Lootman wrote:Gpop321 wrote:Just as a tangent: while comparing various world tracker funds, I discovered this:
https://www.schwab.com/research/mutual- ... fees/swppxWhich appears to be a US tracker... but with extremely low fees (0.02%) and really impressive returns.
Tempting, definitely. But do US trackers present a different risk profile than world trackers?
Fidelity run a class of ETFs in the US with a 0% annual management charge. They make their money from stock lending the underlying, which index funds are perfect for doing. You can also buy and sell them for free, and no stamp duty of course.
Beta is now free.
I can think of no reason why the risk profile of a US domiciled ETF would be worse than a UK or Irish fund.
Broaden the risk-profile however and ... if the US ETF isn't UK reporting registered, which it mostly likely isn't, then all capital gains and dividends are counted as 'income' by HMRC and taxed at your income tax marginal rate. A enforced sale/return of capital in one year could leave you with a large income tax liability in that year.
Another factor is that anything more than something like $60K of US assets opens you (or rather heirs) up to US Estate Tax (death duties/inheritance tax). The US/UK tax treaty gives Brits the same generous allowance as per US citizens, north of $12 million before any tax becomes liable, BUT only providing you complete the correct forms, correctly filled in and submitted within the correct time window. Once case I am aware of used a older version of the form, was correctly filled in but rejected, and by the time that was flagged it was too late to re-submit as the re-submission would have been outside of the time-window. a.k.a. pay a pro to do that for you as the few £K that might cost could potentially save 100's £K's.
With a Irish ETF it is the fund that owns the shares, so even if you die the fund remains 'alive', only UK Inheritance Tax measures applied. And if HMRC registered, which more likely the fund will be, gains are as usual, capital gains counted as capital gains, not income. Ireland also has a similar tax treaty with the US as that of the UK's and US dividends are withheld 15% withholding tax, instead of the standard 30% rate. And that tax can be offset against UK dividend taxation.
On the counter side, increasingly the UK is being locked down, which is a precursor flag of potential confiscations (such as via unfair/punitive taxation rates). The general recommendation is not to keep your liquid money/wealth in your resident country. Recent (Sunak) Tory policy is flagging that to more extremes, as would a Lab government increase that domestic risk. As such utilising a non UK brokerage/banking is increasingly in effect being 'recommended' by the state (outflight of capital). But in turn the state is increasingly making that more difficult, where other countries have to report back to the UK when a Brit holds such accounts/brokerages and where the state can consider that as being 'tax evasion' - even if the taxation rate is punitive/unfair/extreme.
Other countries may employ similar anti-capitalist policies. A world tracker will encompass a broad selection of such - overheads. There is reasonable opinion that a UK home is more inclined to have the UK government set policies that help prop that up, as is the US government inclined to prop up its stock/bond markets. Broadening from a bunch of US stocks such as the S&P500 that includes many firms with international exposure to all-world, is potentially inclined to add in drag/cost factors, make things worse rather than better for the investor.
- any more than you would if the big shareholdings eroded.