The Foreign Stock Market Index That’s Priced To Jump

snake-wine

“This give you strong sex,” said the grinning vendor with just two front teeth.

He held up a large jar. A coiled snake was in it.

I picked up the jar and wondered. Singapore isn’t just a modern city-state. It’s a futuristic image of what the world might become.

So it’s strange that in some colorful corners of this Jetsons-like city, pickled snakes might top Viagra.

This was one of my first impressions of Singapore when I moved there in 2003.

Image by Pixabay

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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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22 Responses

  1. karl Philip says:

    just working my way thru your Global Expat Guide to Investing and
    your blog on Assetbuilder where you profile for Singapore
    iShares MSCI Sin Index ETF- lam curious why not going
    direct to buy at the SGX the Straits Times Index or the Nikko AM
    (being pretty much the same with less liquidity??? – Being
    Toronto based, I am desperately trying to avoid/minimize any
    USA exposure…. thanks KP

  2. Shaun says:

    Hi Andrew, interesting article! I’m not sure if I share your optimism regarding Singapore though…as a Singaporean, I greatly doubt we’d be able to carry on the amazing legacy of the last 40 years without stumbling across the pitfalls that many city states face…

    As a 26 yo Singaporean currently working in Singapore with long term plans to retire overseas (possibly in your home country Canada, though still not sure), what do you suggest in terms of domestic vs international equities allocation?

    Currently, equities-wise, I’m 33.3% invested in the STI index (ES3), and 66.6% invested in the Vanguard world stock index (VWRD). Does that seem appropriate for you, or too world index heavy?

    Also, regarding the bond component of a person’s portfolio; should that be invested solely in your local country’s bond index, or should it be split domestic/international, mirroring the equities split?

    Would appreciate your advice on this!

    • Hi Shaun,

      Considering that you may move overseas, I would say your percentages are too Singapore-heavy. As for the bond index, you have a different circumstance. As a Singaporean, you will receive some money from CPF. You could consider that bond-like. As such, you could either go with international bonds or avoid bonds completely, if you’re going to stay in Singapore and continue contributing to CPF.

      Cheers,
      Andrew

  3. Sander says:

    I Invested in iShares MSCI Singapore index traded on nyse and now see there was tax witheld on dividends paid out. This made me realise I dont understand differences in dividend taxes per country or how works in case which for non-us stocks are traded on us based exchange. Do you know good sources of information on dividend taxes per country?

    Thanks very much

  4. Jordan Heise says:

    Hi Andrew,

    I’m a Canadian investor, interested in investing in Singapore, however I’m having a difficult time finding an ETF that tracks it’s market. Do you know who might offer an ETF that will get me this exposure?

    Thanks,
    Jordan

  5. Sander says:

    Andrew,

    Living in SG I purchased the ishares Singapore ETF on NYSE via Saxo. Despite non of the stocks being American, 30% of the dividend is withheld. Is there no way to avoid this? Do you know how much that adds to the total cost of the ETF?

    I avoid buying US based funds for this reason, and because of the inheritence tax, as you point out many times in your book (if there is an alternative outside US that is).

    cheers!

    • Hi Sander,

      Here’s the one you should buy. It trades on the Singapore exchange: http://www.spdrs.com.sg/etf/fund/fund_detail_STTF.html#

      Cheers,
      Andrew

      • Sander says:

        Thanks. What REIT fund would you advise that minimizes tax withholdings? I was interested in REET and some other US based high income funds, but realize the 30% withholdings are applicable there too.

        • Hi Sander,

          I don’t know your country of preference. But here’s a global REIT ETF that would not attract U.S. estate taxes. https://www.blackrock.com/ca/individual/en/products/239558/ishares-global-real-estate-index-fund

          Cheers,
          Andrew

        • Sander,

          Incidentally, The REIT ETF that I linked has 52% exposure to the U.S. REIT market. The rest is allocated internationally, based on global market capitalisation. How it’s taxed depends on your country of residence. Those residing in Singapore would pay 15% withholding taxes on the interest. This money would be taken at source. That’s as low as you will find anywhere, with a non synthetic product.

          Cheers,
          Andrew

          • Sander says:

            Andrew,

            Thanks for taking time to answer. I do have another question: why would the withholding be just 15% while I see Saxo withhold 30% of dividends paid out? I am indeed living in Singapore.

            That CGR looks good except that the expense ration is 0.72% compared to 0.14% for REET. I wonder if that will weigh more than the tax benefit.

            It’ been hard to choose funds, taking costs and taxes both into consideration…

          • Sander,

            I’m sorry, I can’t recall your nationality. If you are not American, your biggest threat will be U.S. estate taxes for a U.S. domiciled product. I have no idea where REET is domiciled.

            If you are being charged 30% withholding taxes for a Canadian dominated ETF (such as the one I gave you a listing for) then Saxo is charging you too much. You would need to get on the phone and sort that out.

            Cheers,
            Andrew

          • Sander,

            I just looked up that ETF (REET). It’s U.S. domiciled. If you own this product, sell it. Don’t buy a U.S. domiciled ETF if you are not an American, unless you are living in a tax jurisdiction (like Canada) which has an agreement with RRSPs and other tax deferred accounts. Otherwise, your heirs will be very upset with you. https://andrewhallam.com/2014/01/expat-index-investors-should-duck-u-s-estate-taxes/

            Cheers,
            Andrew

  6. Sander says:

    Hi Andrew,

    I’m Dutch. I do not own REET but do have small positions in 3 US domiciled ETF’s which I am looking to switch to similar funds outside of US. Your input has been very helpful, thank you.

    You’re right, Saxo charged 30% for US fund, not Canadian – got mixed up.

    cheers,
    Sander

    • Vig Lacera says:

      Sander, I have an account with Saxo in Singapore. I have Canadian-domiciled ETFs. Saxo has been charging me 30% withholding taxes on dividends. I pointed this out to them, that the rate should be only 15%. They dismissed me, dodged the issue, then referred me to their “tax recouping specialists.” Basically, they’re telling me that I need to hire a third party to collect the overtax that Saxo shouldn’t have been charging in the first place.
      As soon as I move to a region where I can open a TD International or other account, I’m pulling the plug on Saxo and their amateur hour nonsense.

      • Sander says:

        Thanks for sharing that.

        Saxo were so very helpful before opening my account, but now so much less helpful in explaining their tax witholdings, after having poured money in (typical).

        Efficient platforms are hard to find in SG it seems. I also invest via a Dutch service which has a just 3 index funds, but manage to get some or all dividend tax back from countries which Holland has a tax treaty with (which is quite a few) and that saves about 0.4% per year ( while the funds cost 0.5% per year, and 0.3% per buy or sell transaction). Dividends are automatically reinvested. My Saxo costs will be way higher, while many ETF yearly costs are low, the Saxo transaction costs and dividend withholdings do add up.

  7. Sander says:

    Andrew,

    On the topic of dividend withholdings again, do you know approximately how much would be withheld for a world index fund, domiciled in say UK… Or Canada for that matter. I am Dutch and living in Singapore. I ask because I in part invest via a Dutch index fund which in turn invests in a Northern trust in fund which follows MSCI world index, and costs total of 0.5% per year. They manage to minimize dividend withholding because Holland has tax treaties with kany countries, and estimate the benefit of that to be 0.47% per year.

    I also trade ETF’s via Saxo. Some ETF’s, from Vanguard for example, have lower total costs, but wonder how much dividend would be withheld for a similar world index, and how much “extra cost” that might represent. Trying to fugure out which is cheapest after taxes. Despite reading as much as possible I’ve been unable to figure this out. Any insight is much appreciated.

    Thanks 🙂
    Sander

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