Great Option For British Investors: HSBC’s Tracker Index Funds

If you haven’t figured this out by now, let me share one of the most important things everybody should know: The world is full of people who would sell you toe nail clippings and magic cat dung… if they could get away with it.

Unfortunately, the financial service industry breeds more of those opportunists than any other sales field.  And they can skillfully disguise feline faeces to look (and smell) sweeter than a bouquet of spring flowers.

As a young investor, you can’t afford to put some of these products on your dinner plate – not if you eventually want to grow wealthy.  I’m a high school personal finance teacher who built a million dollar investment portfolio by the time I was 38 years old.

Read The Full Article at SavetheStudent.org


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Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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10 Responses

  1. Mike Kovacs says:

    Andrew, thanks for all your hard work. However, I have found a rather large and important missing point in all your collection of work for expat investing, particularly for expats living in the UK. The UK has a rule regarding offshore investments, so as an expat trying to maintain a passive portfolio in Canada, I am at a massive disadvantage. If I sell any of my portfolio positions to rebalance, my gains will be taxed as income; and my losses will not act to reduce my gains (i.e. they aren’t seen as capital losses offsetting capital gains). This is the case for any “non-reporting funds”. The UK tax authority lists which funds are “reporting”, which effectively means those funds qualify to be recognised as Capital Gains and Capital Losses, but actually there are very few international funds that meet that criteria.

    I’ve been looking into this problem for weeks, and I’m at a loss to find a way around this. Did you have any comments, or did I miss something in one of your books?

    Thanks very much.

    • Mike,

      If you are an expat, and your money is with a brokerage domiciled in a capital-gains free jurisdiction, then you would not be liable for UK capital gains incurred while you were an expat.

      Cheers,
      Andrew

      • Mike KOVACS says:

        Thanks Andrew.

        I think what you’re saying, without saying it explicitly, is to move the passive investment accounts to a capital gains free jurisdiction, ie out of Canada. That’s not extremely ideal, as I would prefer to keep my money in Canadian dollars, and I don’t have the funds for the right people to do this kind of thing…

        Apologies if I’m not understanding this correctly though.

        • Hi Mike,

          I’m a bit confused.

          1. What’s your nationality?
          2. Where do you currently live?
          3. How and where (exactly) is your money invested? (brokerage and exchange used)

          Cheers,
          Andrew

          • Mike KOVACS says:

            Hi Andrew,

            Sorry for the confusion. I have a few conversations going on to try and understand this – – no luck yet, but clearly I’m accidentally assuming everyone has details they don’t 🙂 answers below.

            1. Canadian nationality
            2. Currently in the UK.
            3. Money in both registered and TFSA accounts at Questrade in Canada, mostly in ETFs based on the TSX, reflecting a passive portfolio. None of the ETFs are listed on the UK HMRC’s “reporting funds” listing, which means capital gains from these funds are taxed as Income tax, and capital losses cannot be used to count against capital gains.

            Best link regarding this challenge: https://webforms.ey.com/Publication/vwLUAssets/ey-uk-reporting-fund-status/$FILE/ey-uk-reporting-fund-status.pdf

          • Hi Mike,

            This changes everything.
            If you reside in the UK, you should add new investments to a Vanguard UK account and it will be taxable under UK laws. You’ll have to keep your TFSA where it is, or cash it in, if you plan to never come back to Canada again. You might not be able to legally rebalance any RRSPs either (if you have money in such a tax-deferred plan). For tax purposes, you’re basically a Brit now, living in the UK, and subject to their tax laws.

            Cheers,
            Andrew

  2. Mike KOVACS says:

    Thanks for confirming Andrew.

    This is what I suspected. It’s not very clear from your literature that expats in the UK are unable to maintain a balanced passive portfolio in their home country after they leave, particularly because of the reporting funds / offshore funds tax regime of the UK. I was hoping that meant there was some obvious solution that I was missing. Perhaps this is a big disclaimer to add to the relevant chapter in your book?

    Otherwise, I already have been adding new funds to a UK based portfolio; just sad that my Canadian portfolio will go unbalanced indefinitely, and that I wasn’t clever enough to sell the hand full of stocks and rebuy in a UK tax free wrapper, before becoming non resident in Canada.

    • Thanks Mike,

      You’re right. The book isn’t perfect. But I hope it was able to help you a little bit. Don’t feel too badly about not being able to rebalance your Canadian portfolio. Overall, it will get slightly riskier over time, as the equity allocation creeps up. But…it could also end up making more money as a result. And you could consider your overall allocation as the true measuring stick of your asset allocation. For example, assume you have $100,000 in Canada, split 60% in stocks, 40% in bonds. Without the ability to rebalance, you might end up with 70% in stocks and 30% in bonds in a few years. That’s not such a big deal if you consider the combined allocation of your UK and Canadian-based portfolios. By going slightly heavier in the bonds in your UK account, for example, you could maintain the combined allocation you are seeking (assuming, in this case, 60% stocks, 40% bonds) when you see what you have in equities (combining both accounts) with what you have in bonds.

      Cheers,
      Andrew

      • Mike Kovacs says:

        Thanks a bunch Andrew.

        I’ll bear this in mind; and I have a few discussions lined up in the short term with Objective Financial Partners and one particular robo-advisor in Canada, looking at what the options are for building that more tax-sensible portfolio out of Canadian funds (i.e. finding ETFs to make a portfolio that will be taxed as capital gains and losses rather than income tax in the UK). When I get the results of those discussions and make a decision, I’ll try to come back and share. Surely I’m not the first Canadian in the UK with a passive portfolio in Canada — so this problem MUST be more wide-spread than existing internet blogs have lead me to believe.

        Cheers,

        Mike

      • Mike Kovacs says:

        Sorry for the two posts in one day Andrew.

        Today I spoke with one of the financial planners you recommend, and the outcome was rather interesting. They were not aware of this tax implication I’m talking about, despite having clients in the UK; and I sent the EY reporting fund status document to explain properly (https://webforms.ey.com/Publication/vwLUAssets/ey-uk-reporting-fund-status/$FILE/ey-uk-reporting-fund-status.pdf). They will be looking into this in the near future, for obvious reasons.

        Similarly, my experience with trying to get an adviser in the UK (even when they claim to be experts in international matters) has been surprise at this offshore funds tax regime that I’m asking about. Some have said “We can look into this for you, and then help you after we figure it out”; or they have said “We think your situation will be too complicated for us to handle”. Smells fishy…

        I’m still shocked at the lack of awareness at this. My current way forward is either (1) to see what kind of portfolio WealthBar can build from the reporting funds list, so the portfolio can be rebalanced and not taxed as income while I reside in the UK; or (2) I may take your advice regarding an unbalanced portfolio and simply let it sit there… In that case, I suppose I’d be saving the small fee from WealthBar.

        Thanks again for your insight.

        Cheers,

        Mike


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