The JSE and finance forum for South Africa
General Category => Shares => Topic started by: Strive on February 08, 2016, 12:22:04 pm
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Hi guys - about to begin riding the TFSA train, and I'm wondering how best to go about splitting the various ETF's.
My thinking is this - the only real question for a TFSA is how big you're going on the international allocation. For the SA equities, you'd put the bulk in DIVTRX/STXINDI/perhaps a REIT. For the international, a good option is DBXWD (TER of 0.68%). Not sure if it's necessary to include DBXUS, but perhaps it's a good idea to have a bigger proportion of the world's biggest economy.
So, with these conditions, how much of your portfolio would you put in the international players? I was thinking of a straight 50/50, but I'm wondering if that could be favorably tweaked. As this will only be accessed in 16 odd years, I'm ultimately far more interested in the long term performance, and so want to optimize for that. Any thoughts/criticisms?
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I'm not sure myself yet about how much to go for international, especially at the current rand rate. To me, more importance is that you find a way to reach that R30k before 28 Feb. You can't catch this up.
On the DBXDW vs DBXUS, I'm going DBXWD as this has the maximum diversification. It does allocate about 50% or so to the US, so you might decide that is enough invested in the USA.
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Sitting in the same boat. At the moment my TFSA is 33% DBXWD and 66% STXIND. Not sure if I should keep it weighted like that or push the next R30k all into STXIND. Problem I have with STXIND is that there is that the top three holdings make up more than 50% of it.
That said, the top 3 holdings are Naspers, SAB and Richemont all with offshore exposure.
Another option is to play it safer and go with a Top40 like MAPPSG (I'm still looking for a reason not drop my RMBT40 in favour of it).
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I'm not sure myself yet about how much to go for international, especially at the current rand rate. To me, more importance is that you find a way to reach that R30k before 28 Feb. You can't catch this up.
On the DBXDW vs DBXUS, I'm going DBXWD as this has the maximum diversification. It does allocate about 50% or so to the US, so you might decide that is enough invested in the USA.
If DBXWD has as much as 50% US allocation, then that sounds pretty good - shall go with that one!
Yeah, I'm debating what to do about the TFSA - I have the option of pulling R30K from the access bond and using that, but my fiance would have a slight problem with that :P The compromise is, as of next month, we're going to start contributing R2500 each into our respective accounts. As this is a two-decade commitment, my feeling is, eh, it'll be alright.
Sitting in the same boat. At the moment my TFSA is 33% DBXWD and 66% STXIND. Not sure if I should keep it weighted like that or push the next R30k all into STXIND. Problem I have with STXIND is that there is that the top three holdings make up more than 50% of it.
That said, the top 3 holdings are Naspers, SAB and Richemont all with offshore exposure.
Another option is to play it safer and go with a Top40 like MAPPSG (I'm still looking for a reason not drop my RMBT40 in favour of it).
I was also contemplating going with a top 40 ETF, as a buffer to any craziness that might be introduced by going with a more specific ETF, ala STXINDI. I see there's a Coreshares Top 50, with a TER of only 0.2 - hmmmm. - EDIT: I see there's a service fee of 0.2%, but since it hasn't been around for a year yet, the full TER isn't available.
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Dividends are still taxed for overseas companies - so your only saving will be capital gains for the DBX funds, unlike SA ETF's where you obviously score on the dividend front. Just keep it in mind when deciding what's in the TFSA and what's out.
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Dividends are still taxed for overseas companies - so your only saving will be capital gains for the DBX funds, unlike SA ETF's where you obviously score on the dividend front. Just keep it in mind when deciding what's in the TFSA and what's out.
Huh, that's an interesting point that I hadn't considered, thanks for the heads up. Over 15 plus years, that's going to have a pretty substantial impact on the returns over the tax-free ideal. I suppose there's a sweet spot between the gains from being exposed to the world economy, and the loss of the dividends from said exposure. Maybe 50/50 is a bit much?
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Dividends are still taxed for overseas companies - so your only saving will be capital gains for the DBX funds, unlike SA ETF's where you obviously score on the dividend front. Just keep it in mind when deciding what's in the TFSA and what's out.
Huh, that's an interesting point that I hadn't considered, thanks for the heads up. Over 15 plus years, that's going to have a pretty substantial impact on the returns over the tax-free ideal. I suppose there's a sweet spot between the gains from being exposed to the world economy, and the loss of the dividends from said exposure. Maybe 50/50 is a bit much?
Never knew. But then the dividends from DBXWD is so little they can just as well keep it.
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Dividends are still taxed for overseas companies - so your only saving will be capital gains for the DBX funds, unlike SA ETF's where you obviously score on the dividend front. Just keep it in mind when deciding what's in the TFSA and what's out.
Huh, that's an interesting point that I hadn't considered, thanks for the heads up. Over 15 plus years, that's going to have a pretty substantial impact on the returns over the tax-free ideal. I suppose there's a sweet spot between the gains from being exposed to the world economy, and the loss of the dividends from said exposure. Maybe 50/50 is a bit much?
Never knew. But then the dividends from DBXWD is so little they can just as well keep it.
I never knew that either. Remember even dividend yields compound, so the 2% or so for DBXWD is nothing to be sneezed at. I want all my money, any reference to the foreign shares still paying divvie tax?
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A disadvantage of holding Deutsche Bank MSCI World in a TFSA account is you do not get the full benefit of not having to pay government’s 15% dividend withholding tax.
Deutsche Bank’s response to my question on how dividend withholding tax worked on its range of blue-chip exchange-traded funds (ETFs) was: "Section 64 (n) of the Income Tax Act provides for a rebate to be deducted from the local dividends tax payable in respect of a foreign dividend if that dividend was subject to foreign tax."
As far as I understand that, it means the dividend taxes are already deducted in the US or wherever, so you do not get as much tax savings from holding them in a TFSA as you would by escaping the full 15% tax on dividends from local companies.
Aside from the tax issues, the MSCI World tracker is not particularly attractive from a dividend perspective since its dividend yield is only about 1.7%, placing it fairly low when ranking ETFs by their dividend or interest payouts.
There we go, clear as mud. Might have to get some one to compare the dividends received in and out of the TFSA.
http://www.bdlive.co.za/opinion/columnists/2015/08/27/how-to-find-your-perfect-tax-free-saving-fund
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I was under the impression that if you had DBXWD (or any international ETF) in your taxable account, you would indeed pay dividend tax, but only up to 15%. Does this imply that investing offshore via these trackers means you get hit with double tax?
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A disadvantage of holding Deutsche Bank MSCI World in a TFSA account is you do not get the full benefit of not having to pay government’s 15% dividend withholding tax.
Deutsche Bank’s response to my question on how dividend withholding tax worked on its range of blue-chip exchange-traded funds (ETFs) was: "Section 64 (n) of the Income Tax Act provides for a rebate to be deducted from the local dividends tax payable in respect of a foreign dividend if that dividend was subject to foreign tax."
As far as I understand that, it means the dividend taxes are already deducted in the US or wherever, so you do not get as much tax savings from holding them in a TFSA as you would by escaping the full 15% tax on dividends from local companies.
Aside from the tax issues, the MSCI World tracker is not particularly attractive from a dividend perspective since its dividend yield is only about 1.7%, placing it fairly low when ranking ETFs by their dividend or interest payouts.
There we go, clear as mud. Might have to get some one to compare the dividends received in and out of the TFSA.
http://www.bdlive.co.za/opinion/columnists/2015/08/27/how-to-find-your-perfect-tax-free-saving-fund
Pretty clear indeed. Thanks for that. It changes my allocation, now I will only hold SA ETFs in my TFSA. I already have an interactive brokers account, and will hold VWRD in there instead. The TER is lower at only 0.25% and I'll only be paying +- 11% divvie tax. No point in paying 0.67% TER when there's no tax advantage.
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A disadvantage of holding Deutsche Bank MSCI World in a TFSA account is you do not get the full benefit of not having to pay government’s 15% dividend withholding tax.
Deutsche Bank’s response to my question on how dividend withholding tax worked on its range of blue-chip exchange-traded funds (ETFs) was: "Section 64 (n) of the Income Tax Act provides for a rebate to be deducted from the local dividends tax payable in respect of a foreign dividend if that dividend was subject to foreign tax."
As far as I understand that, it means the dividend taxes are already deducted in the US or wherever, so you do not get as much tax savings from holding them in a TFSA as you would by escaping the full 15% tax on dividends from local companies.
Aside from the tax issues, the MSCI World tracker is not particularly attractive from a dividend perspective since its dividend yield is only about 1.7%, placing it fairly low when ranking ETFs by their dividend or interest payouts.
There we go, clear as mud. Might have to get some one to compare the dividends received in and out of the TFSA.
http://www.bdlive.co.za/opinion/columnists/2015/08/27/how-to-find-your-perfect-tax-free-saving-fund
Pretty clear indeed. Thanks for that. It changes my allocation, now I will only hold SA ETFs in my TFSA. I already have an interactive brokers account, and will hold VWRD in there instead. The TER is lower at only 0.25% and I'll only be paying +- 11% divvie tax. No point in paying 0.67% TER when there's no tax advantage.
When and how do you get the 15% tax back in your TFSA that was withheld at source?
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A disadvantage of holding Deutsche Bank MSCI World in a TFSA account is you do not get the full benefit of not having to pay government’s 15% dividend withholding tax.
Deutsche Bank’s response to my question on how dividend withholding tax worked on its range of blue-chip exchange-traded funds (ETFs) was: "Section 64 (n) of the Income Tax Act provides for a rebate to be deducted from the local dividends tax payable in respect of a foreign dividend if that dividend was subject to foreign tax."
As far as I understand that, it means the dividend taxes are already deducted in the US or wherever, so you do not get as much tax savings from holding them in a TFSA as you would by escaping the full 15% tax on dividends from local companies.
Aside from the tax issues, the MSCI World tracker is not particularly attractive from a dividend perspective since its dividend yield is only about 1.7%, placing it fairly low when ranking ETFs by their dividend or interest payouts.
There we go, clear as mud. Might have to get some one to compare the dividends received in and out of the TFSA.
http://www.bdlive.co.za/opinion/columnists/2015/08/27/how-to-find-your-perfect-tax-free-saving-fund
I'm trying to read up on this but the link you posted isn't working?
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Hi guys - about to begin riding the TFSA train, and I'm wondering how best to go about splitting the various ETF's.
My thinking is this - the only real question for a TFSA is how big you're going on the international allocation. For the SA equities, you'd put the bulk in DIVTRX/STXINDI/perhaps a REIT. For the international, a good option is DBXWD (TER of 0.68%). Not sure if it's necessary to include DBXUS, but perhaps it's a good idea to have a bigger proportion of the world's biggest economy.
So, with these conditions, how much of your portfolio would you put in the international players? I was thinking of a straight 50/50, but I'm wondering if that could be favorably tweaked. As this will only be accessed in 16 odd years, I'm ultimately far more interested in the long term performance, and so want to optimize for that. Any thoughts/criticisms?
My TFSA consists of
50% DbxWD
30% CTOP50
10% PTXTEN
10% GLPROP
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My TFSA consists of
50% DbxWD
30% CTOP50
10% PTXTEN
10% GLPROP
A decent mix. A bit heavy on the large caps. I personally like to add some small/mid cap as rocket fuel for my portfolio. Also, you have a 60% exposure to foreign currencies. Ok if you are thinking of leaving SA, a bit high if you are planning to stay.
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My TFSA consists of
50% DbxWD
30% CTOP50
10% PTXTEN
10% GLPROP
A decent mix. A bit heavy on the large caps. I personally like to add some small/mid cap as rocket fuel for my portfolio. Also, you have a 60% exposure to foreign currencies. Ok if you are thinking of leaving SA, a bit high if you are planning to stay.
It won't mean anything if you leave, it's still a JSE traded stock in rands. DbxWD is exposure to outside SAs borders which is a good thing concidering where this country is going.
I won't add any small caps in a TFSA, remember a TFSA/TFSI is not a short term or trading portfolio its a tax free long term read decades portfolio you want a proven track record in there. Despite the dip coming in 2017 time in the market over the decades will make a bigger difference.
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I won't add any small caps in a TFSA, remember a TFSA/TFSI is not a short term or trading portfolio its a tax free long term read decades portfolio you want a proven track record in there. Despite the dip coming in 2017 time in the market over the decades will make a bigger difference.
Small/mid caps do better over the long term than large caps, that's why I recommended them.
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Small/mid caps do better over the long term than large caps, that's why I recommended them.
If you choose the right ones MC :P I've not been so lucky with a few. African Cellular Towers, Esor, Gooderson Leisure. On the other hand i've been very lucky with others. The successful small caps become the mid-caps and mid-caps become large caps over time...
This is off-topic but I've bought small-cap ETFs in the US after doing a little bit of homework. The international universe is like a massive sweet shop, there is so much to choose from. Except Small-cap in the US is classified as >$500m and <$500m is a micro-cap. I've been investigating a nice emerging market ETF and you will be surprised that in for example the Vanguard VWO ETF how many SA companies are included (a small feather in our caps I rate)...
Our TFSA (taking advantage of the divi tax not being applied), I am already covered by being invested in Europe and the US:
- 67% PTXTEN
- 33% DivTrax
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If you choose the right ones MC :P I've not been so lucky with a few. African Cellular Towers, Esor, Gooderson Leisure. On the other hand i've been very lucky with others. The successful small caps become the mid-caps and mid-caps become large caps over time...
I just buy the ASHMID midcap index instead of individual companies, excludes top 40 and is basically the next 60 largest companies. I also have this expensive Investec global small cap fund that I am planning to switch out for a cheap ETF equivalent soon.
This is off-topic but I've bought small-cap ETFs in the US after doing a little bit of homework. The international universe is like a massive sweet shop, there is so much to choose from. Except Small-cap in the US is classified as >$500m and <$500m is a micro-cap.
The midcap and smallcap indexes (for the US since 1971) perform equally well over the long term, just the large cap that lags.
I've been investigating a nice emerging market ETF and you will be surprised that in for example the Vanguard VWO ETF how many SA companies are included (a small feather in our caps I rate)...
Yep, SA is a very strong emerging economy, last time I checked we are the 30th largest economy in the world by GDP (PPP) out of 228.
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Once I get rid of the STXIND pain in the *ss I'll readjust to:
DBXWD (30%)
DIVTRX (45%)
PTXTEN (15%)
GLPROP (10%)
Maybe even a better idea to drop DBXWD completely and distribute those funds (maybe up GLPROP a tiny bit).
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Hamster - can't you use your STXIND as a tax break or are you going to lose more than you are prepared to lose. Most segment counters are cyclic and maybe you need to look at the share prices of a couple of counters and track the cycles which could assist as to when you enter those counters.
Also there is so much noise out in the market - FNB will say that house prices have stagnated and even gone backwards. There was an article recently where it said to build a house costs more (square metre basis) than to buy a house of similar size - strangely that's been the situation for all of 30 years anyway - if you even out the peaks and troughs. I myself have just received notification that my homeowners policy (replacement of my current premises id razed to the ground) is increasing by 11%. Strangely enough this insurance cover has doubled since 2013 so I think everybody is putting in false information into the market.
I hold STXIND but then I have held them for a good number of years so am showing + 40% share price improvement - so maybe you should reconsider selling out - but that's just my opinion.
The market also works in cycles in 2007/2008 my portfolio took a hit of some R800,000 but within 18 months the value was some R 200,000 above its highest point at the time of the crash. Investing in the stock exchange is a long term investment so stick it out
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Hamster - can't you use your STXIND as a tax break or are you going to lose more than you are prepared to lose. Most segment counters are cyclic and maybe you need to look at the share prices of a couple of counters and track the cycles which could assist as to when you enter those counters.
Also there is so much noise out in the market - FNB will say that house prices have stagnated and even gone backwards. There was an article recently where it said to build a house costs more (square metre basis) than to buy a house of similar size - strangely that's been the situation for all of 30 years anyway - if you even out the peaks and troughs. I myself have just received notification that my homeowners policy (replacement of my current premises id razed to the ground) is increasing by 11%. Strangely enough this insurance cover has doubled since 2013 so I think everybody is putting in false information into the market.
I hold STXIND but then I have held them for a good number of years so am showing + 40% share price improvement - so maybe you should reconsider selling out - but that's just my opinion.
The market also works in cycles in 2007/2008 my portfolio took a hit of some R800,000 but within 18 months the value was some R 200,000 above its highest point at the time of the crash. Investing in the stock exchange is a long term investment so stick it out
My average buying price for STXIND is more or less 7000 in my TFSA so I'm reluctant to just get rid of it and "cut my losses" It recovered quite well for a couple of weeks and now struggling to stay in the 6800 range which is frustrating. What's more frustrating is that SONA, the Budget Speech and potentially replacing Gordhan with Dlamini-Zuma are all happening in the next month... who knows what the effect will be (hopefully STXIND shoots up and other ETFs shoot down so I can reallocate at a good price :p )
Also, I don't think it belongs in a TFSA but that's just my opinion.
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HAS ANYONE HAD NFEMOM IN THEIR TFSA?
ANY REASON FOR ADDING / OR NOT CONSIDERING THIS?
:TU:
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HAS ANYONE HAD NFEMOM IN THEIR TFSA?
ANY REASON FOR ADDING / OR NOT CONSIDERING THIS?
:TU:
Not in my TFSA but in my regular ETF portfolio. If I was just starting out and didn't have local exposure through DIVTRX and STXIND already I would definitely have gone with NFEMOM.
The only reason not to own NFEMOM in your TFSA is if you are looking for dividends. It really isn't geared for it at all and tracks companies that potentially have no reason to pay dividends (like the previous quarter for example). But I like it, one of my favourites.
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HAS ANYONE HAD NFEMOM IN THEIR TFSA?
ANY REASON FOR ADDING / OR NOT CONSIDERING THIS?
:TU:
I just learned about NFEMOM.
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I just learned about NFEMOM.
Here you go (if you wanted to know how it works since Sept 2016): http://shareforum.co.za/shares/divtrx-vs-nfemom/msg16789/#msg16789
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NFEMOM come on! I am red again.
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Was the annual TFSA input limit increased in the recent budget? Or is it still R30,000 per year?
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Was the annual TFSA input limit increased in the recent budget? Or is it still R30,000 per year?
R33000 pa (R2750 pm)
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Was the annual TFSA input limit increased in the recent budget? Or is it still R30,000 per year?
R33000 pa (R2750 pm)
Thanks Hamster. I'll transfer another R3000 across poste haste.