ETFs in the USA - any thoughts?

[Bouncerdog]

The only dumb question is the one you don't ask, right?

Well I've got plenty of questions and some of them are going to be dumb - and probably already answered on this forum. So bear with me and redirect me if required. I've been looking over this site recently and there is obviously a heap of skill and knowledge out there.

My wife and I have recently given up the day jobs and cashed in the investment properties and now need to get some growth out of a chunk of our cash - with another chunk sitting safely in raboplus at 8.6%.

Diversification is a key word so I've been considering using ETFs. And I've been looking beyond our little pool downunder and considering the wealth of ETFs listed in the USA on the AMEX.

The NZD is still reasonably strong against the USD so there seems to be some logic in buying well diversified global growth stocks through the US market.

I'm thinking of the set and (almost) forget style of investing rather than regular trading - because I'm not organised enough...

And so to the questions...

Is this concept fundamentally sound or have I totally overlooked something?

What are the tax implications for this?

How difficult is it to trade (eg. National Bank online share trading doesn't give access to these ETFs)?

Is there a NZ broker that specialises in this sort of stuff? And how do I keep my costs down?

Any thoughts, anyone??

[rimu]

ask yourself why the US dollar is so weak at the moment? it's because their economy is utterly screwed.

because ETFs are so spread out, if the economy as a whole goes down, so does the ETF.

if you must invest in the US, target individual companies

[patsy]

Is this concept fundamentally sound or have I totally overlooked something?

What are the tax implications for this?

How difficult is it to trade (eg. National Bank online share trading doesn't give access to these ETFs)?

Is there a NZ broker that specialises in this sort of stuff? And how do I keep my costs down?

Any thoughts, anyone??

Investing in US-based ETF is the only really available option if you wish to implement an index-based strategy with your investments. The NZX and the ASX have only eight ETF, seven of which focus on NZ and Oz. In the USA there are around 300, which cut and dice every market and every investment style you can dream of. This means that you can reduce your exposure to any one economy or any one one investment style (you can even have a whole basket of ETF of non-US markets).

As far as what broker to use, I wouldn't even consider any in NZ. Best thing you can do is to get an ITIN number (a number that allows you to become a non-American investor) from the IRS Dept (look for the appropriate form in www.irs.gov) and then open an account with an American broker such as E-trade. Fees are extremely low, no minimum transaction size (as opposed to ridiculous requirements from NZ brokers), online trading (which saves you the hassle of having to deal with below-average-IQ NZ help desk staff).

[patsy]

You're welcome, Bouncerdog.

[Bouncerdog]

Sorry for saying thanks slowly. I've been away in a non-PC environment (don't you hate those back-block training camps?)

I will be exploring what you say over the next few days, Patsy, thanks.

The opportunity to move out of NZ with a bit of diversification and without huge fund manager/broker fees interests me. And as you have seen by my slow(but sincere) response, I am not one to be watching a screen on an hour by hour basis - or even day by day.

Thanks.