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  1. #1
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    Default Investing in stock markets other than NZX and ASX

    For those who have invested in stock markets other than NZX and ASX, can you please share which stock market you have invested in and the platform you have used?

    For example: hatch for US stocks

    Anyone here invested in European/Asian stocks?
    Last edited by hyinvest; 17-11-2020 at 08:38 AM.

  2. #2
    Contrarian Investor Ferg's Avatar
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    I dabble in US shares using Sharesies. The reason I use that is because the brokerage is low and the FX rates are ok. I'm not sure how the fees compare to Hatch. Sharesies currently gives you access to 2,276 companies on the CBOE, NYSE and NASDAQ. Current holdings include RBC bearings (ROLL) on the NASDAQ and Campbells Soup (CPB) and AT&T (T) on the NYSE. Having such low brokerage means you can make small investments without being hit with relatively large transaction fees, plus I want to stay under the NZ$50k limit.

  3. #3
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    Quote Originally Posted by hyinvest View Post
    For those who have invested in stock markets other than NZX and ASX, can you please share which stock market you have invested in and the platform you have used?

    For example: hatch for US stocks
    I use TDAmeritrade for my father's US brokerage account. To be clear, since my father is a Canadian resident, it means the account is outside of the FMA & IRD's concern. The key deterrent for foreign equities is FIF once you go over $50K NZD.

    TDAmeritrade uses the ThinkorSwim platform Level 2 monitoring but for anyone in NZ wanting to do real time trades well... you have to be up between 3:30AM to 10AM. Not really ideal for the regular trader.

    Something to think about is the reliability of the broker. My father's US brokerage account originated with Datek, then was bought out by Ameritrade. Then TD (Toronto Dominion) merged to form TDAmeritrade. Now recently, Schwab bought them out. There are NO commission fees on trades. Yes $0 that Schwab had been marketing for well over a year.

    Furthermore TDAmeritrade provides SPIC insurance on all cash to US foreign account holders (up to $1/2 Million). The cash goes into a sweep account which is depository insured. Something no NZ bank offers and what the FMA is saying in terms of security and risk is complete BS ; implying when a NZ resident sends $ abroad to the US, that their $ is at risk of going missing. The US Bank have FDIC up to $250K and in Canada, their banks have CDIC for up to $100K per account.

  4. #4
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    @SBQ
    Wow! Lots of information. Thanks heaps.

  5. #5
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    @Ferg
    Thank you

  6. #6
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    Remember that the $50,000 is the cost price of investment. ie if you pay $49,999 for you investment then it rises to $50,001, or above, it does not put you in the FIF regime.

    At least as I understand it. You can check the IRD website.
    Last edited by 777; 17-11-2020 at 10:27 AM.

  7. #7
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    Quote Originally Posted by 777 View Post
    Remember that the $50,000 is the cost price of investment. ie if you pay $49,999 for you investment then it rises to $50,001, or above, it does not put you in the FIF regime.

    At least as I understand it. You can check the IRD website.
    It's a threshold trigger. So at end of accounting year (March 31st) if the account balance exceeds $50K, then FIF applies. This is regardless of the cost of the initial investment. Once the account is under FIF, it doesn't matter if the person keeps investing more at under $50K, the whole balance is still subjected to FIF in future years.

    https://home.kpmg/content/dam/kpmg/p...s-FIF-2015.pdf

    "Take for example, a New Zealand tax resident who:

    Acquires shares in USCo with a cost of $40,000 on 1 July 2013
    Acquires shares in UKCo with a cost of $20,000 on 20 March 2015
    Sells all shares on 30 April 2015

    Application of the FIF regimeMarch 2014 The USCo shares are under the $50,000 threshold. So the individual is not required to calculate FIF income and is subject to tax on any dividends received.March 2015

    The acquisition of the UKCo shares causes the individual to exceed that threshold on 20 March 2015. Therefore, the individual is subject to the FIF rules for the income year to 31 March 2015. FIF income for the 2015 income year, calculated under the FDR method, would be 5% times the market value of the USCo shares on 1 April 2014. As the shares in UKCo were not held on 1 April 2014, the FIF income calculated on those shares is zero.

    March 2016FIF income for the 2016 income year, calculated under the FDR method, would be 5% times the market value of the USCo and UKCo shares on 1 April 2015.

    The taxable income is not reduced even though the shares were sold at the end of the first
    month in the income year."

    On a rolling basis, the 5% FDR is a killer when you're trying to compound returns. This is the equivalent of management fees that fund portfolios administer to their clients. Generally speaking, all famous investors around the world (Ray Dalio, Warren Buffet, etc) all say there's nothing more taxing than high management fees. But in NZ's case under FIF, the account is hit with 1) Management fees by the fund manager or by the brokerage firm handling the client's money & 2) the taxes IRD takes. The latter being the largest killer in long term gains. For eg. what does the person end up if say for 10 years, and this is hypothetical, that their account balance returns 5% a year every year. Well the individual will have to report the 5% FDR gain as taxable income - and for large accounts holders, most often they are forced to sell a portion of their shares just to pay each year's tax liability. You will find that at the end of 10 years, the actual account balance has not grown much at all - and this is assuming an even 5% FDR every year.

    Then there's the issue on years that go negative which FDR does not apply. But what use is that to the investor? Because in the following year, they may be working at a much lower account balance value but IRD comes along and starts applying the 5% FDR on future returns in recovery.

    There was an important link that has been taken down called "For FIF's Sake" where a NZ investment firm outlined the difference between the individual investing in a NZ based managed fund buying say the S&P500 ETF, and the other by investing DIRECTLY via an overseas account but pays tax under FIF. The math calculations showed after 2 or 3 years, the person that invested directly had a much higher portfolio balance than going through the NZ based managed fund (ie Kiwi Saver) that pays tax under the individual's PIR tax bracket.

    Then there's another article that proved investing in NZ real estate again is better than Kiwi Saver:

    https://www.nzherald.co.nz/business/...6O557O2OLOVTU/


  8. #8
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    Straight from the IRD website.

    De minimis exemption

    If you're an individual investor with attributing interests in FIFs that COST less than NZ$50,000 in total, you do not need to calculate income under the FIF rules.

  9. #9
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    Quote Originally Posted by 777 View Post
    Straight from the IRD website.

    De minimis exemption

    If you're an individual investor with attributing interests in FIFs that COST less than NZ$50,000 in total, you do not need to calculate income under the FIF rules.
    Page 15 from the horse's mouth:

    IF:

    "NZ$50,000 threshold is exceeded at any time in the year when you're a New Zealand resident (for a natural person), or any time in the year for the trustee of an eligible trust"

    THEN:

    all your offshore interests are subject to the FIF rules - the first NZ$50,000 is not exempt.

    https://www.ird.govt.nz/-/media/proj...ir461-2019.pdf

    FIF on the initial cost of the account balance would only apply if under $50K (and that's speaking if the cost of the investment were UNDER this threshold). All references from major NZ accounting firms online explain it that way ; What is the definition of a "threshold" ???

  10. #10
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    Page 30 offers a bit of interest in terms of 'attribution' rules. There's a clear distinction on cost basis of the investment if A) the asset was gifted vs B) the asset was inherited. The latter means the cost of the investment would be treated as if they were the original purchaser of the asset (if the 2 parties are non-arms length transaction a la a family relative). It means it's far more easier to organise your estate BEFORE YOU DIE than to let the investment assets 'willed' via inheritance.

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