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  1. #11
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    Quote Originally Posted by GOAT View Post
    I agree with you, but if I invest directly into overseas ETFs (over 50k) then I will need to spend time figuring out tax laws etc. I would prefer to invest directly into Vanguard VUG rather than smartshares equivalent (USG) and avoid the 0.51% charge but I don't know anything about FIF tax implications. Perhaps if the government simplified the tax system, we would have more people investing in stocks rather than houses, which could fix the housing crisis.
    You have hit the nail on the head there. Part of the reason for NZers preference for investing in houses is because of NZ's tax laws. The comparative tax treatment (with different effective tax burdens on total returns) of Kiwisaver and pension funds, overseas investments, returns from NZ company investments and returns from real estate has helped shape NZers preferences for various asset classes, with real estate still remaining top of the list.
    Last edited by Bjauck; 21-03-2022 at 07:35 AM.

  2. #12
    FEAR n GREED JBmurc's Avatar
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    Quote Originally Posted by GOAT View Post
    Hi Folks

    I want to retire early and stop working in about 20 years and figured that my best way of getting there is through investing in ETF / PIE funds and letting the compound/exponential growth do the work.

    I'm thinking of investing 250k initially, and then 50k per year for 20 years, and I estimate the growth to be somewhere between 10% and 15% average across the 20 years, which would mean I would end up with a figure between 4.8m to 10.7m at which point I should be able to comfortably retire.

    My investment would be weighted evenly across 5 different ETFs / PIEs as I don't want to be exposed to a single market or fund manager etc. I haven't made a decision on which ETFs / PIEs, but I was considering the following:

    1. Piefunds - Australasian Dividend Growth
    2. Smartshares - US Large Growth (USG)
    3. Kernel wealth - S&P Global 100
    4. Kernel wealth - S&P NZX20
    5. yet to be determined


    I'm making the following assumptions:

    1. Growth funds work in the same way as compound interest e.g. if one was to invest 50k in a growth ETF and get 10% growth year on year then it will grow in first few years to 55k, 60.5k, 67k etc. as it will grow based on both the principal and also exponentially with the increase in value of the fund.
    2. If my above assumption is correct, then we would see the same application for dividends being reinvested.
    3. There are ETFs / Funds that could return between 10% and 15% growth per annum across 20 years (this would be averaged as I'm taking into account there will be some years in the negative and some years above 15%)


    Questions:

    1. Is my assumption #1 correct?
      • Would 50k at 10% growth per year increase by 55k, 60.5k, 67k, or;
      • Am I wrong and that it is only principal amount would grow e.g. 55k, 60k, 65k?

    2. Is 10% to 15% growth per annum feasible? (taking into account the management fees etc.)
    3. Is investing in these ETFs / PIEs via a provider like smartshares or piefunds etc. secure/safe? i.e. will the investment be in my name in the off chance the provider folds?
    4. Any thoughts/feedback on my selection of funds?


    Just looking for some advice to avoid any newbie mistakes, so any tips/help would be much appreciated.
    Well if you can put $250k in shares ETF etc and $50k per year I'm sure you will build quite a nest egg...

    I started with $40k- 20yrs ago and have turned that into more than 2mill NZD .. but I've taken a much higher risk time consuming traders road of much stress and suffering .. looking back I could have done the same if not better just buying Res property ... but thats the problem we just don't know have the future will play out the next 20yrs might well be very different than the last in say NZ property .. I don't see the 1000%+ growth in RES values we have seen .. I don't see kiwis happy to pay 8-9mill for an average home in 2042 etc .. well unless a every else has keeped up with inflation and we have $700-800k av income households....

    Personally I think this decade will continue to be a Resources Bull market well lease till 2028 ... so If a young guy with $250k came to me wanting to invest the funds to secure his retirement in 20yrs etc .... I'd recommend he did much research into some companies I believe will do very well and some others I don't know about and make his own decision up on least 8-10 companies on say the ASX ...

    Then for the other $50k pa .. I'd say yes invest that into your ETFs

    And IMHO that 250k if smartly invested in Resources stock will return 5x min what the ETF will by 2042 ...

    But I am Bias as thats the sector I've focused on for the last 20yrs ... so DYOR

    But at 44yrs old I'm a Full-time Investor/Trading
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  3. #13
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    Good synopsis JB & from experience too. The benefits of starting relatively young and putting an early nest egg to work?

  4. #14
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    Quote Originally Posted by GOAT View Post
    I agree with you, but if I invest directly into overseas ETFs (over 50k) then I will need to spend time figuring out tax laws etc. I would prefer to invest directly into Vanguard VUG rather than smartshares equivalent (USG) and avoid the 0.51% charge but I don't know anything about FIF tax implications. Perhaps if the government simplified the tax system, we would have more people investing in stocks rather than houses, which could fix the housing crisis.
    If you keep your investing simple, FIF is not that complicated. I tell starting investors with an interest in buying US equities is to buy direct because you have the $50K threshold to start with. For someone young, that could take some years to get to that $50K total capital invested and all future gains would be tax free. When the time comes you invest more that pushes you over the $50K limit, then you can lock in the gains and invest into something decent or just go in with an ETF.

    Something you should know is that the minute you invest with a managed or passive fund in NZ, regardless of the amount you start with, FIF will apply. $1,000 or $100K to that Milford Fund will attract FIF. That's because all funds that make any foreign investment will have to pay FIF (of course there are some ASX listed companies that are exempted from FIF) - but the matter of fact i'm getting at is the individual investor that buys those shares directly has an initial advantage that the fund managers can not provide to their clients. If you're married, your partner can also do the same thing = $100K threshold.

    To buy Vanguard VUG directly would mean you need to find an overseas / US broker. However, in recent times it's very difficult to do as most US brokers (typically the large ones) have been scared off by NZ's FMA sending them nasty letters. The rule by FMA is they have to be licensed by them if they want to open foreign clients living in NZ. The hassle is not worth it so they just simply don't bother. My aunt is with MacQuires and they charge horrendous monthly 'account management fees' (I believe Jarden is not different). So if you bought VUG from a NZ broker, you'll find they too have ways of extracting fees ; I would say the 0.51% may be the lowest in industry here in NZ.

  5. #15
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    Quote Originally Posted by SBQ View Post
    If you keep your investing simple, FIF is not that complicated. I tell starting investors with an interest in buying US equities is to buy direct because you have the $50K threshold to start with. For someone young, that could take some years to get to that $50K total capital invested and all future gains would be tax free. When the time comes you invest more that pushes you over the $50K limit, then you can lock in the gains and invest into something decent or just go in with an ETF.

    Something you should know is that the minute you invest with a managed or passive fund in NZ, regardless of the amount you start with, FIF will apply. $1,000 or $100K to that Milford Fund will attract FIF. That's because all funds that make any foreign investment will have to pay FIF (of course there are some ASX listed companies that are exempted from FIF) - but the matter of fact i'm getting at is the individual investor that buys those shares directly has an initial advantage that the fund managers can not provide to their clients. If you're married, your partner can also do the same thing = $100K threshold.

    To buy Vanguard VUG directly would mean you need to find an overseas / US broker. However, in recent times it's very difficult to do as most US brokers (typically the large ones) have been scared off by NZ's FMA sending them nasty letters. The rule by FMA is they have to be licensed by them if they want to open foreign clients living in NZ. The hassle is not worth it so they just simply don't bother. My aunt is with MacQuires and they charge horrendous monthly 'account management fees' (I believe Jarden is not different). So if you bought VUG from a NZ broker, you'll find they too have ways of extracting fees ; I would say the 0.51% may be the lowest in industry here in NZ.
    Is your Aunt Irish ?

  6. #16
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    Quote Originally Posted by stoploss View Post
    Is your Aunt Irish ?
    No. If you would like to know more about their services: https://www.macquarie.com/nz/en.html

    There are plenty of others to pick as your broker in NZ. Forsyth Barr, Jarden, easy to Google search. But you can bet none of them will operate in the manner of best interest to their clients. As for Vanguard, there's a reason why so many choose their funds over other. $7.2 Trillion under management, most people in NZ never heard of the name Vanguard.
    Last edited by SBQ; 22-03-2022 at 09:45 AM. Reason: spelling mistakes

  7. #17
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    Quote Originally Posted by SBQ View Post
    If you keep your investing simple, FIF is not that complicated. I tell starting investors with an interest in buying US equities is to buy direct because you have the $50K threshold to start with. For someone young, that could take some years to get to that $50K total capital invested and all future gains would be tax free. When the time comes you invest more that pushes you over the $50K limit, then you can lock in the gains and invest into something decent or just go in with an ETF.

    Something you should know is that the minute you invest with a managed or passive fund in NZ, regardless of the amount you start with, FIF will apply. $1,000 or $100K to that Milford Fund will attract FIF. That's because all funds that make any foreign investment will have to pay FIF (of course there are some ASX listed companies that are exempted from FIF) - but the matter of fact i'm getting at is the individual investor that buys those shares directly has an initial advantage that the fund managers can not provide to their clients. If you're married, your partner can also do the same thing = $100K threshold.

    To buy Vanguard VUG directly would mean you need to find an overseas / US broker. However, in recent times it's very difficult to do as most US brokers (typically the large ones) have been scared off by NZ's FMA sending them nasty letters. The rule by FMA is they have to be licensed by them if they want to open foreign clients living in NZ. The hassle is not worth it so they just simply don't bother. My aunt is with MacQuires and they charge horrendous monthly 'account management fees' (I believe Jarden is not different). So if you bought VUG from a NZ broker, you'll find they too have ways of extracting fees ; I would say the 0.51% may be the lowest in industry here in NZ.
    I could buy into Vanguard ETF directly from the NYSE on Sharesies. It has a small transaction fee, and another 0.4% exchange rate fee.. but once I buy into it, then there wouldn't be any additional management fees apartment from the small fee that Vanguard charges which would work for me long term.

    If I was to invest 49k and avoid FIF, and let's say the value of my investment grows to 60k. I wouldn't need to pay any FIF tax on the first year. However, what happens on the second and subsequent years? Is FIF determined based on the total foreign investment at the start of each year? or the initial cost?

  8. #18
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    Quote Originally Posted by GOAT View Post
    If I was to invest 49k and avoid FIF, and let's say the value of my investment grows to 60k. I wouldn't need to pay any FIF tax on the first year. However, what happens on the second and subsequent years? Is FIF determined based on the total foreign investment at the start of each year? or the initial cost?
    The FIF threshold is based on the initial cost of your investment.

    https://www.ird.govt.nz/income-tax/i...les-exemptions

    SNOOPY
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  9. #19
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    Quote Originally Posted by GOAT View Post
    I could buy into Vanguard ETF directly from the NYSE on Sharesies. It has a small transaction fee, and another 0.4% exchange rate fee.. but once I buy into it, then there wouldn't be any additional management fees apartment from the small fee that Vanguard charges which would work for me long term.

    If I was to invest 49k and avoid FIF, and let's say the value of my investment grows to 60k. I wouldn't need to pay any FIF tax on the first year. However, what happens on the second and subsequent years? Is FIF determined based on the total foreign investment at the start of each year? or the initial cost?
    As Snoopy showed, this threshold is based on your cumulative initial cost. What ever gains it grows to in 1 or 10 or 20 years is tax free. Yep a clear winner for the small investor ; however, not something you can rely on in terms of retirement nest egg at the end. Unless you hit something really insane such as buying Bitcoin at the right time, $50K can't compound enough if you look at 5% or 10% per year returns over 20 or 30 years. This was the question brought up when I was at a Jarden seminar where they were seeking new clients. A person asked them about the Sharesies platform of low cost commissions and investing. Their reply was that was not their game, what they were seeking is people with $500K+ range to invest so they can ensure them multimillionaire status at retirement. At the time of that seminar, I think my Berkshire (Class A) stock was around $300K (the seminar was IRC was 2019 just before Covid). Now BRKA has closed at $525K. I often wonder if the same $300K handled by Jarden would net me a better return in less than 3 years.

  10. #20
    FEAR n GREED JBmurc's Avatar
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    Quote Originally Posted by SBQ View Post
    As Snoopy showed, this threshold is based on your cumulative initial cost. What ever gains it grows to in 1 or 10 or 20 years is tax free. Yep a clear winner for the small investor ; however, not something you can rely on in terms of retirement nest egg at the end. Unless you hit something really insane such as buying Bitcoin at the right time, $50K can't compound enough if you look at 5% or 10% per year returns over 20 or 30 years. This was the question brought up when I was at a Jarden seminar where they were seeking new clients. A person asked them about the Sharesies platform of low cost commissions and investing. Their reply was that was not their game, what they were seeking is people with $500K+ range to invest so they can ensure them multimillionaire status at retirement. At the time of that seminar, I think my Berkshire (Class A) stock was around $300K (the seminar was IRC was 2019 just before Covid). Now BRKA has closed at $525K. I often wonder if the same $300K handled by Jarden would net me a better return in less than 3 years.
    Interesting ... I might flick someone like "Jarden" $500k see how they go..... if next few month are going be as good as I expect >> ...would be good to have someone else deal with some of the excess funds ..
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

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