local exporters. My fav is comvita.

Noodles

I admit to being a novice share investor, and I have to say that CFD's are a scary prospect especially when its a leveraged product and you can stand to lose a lot.

What were your experiences in dealing in CFD's? Was that net result profitable for you?

[noodles]

You are right to be scared. I would not recommend CFD's to novices. A lot of discipline is required. Position sizing is very important. You can get large positions with little money down.

Regarding profitability, it is not the platform that makes you profitable, it is the stock selection. So whether I traded through IG or direct broking, my returns would be much the same(ex-brokerage).

Not sure where you are at with your trading, but I think you should master your home markets first (asx and nzx) before moving offshore. If you are worried about portfolio allocation, you can always tap a fund manager. The new piefunds international fund seems to be doing well.

[Arndale]

You're right, I am well and truly a long way off of getting into off shore markets as at present I only dabble in the NZX. The whole CFD and derivative areas, to me at my stage, just seem like gambling. I'd have as much ability to return a profit from those means as I would winning Powerball by buying a Lotto ticket.

In terms of being profitable, I was meaning in overall terms of your selections, tallying up all your CFD trades (and costs), did they make you money?

[noodles]

You're right, I am well and truly a long way off of getting into off shore markets as at present I only dabble in the NZX. The whole CFD and derivative areas, to me at my stage, just seem like gambling. I'd have as much ability to return a profit from those means as I would winning Powerball by buying a Lotto ticket.

In terms of being profitable, I was meaning in overall terms of your selections, tallying up all your CFD trades (and costs), did they make you money?
It is not really important how my trading went as we will likely have completely different approaches. But since you are interested:
1. LONG ASX AND LSE - profitable
2. SHORT ASX - Profitable
3. SHORT LSE - Unprofitable
4. SHORT INDEX's - Unprofitable. I don't really class this as a failure as it is like insurance.
5. CURRENCY HEDGES - LONG NZD vs AUD Profitable

Overall, I returned 130% on my IG equity balance from 1/4/2013 - 31/3/2014. This is pre-tax and after all commissions and interest charged on leveraged positions.

But this profit is leveraged. If I was unleveraged, the return would have been much lower. Maybe 40%.

I have been trading for 14 years.

[Arndale]

Thanks for sharing. I have to say that those figures are very impressive. I guess there is no substitute for experience and time served in the markets.

How long have you been trading in the CFD and derivative markets? Was it something that took a great deal of education, research and experience before you felt comfortable with these?

[OldRider]

Arndale:

All investments were made through NZ broker. LSX shares are held in UK registry though,no cost for this, we actually have share certificates for them, could sell through UK registry if we wished, we did have a British bank account for a while but too much trouble so closed it, registries still post cheques, costs $5 flat fee at Westpac to bank, could have direct credit but this is rather more expensive, ASX investments in CHESS. Have Australian bank account to collect dividends, use this via internet - Bpay for issues and brokers cash management account for broker trades.

Changes are not frequent so brokerage is not significant, though if I were to sell through local broker I get slugged twice, once to transfer investment so they can sell, then brokerage. Hope this is useful.

[noodles]

Thanks for sharing. I have to say that those figures are very impressive. I guess there is no substitute for experience and time served in the markets.

How long have you been trading in the CFD and derivative markets? Was it something that took a great deal of education, research and experience before you felt comfortable with these?
I have been trading CFD's for 7 years. I did some research before signing up. It is important to understand the how it works. You can usually open a demo account to educate yourself. But I stress, it is best to master normal shares before venturing into the CFD space.

Also, CFD's are better suited to short term traders than buy and hold investors.

[Arndale]

Arndale:

All investments were made through NZ broker. LSX shares are held in UK registry though,no cost for this, we actually have share certificates for them, could sell through UK registry if we wished, we did have a British bank account for a while but too much trouble so closed it, registries still post cheques, costs $5 flat fee at Westpac to bank, could have direct credit but this is rather more expensive, ASX investments in CHESS. Have Australian bank account to collect dividends, use this via internet - Bpay for issues and brokers cash management account for broker trades.

Changes are not frequent so brokerage is not significant, though if I were to sell through local broker I get slugged twice, once to transfer investment so they can sell, then brokerage. Hope this is useful.

Thanks for the info OldRider. I had a little look out of interest into this area this morning. When you purchased UK shares through the NZ broker, did you then have to pay to get the UK shares certificated so you held them as opposed to them being held in a nominee account with your broker? And I'm guessing you can still be on the UK register as having an international address to which they post to?

[voltage]

Yes it is not cheap investing overseas from NZ. If you have shares outside asx and nzx you really need custodial. I have held UK investment trusts in savings schemes in the UK but everything gets complicated and now have withdrawn all these funds. I have looked at etrade in australia and they have the cheapest option to purchase global shares ay .6% and low custodial of .1%. Your idea of purchasing ETFs on asx is a good one. Look at etrade.com.au for this. Keep things simple.

[GTM 3442]

You could look at these guys in Luxembourg:

http://int.tddirectinvesting.com/

[Arndale]

Thanks Voltage and GTM3442.

In terms of international trades through somewhere close to home, etrade Oz seems like a very viable option. Rates certainly beat ANZ Securities hands down in terms of custody.

Am I right in saying that management fees for ETF's are taken from dividends paid by the companies within the ETF?

[zb3]

Thanks for that GTM. On first glance these guys look quite good. It seems they even offer access to vanguard mutual funds. Are you using them/have you used them in the past and do you recommend them?

[GTM 3442]

Thanks for that GTM. On first glance these guys look quite good. It seems they even offer access to vanguard mutual funds. Are you using them/have you used them in the past and do you recommend them?

TD Direct in Luxembourg offer me access to a lot of things which are very useful, but charge me for these very useful things.

They offer me custody services. They offer me accounts in multiple currency. They offer me access to a wide range of Mutual Funds. They offer me access to a wide range of ETFs. They offer me access to direct investment in specific shares in a wide selection of markets. They are easy to pop money into.

Note that they do not pay interest on cash balances. Note that they charge for custody services. Note that they charge brokerage. Note that they make money on multi-currency transactions.

Primarily they offer me a "one-stop-shop" which allows me to keep all my non-NZ non-bank investing in one easily-accessible place. This is my main reason for using them. It has worked well for me for years now.

I will shut up now as I am starting to sound as if I am on the payroll.

But before I go - be very careful about all of this. Much of the work of investment is in administration , in compliance, and in taxation.

Before you start flinging money around the world, make sure that you know what you will be up for in the way of tax liabilities, where those liabilities will fall, how you will deal with them when they arrive, as well as the inevitable compliance and administrative overhead

[Arndale]

Thats great advice GTM. Particularly the elephant in the room, which is no doubt the tax burden on top of the quoted administration, brokerage and custody fees.

I assume the IRD website will have all the relevant tax implications? Is there any other websites which you have found useful that you could point us in the direction of?

Thanks again.

[GTM 3442]

Mornin' Arndale.

I've always found the New Zealand IRD website more circular than helpful, and just thank my lucky stars that I don't have to have anything to do with New Zealand's FIF tax regime. My tax situation is almost certainly different to yours, which means that it's almost impossible for me to contribute anything meaningful.

However, in a more general sense, I don't think that tax should be a major driver in investing. I think it's more important to set up a structure which suits you, and then start looking at tax.

For example, I invest out of Luxembourg, but I bank in Australia.

Have a look round the various expat forums for discussions about expat-oriented "offshore" financial services companies.

Good luck.

[zb3]

TD Direct in Luxembourg offer me access to a lot of things which are very useful, but charge me for these very useful things.

They offer me custody services. They offer me accounts in multiple currency. They offer me access to a wide range of Mutual Funds. They offer me access to a wide range of ETFs. They offer me access to direct investment in specific shares in a wide selection of markets. They are easy to pop money into.

Note that they do not pay interest on cash balances. Note that they charge for custody services. Note that they charge brokerage. Note that they make money on multi-currency transactions.

Primarily they offer me a "one-stop-shop" which allows me to keep all my non-NZ non-bank investing in one easily-accessible place. This is my main reason for using them. It has worked well for me for years now.

I will shut up now as I am starting to sound as if I am on the payroll.

But before I go - be very careful about all of this. Much of the work of investment is in administration , in compliance, and in taxation.

Before you start flinging money around the world, make sure that you know what you will be up for in the way of tax liabilities, where those liabilities will fall, how you will deal with them when they arrive, as well as the inevitable compliance and administrative overhead


Thanks for the reply GTM. I am looking at investing in UPRO and TQQQ ETFs through them. Just have a few questions for you.

- How does the tax work? Is the tax on dividends withheld at source like in NZ, or do they pay you out their imputation credit without withholding any RWT? Or what? Where is the best place to find out this sort of thing?

- What sort of statements do they send you?

- How difficult is it signing up as an NZ resident?

Any other info you could tell me about the process would be much appreciated.


Thanks for your help.

[GTM 3442]

Thanks for the reply GTM. I am looking at investing in UPRO and TQQQ ETFs through them. Just have a few questions for you.

- How does the tax work? Is the tax on dividends withheld at source like in NZ, or do they pay you out their imputation credit without withholding any RWT? Or what? Where is the best place to find out this sort of thing?

- What sort of statements do they send you?

- How difficult is it signing up as an NZ resident?

Any other info you could tell me about the process would be much appreciated.


Thanks for your help.

Mornin' zb3

Tax is either paid or not paid at source. This will vary according to where the investment vehicle is based. The best way to find out the details is to ask, either by email or by a telephone. You do get two consolidated tax statements each year. As a custodian, they simply pass on the details provided by the investment vehicle, and assume that you know what to do with those details.

It's an online system, so they don't send you any statements, but you can access them online, and print them if you feel the urge. Similarly with contract notes and other documentation.

I imagine that it would be as easy to sign up as a New Zealand resident as any other form of resident. I certainly had no issues or problems other than the fact that I have no residential address.

Note: It is almost certain that my residency and tax situation is different to yours. Thus my experience will be of limited value to you, and you should check it out for yourself