The JSE and finance forum for South Africa
General Category => Shares => Topic started by: Mr_Dividend on September 03, 2015, 04:46:20 pm
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This conversation seems to often pop up on different threads. I thought I would compare a very popular overseas fund (VSTX - vanguard total market, broad USA all share) with one of our favorite funds - the STXIND
https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT#tab=1
5 Years: The info.
Dollar : 7.18 now 13.3
STXIndi - R23,96 now R63.81
VSTX $10,000 -----> $21,046
So, if you had R71800 you could have changed it into $10,000 and you would now have (21046 x 13.3) R279,911
Had you bought the STXind R71800 you could have bought 2996 STXindi shares, now worth R191,174
So although the INDI has done very well in % terms, because of the Rand, you would have done a fair amount better had you taken the money overseas.
#####should just add, the Rand has taken a beating lately - it might recover. At the same time, what do you think would happen to the rand if say a Mr Malema came into power?
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I don't want to be a doomsayer and I have expressed my opinions about the current situation in SA a couple of times now. But I think it is always a good idea to have something overseas just in case. As a safety net.
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Dollar : 7.18 now 13.3
STXIndi - R23,96 now R63.81
VSTX $10,000 -----> $21,046
So, if you had R71800 you could have changed it into $10,000 and you would now have (21046 x 13.3) R279,911
Had you bought the STXind R71800 you could have bought 2996 STXindi shares, now worth R191,174
What about if the rate of exchange was R10 to the $1?
so, $21046 x 10 = R210,460
vs
R191,174
Still better off overseas - but a lot closer. And of course, if the rand goes to R20 to the $ - you would have had R420K - so over double.
Unfortunately, the rand /dollar equation will be set (by the large part) by our politicians (and there policies and actions). Personally, there is a chance we might see 10 again I guess, but I think there is a better chance of us seeing 20/1 in the next 5 years.
Now I do hope I am wrong, and some amazing leadership arrives in SA to lead this country forward - but it's not looking good. Forget long term planning, the current leadership has problems with even short term planning. Like making sure the SAPO has petrol.
Luckily, most of our portfolio's will have dollar/euro hedges - the guy with "savings in the bank", not so much. But I suggest the dollar hedge question move up in the list when it comes to add a new stock/etf to your portfolio.
Maybe Patrick can be nice and do a more in depth look for one of his blog posts...
On the side...
What do you think would happen to the rand if one of our ministers says they think they might like to implement a Zimbabwe style indigenisation type act? Just a thought.
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You might want to take a look at these figures too:
5 years ago, for R71 800, you could've bought 9 509 shares of the DBXUS at R7.55 a pop. Those 9 509 shares would be worth R242 859.86 at todays prices.
Sure that is about R37 000 short of the VSTX but it still beat the STXIND by R50 000.
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Clearly the DBXUS is the better performer but there are other factors to take into consideration. The DBXUS holds about 600 stocks mostly in the tech sector and is overweight in Apple and Microsoft. Need I mention the dot net bubble that burst?
The tech sector is, according to analysts, the best sector to be in at this stage. So 5 stars for that.
What is not taken into consideration is the fact that the DIVTRX pays a much higher dividend. I would love to see a chart where dividends are factored in.
I would prefer this to DBXUS due to it's diversity alone regardless of the superior dividends it pays.
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I get what you're saying but was just doing the comparison for Mr_Dividend so that he can see he does not need to go through the hassle and trouble of opening up an offshore trading account to invest in the US and have access to the benefits of the weak Rand. He can do it right here in SA by investing in the DBX trackers.
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I get what you're saying but was just doing the comparison for Mr_Dividend so that he can see he does not need to go through the hassle and trouble of opening up an offshore trading account to invest in the US and have access to the benefits of the weak Rand. He can do it right here in SA by investing in the DBX trackers.
Sure, but I already did the comparison yesterday ;)
Re: What would you do with R10,000/month savings?
« Reply #28 on: September 03, 2015, 02:46:58 pm »
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Actually, was wondering the best way to compare - working out how much R1000 could buy 5 years ago ect ect. But of course, the easiest is just to compare JSe:DBXUS vs STXIND - over 5 years, 236% vs 177%
I would hazard a guess too, that out the country, there are better ETF's to go into than the rather high fee DB funds. Not only that - trading fees are a lot lower as a bonus.
Personally, if I was out the country and needed to live on Euro/Dollars, the bulk of my money would have followed me - but probably would have left some behind to try get some of the African growth.
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Ah. I guess I missed that. Anyways, you might be interested in reading this:
http://investor.moneyweb.co.za/2015/09/02/offshore-investing-foreign-investing-the-direct-or-indirect-route/
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The only thing I don't like about the DBX trackers is the very high fees, and spread too if I remember right. I think it was about 6 times more expensive than a similar vanguard funds, and twice the price of the indi or divtrx.
If like to know what the odour component is of the indi and divtrx. I've heard numbers as high as 70% for the indi. It's pretty believable if you look at the bigger companies in the index, and I expect it will grow as those smart, well run companies focus their expansion outside of SA.
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This is a very interesting thread. I'm currently living in China and I was planning to take all my income from back to SA because it will be double, and invest it in dividend stocks. After reading this thread, it may be wise to keep a good portion in USD for emergencies.
In China you can easily get a bank account in USD. I have a credit card from ICBC Bank which is 5000 RMB and over 700 USD. When I spend locally it goes off my RMB balance, and online transactions goes from USD balance. Even though their currency is regulated, it's pegged directly to the USD.
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It might be wise to keep a good portion in the overseas but be sure to not keep too much of your money in cash. As many people will tell you, inflation will beat the hell out of your cash.
By the by, for anyone interested, I looked into FNB's offshore account offering. For those who do not know what I am talking about, you can open up an FNB Channel Islands account on the island of Guernsey. You can open up the account in either GBP, USD or EUR. As long as you keep a balance of more than GBP5000 there are no monthly banking fees(this is how I understand it but you can check it yourself). If you have an FNB Share Investor account you can link it to your Guernsey account and you will be able to move funds between the two.
I am looking into opening up one myself but haven't made my mind up just quite yet. If you want to look into it yourself you can do so here:
https://www.fnbci.co.uk/index.html
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No transaction fees in the EU. No interest on credit cards either.
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Don't know if you will be interested in this Mr_Dividend but you might want to look into Redefine International. Even though the SA REIT Redefine Properties owns a roughly 33% share in it, it is still a fully foreign company. They do, however, have a secondary listing on the JSE. So you there is an opportunity for you to invest offshore without having to go through the hassle of sending money abroad. Doesn't give you exactly what you are looking for but still something you might want to look into.
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Yup, have had them for a few years now - actually one of my first purchases - before they changed their name. Also own ROC, INTU and Nepi and recently added Delta inter as well as TEX which now has a fair UK component.
The other day I checked my main main portfolio and 25% reports in ether dollars/ euro's or pounds - most of that is REITS but also OML and BTI. So relatively well rand hedged.
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Yup, have had them for a few years now - actually one of my first purchases - before they changed their name. Also own ROC, INTU and Nepi and recently added Delta inter as well as TEX which now has a fair UK component.
The other day I checked my main main portfolio and 25% reports in ether dollars/ euro's or pounds - most of that is REITS but also OML and BTI. So relatively well rand hedged.
Seems like you have been dealing with offshore REITs for awhile now. Maybe you can answer me this then, when they pay out dividends do those dividends get taxed twice? In other words do they get taxed in the UK and in SA?
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You pay 20% foreign dividend tax when it come into the country - that is the only tax that I know - I don't think tax is deducted in the country of origin - could be wrong though. That said, looking at BTI/OML, I only paid 15% - so it looks like 20% on REITS and 15% on dividends for overseas companies.
BTW Just looked it up RPL was the first share I bought in Jan 2013 - at a cost of R5.25 - have bought a few since, avg cost is now R7.72 and makes up 5.9% of my main portfolio.
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So 20% taxes in total on dividends for RPL? Also, do you know if they pay dividends quarterly or semi-annually?
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Semi
Besides many ETF's, the only property REIT I know that pays quarterly is Arrowhead.
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So 20% taxes in total on dividends for RPL? Also, do you know if they pay dividends quarterly or semi-annually?
I hold RPL and like it.
The UK withholding tax on the so called PID element is 20% (of course no additional 15% withholding tax in ZA). The so called Non PID
element is not subject to UK withholding tax. Taking the cash alternative for the dividends declared for the 6 months ended Feb 2015 was subject
to the full 20% UK tax. (Opting for scrip has a Non Pid element portion which is free of tax).
However, you will note that sometimes, for reasons unknown to me, e.g. the cash dividends declared for the period ended Aug.2014
also contain a tax free Non Pid portion. Best illustrated in the attached images.
(They are foreign dividends, but are regarded as local dividends for tax purposes - just like SAB, BTI etc.
Real estate investment companies like NEPI ROC etc. are treated the same way for tax purposes but withholding tax is the normal 15% on ZA dividends).
A great Rand hedge that more than held its own during the Aug/Sept turmoil and down trend. See graph.
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Yeah, you used a lot of fancy words there that I did not understand. Looked at their previous dividends report and also came across PID and non-PID and scrip. Can someone explain to me what these things mean? ::) ::) ::)
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Yeah, you used a lot of fancy words there that I did not understand. Looked at their previous dividends report and also came across PID and non-PID and scrip. Can someone explain to me what these things mean? ::) ::) ::)
The answer is to be found on their website, copied as shown below:-
Distributions
As a UK-REIT, Redefine International does not pay UK direct taxes on the income and capital gains from its qualifying UK property rental business (the “Tax Exempt Business”). However, UK-REITs are required to distribute at least 90% of its taxable profits from its Taxable Exempt Business, for each accounting period, in the form of a property income distribution (“PID”) rather than as a dividend. In this way, taxation of income from property is moved from the corporate level to the investor level.
A UK-REIT may elect to designate any additional dividend above the 90% minimum PID, as either a PID or an ordinary dividend (“Non-PID”).
Therefore distribution payments may comprise a mixture of both PID and Non-PID or solely a PID. The amount of PID and any Non-PID elements of each Redefine International dividend will be shown on the associated tax vouchers that will be provided to shareholders within 14 days from the dividend payment date.
Tax treatment
Shareholders should note that the tax treatment of PID and Non-PID dividends differs.
Any Non-PID dividends will be treated in the same way as dividends paid by non-UK REIT companies.
PID dividends have not been taxed in the Company and therefore for most shareholders, PIDs will be paid after deducting withholding tax at the current basic rate of 20%.
Market stats @ close 11/09/15 >>
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And what is scrip?
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And what is scrip?
I don't believe it. Have you ever subscribed for rights in a rights issue ? Like 10 shares for every 100 held - scrip are the shares subscribed for. :))
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Well believe it. I have only been an investor since maybe May. So still have a lot to learn. Hence me joining this forum. I don't get what's so funny
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Sorry Fawkes85, judging by some of your posts I was under the impression that you are pretty clued up. :TU:
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I have a UK pension lump sum due in the next few months which will be paid into my UK acc and my intentions would be to invest it in DBX Trackers or similar ETF's in Europe, US, etc but I would like to do this without using a broker and presume the best way is to buy from DBX directly? Would I be saving much on fees, etc? Don't want to bring the funds here prefer to keep the sterling in the UK.
Is this straightforward and easy to do or is it a hassle and best to use a broker?
Also, if you were in the same position where would you invest?
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Do you still have an address and UK bank account? If so, I would open an online account - some do not charge monthly fees and trade fees are lower than SA - beside EE of course. http://www.moneysupermarket.com/shares/
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If you want to keep your Pounds in the UK you will want to buy into the DBX trackers on the FTSE. DB offers a lot more ETFs in the UK than they do in SA.
Here's a link to their UK site:
https://etf.deutscheawm.com/GBR/ENG/Home
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Thanks guys,
Yes, have UK acc and address so good to go and Money Supermarket is an interesting site and not only for shares. Will look into using a share service on there.
Also, the DBX UK site is really informative and performance wise the S&P 500 ETF over 5 yrs being a no brainer with 222% return! What would you be investing in on the UK site?
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Well I am, and have always been, a firm believer in real estate. So I would say invest in a REIT or two. With a P/E of a little over 15 and a P/BV of just over 1.5 Redefine International is selling at a discount right now. You can buy their shares on the JSE under RPL or on the FTSE under RDI.
Caveat: I am not an expert so you definitely will want to look into this yourself and do your own homework.
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I have a UK pension lump sum due in the next few months which will be paid into my UK acc and my intentions would be to invest it in DBX Trackers or similar ETF's in Europe, US, etc but I would like to do this without using a broker and presume the best way is to buy from DBX directly? Would I be saving much on fees, etc? Don't want to bring the funds here prefer to keep the sterling in the UK.
Is this straightforward and easy to do or is it a hassle and best to use a broker?
Also, if you were in the same position where would you invest?
Hi guys, as per my previous post in Sept I've now been paid out the pension amount but have tried to open an online account with a few UK brokers but as soon as they detect I'm based in SA they won't allow an account to be opened is there an easier way to buy DBX WD OR DBXUS ETF's with a UK broker as I'd like to keep the funds over there?
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Yes, open a US based interactive brokers account and buy VWRD on the london exchange. That's what I've done, and have bought for the last 2 months. I also couldn't find a cheaper international broker than interactive that would accept South Africans.
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Yes, open a US based interactive brokers account and buy VWRD on the london exchange. That's what I've done, and have bought for the last 2 months. I also couldn't find a cheaper international broker than interactive that would accept South Africans.
You have a link or is their name literally "interactive"?
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Yes, open a US based interactive brokers account and buy VWRD on the london exchange. That's what I've done, and have bought for the last 2 months. I also couldn't find a cheaper international broker than interactive that would accept South Africans.
You have a link or is their name literally "interactive"?
http://interactivebrokers.com/
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Just as a curiousity what made you pick the above company and how much of your permitted R 1 million did you entrust to them. I presume you did the transfer via a bank so that there is a paper trail in the event of funds going missing or removed from the overseas account.
To me it seems a bit scary as the whole account opening is based on trust which in this country is at a pretty low level
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I did a lot of searching for something equivalent to the options Americans had just buying Vanguard. Somehow I stumbled on the term non-resident alien (NRA), which is anyone living outside of the US who isn't a US citizen. That lead to a lot of really well written wiki's and forum posts on the bogleheads forums. There are a few options for NRAs, but the one most recommended by the bogleheads, and on a number of other sites was interactive brokers. I also liked that their monthly fee is waived if you have $100 000 invested with them.
At the moment I just have new money in their account, so it's not my R1m by quite some distance, but the account is ready and waiting, and should I need to move the funds I'll be able to. I'm also fortunate to have a US bank account, but they take transfers in all major currencies, so an EU, UK or even local bank offshore account would be perfect.
I was close to moving all my cash in December after it looked like we were heading downhill fast, but I couldn't bring myself to pull the trigger. All the reading material says the dollar is overvalued, and the rand is undervalued, and I just couldn't swallow a hit that big. I even went as far as getting my tax clearance, almost. It turns out you can't get tax clearance for investment without going through a bank/broker, but the lady at SARS did confirm they would give it to me with the documents I had on hand. We'll have to wait and see which way we head.
Eventually all my investments will sit in interactive. If I decide I want to hold South African shares, I'll just buy the iShares MSCI South Africa Index Fund, or buy dual listed shares, but I think once I'm out I'll be staying out.
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Hi Patrick - am I right in understanding that, in your case, you'd have no choice but to take the capital gains hit if you wanted to transfer your investments out of the country? Or is there some loophole one can exploit?
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Yes, you'll have to take the hit, and unfortunately even inflation isn't taken in to account. My strategy is to sell when all markets are down like in a bear market. That minimizes your capital gains for instance your JSE shares aren't worth as much, but you also buy foreign shares at a lower price, so the net effect is no loss.
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Yes, you'll have to take the hit, and unfortunately even inflation isn't taken in to account. My strategy is to sell when all markets are down like in a bear market. That minimizes your capital gains for instance your JSE shares aren't worth as much, but you also buy foreign shares at a lower price, so the net effect is no loss.
You like to travel so one option is to take a busman's tour of selected countries and take out the maximum travel allowance possible for you and your wife and then deposit the excess over needs into your foreign account. The foreign country where you funds are being held may request you to explain the deposit when made but I am sure they are competent to report as required without any problems for you
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Yes, open a US based interactive brokers account and buy VWRD on the london exchange. That's what I've done, and have bought for the last 2 months. I also couldn't find a cheaper international broker than interactive that would accept South Africans.
Thanks Patrick have opened an account online so hope I'm up and away!
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Very informative thread. How did you open a US bank account Patrick?
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Very informative thread. How did you open a US bank account Patrick?
Looking for a different thread, but just saw this now Nios. The agency I work for helped me open the US bank account, unfortunately it's not a method that would work for others. If you have lots of cash any of the big banks locally will be able to help you, but in terms of low cost, we're all still looking. Investec seems to be the most clued up so far.
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http://citywire.co.uk/money/emerging-markets-recover-but-now-for-the-hard-part/a953143?re=42361&ea=394747&utm_source=BulkEmail_Money_Daily_Summary&utm_medium=BulkEmail_Money_Daily_Summary&utm_campaign=BulkEmail_Money_Daily_Summary
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I use Webtrader from Standard Bank.
The offshore bank they are using is Deutsche Bank.
I am a bit worried because it seems all is not well at Deutsche Bank.
I bought mostly BRK B and Vanguard, so I suppose even if Deutsche Bank goes under, my funds are still ok.
Any thoughts?
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Citywire-UK
The FTSE 100 snapped out of a three-day losing streak amid signs some of the clouds over the banking sector sparked by Deutsche Bank's problems were beginning to clear.
The UK blue-chip index rose 64 points, or 0.9%, to 6,871, helped by a boost to sentiment from a rise in Deutsche Bank (DBKGn.DE) shares from lows.
Deutsche Bank rose 2.1% after Monday's 7.5% tumble and sideways trading yesterday. The move came after chief executive John Cryan dismissed claims the bank had sought German government help to pay a $14 billion US penalty (£10.8 billion) over the sale of mortgage products in the run-up to the financial crisis.
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Yes, open a US based interactive brokers account and buy VWRD on the london exchange. That's what I've done, and have bought for the last 2 months. I also couldn't find a cheaper international broker than interactive that would accept South Africans.
You have a link or is their name literally "interactive"?
http://interactivebrokers.com/
How does your will / estate planning work for these offshore investments?
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There's been a discussion here you can follow: https://shareforum.co.za/shares/us-shares-for-those-with-ee-accounts/30/