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UK citizen, long term HK resident - want to buy EFTs

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  1. #1

    UK citizen, long term HK resident - want to buy EFTs

    I'm a long term (non permanent) HK resident with a British passport and I want to invest in some ETFs as I have money collecting no interest in the bank. I'm wanting to do long term investments in S&P 500 ETFs for retirement (I'm in my 30s now) and I plan on putting around 5k into the investment each month. I'm a total noob at this.

    Any advice on a broker to use? I've heard good things about Charles Schwab but I hear it's more set up for US investors (?). I've looked into IB but I'm not entirely sure what I'm doing. I'm also a bit unsure about the HK tax situation - how much can I invest before I need to start paying HK tax?

    Thanks!


  2. #2

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    Talking about HK tax, does your income fall into or close to standard tax rate and if so, have you set up TVC account to save tax?

    For 5k monthly investment, i would rather invest through TVC act first and claim tax benefit than invest directly in the market, TVC act do have investment choices for global/USA and other region centric funds albeit at a higher cost but savings on tax more than compensate for it..


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    Quote Originally Posted by ndt:
    Talking about HK tax, does your income fall into or close to standard tax rate and if so, have you set up TVC account to save tax?

    For 5k monthly investment, i would rather invest through TVC act first and claim tax benefit than invest directly in the market, TVC act do have investment choices for global/USA and other region centric funds albeit at a higher cost but savings on tax more than compensate for it..
    I would not recommend TVC. The management fee more than negates the tax saving, especially if you are young.

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    with TVC, you get about 17% discount/return. not bad for $60k investment every year


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    Yea you save 10k a year on tax right if you put 60k in? Still most are insurance linked so would take at least 7 years to show a positive a return on the investment. I still think its worth it


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    Quote Originally Posted by Trebor:
    Yea you save 10k a year on tax right if you put 60k in? Still most are insurance linked so would take at least 7 years to show a positive a return on the investment. I still think its worth it
    You are confusing insurance linked investment products with TVC account which is basically another MPF account with same/similar choice of funds for investment.

  7. #7

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    IBHK is the broker i use and I am happy to recommend, PM me for referral link if you want which would give us both some bonus. I have no experience with Schwab, but one small piece of information to note, IBHK will pay you 4.33% on any unused USD funds in your account, whereas Schwab will pay you only 0.45%. What I mean is just transfer your HKD to IB, convert it to USD ready for investing, but then if you dont invest and just leave it sitting there they pay you 4.33%. So already you are winning just opening an account and transferring some money in.

    For more advanced investing and leveraging, IBHK also offers the best margin rates. For example, you can transfer HK$1000 into your account, then buy $5000 worth of stocks, you have just leveraged 5 times and you have taken out a $4000 loan with IB! This is all automatic and seamless, gives you 5x the profit (or 5x the loss). IB charge very competitive interest rates on this $4000 loan. Its even cheaper than many banks mortgage rates. For example, I have mortgages in Australia for property I own, I pay 6% interest rates in Australia, but I can get IB margin loan in AUD at 4.713%. So I max out my IB margin to repay my Australian mortgage. Its all in AUD so no FX gain/loss to consider at all and a very simple cost saving.

    Even transferring money in to IB from HKD bank account, transferring out to overseas bank account, no fees at all from both sides and great FX rates. This is why when someone ask on geoexpat whats the best way to send money overseas, so many replies will be IB even though this is not the main purposes of IB.


  8. #8

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    Quote Originally Posted by ndt:
    You are confusing insurance linked investment products with TVC account which is basically another MPF account with same/similar choice of funds for investment.
    I am, but both qualify for the deduction.

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    Quote Originally Posted by aw451:
    I would not recommend TVC. The management fee more than negates the tax saving, especially if you are young.
    Depends on invidual timeline, it does negates tax savings in very long term but if we base on assumption many/most expats do not end up staying in HK very long term and TVC gives flexibility of cashing out anytime when leaving HK, it does work.

    My understanding is 17yr is the breakeven period between tax savings and additional cost of investing in TVC based funds (im taking roughly 10k tax savgins/year vs 0.75% (additional) expense ratio on TVC for reference).

    https://www.nerdwallet.com/article/i...und-calculator

    Now factor in reinvestment of 10k (saved via tax) in open market ETF via IB etc and total return on that will take that 17yr sweet spot even further..

    Bottomline, if you are not planning to stay in HK beyond 10-15 yrs, TVC is a better choice..
    bdw likes this.

  10. #10

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    Quote Originally Posted by ndt:
    Depends on invidual timeline, it does negates tax savings in very long term but if we base on assumption many/most expats do not end up staying in HK very long term and TVC gives flexibility of cashing out anytime when leaving HK, it does work.

    My understanding is 17yr is the breakeven period between tax savings and additional cost of investing in TVC based funds (im taking roughly 10k tax savgins/year vs 0.75% (additional) expense ratio on TVC for reference).

    https://www.nerdwallet.com/article/i...und-calculator

    Now factor in reinvestment of 10k (saved via tax) in open market ETF via IB etc and total return on that will take that 17yr sweet spot even further..

    Bottomline, if you are not planning to stay in HK beyond 10-15 yrs, TVC is a better choice..
    I would agree with this. In summary, TVC is questionable for local HK'ers looking to save for their retirement in HK. There are pros and cons, need some deep analysis and there are arguments both ways whether to do it or not. But for expats in HK for less than 10 years (also for locals planning to leave HK permanently in the next 10 years), its a simple no brainer and you absolutely should do the TVC. This is a loophole the government should close but for whatever reason they havent, fantastic free "fuck off" gift money from the government for expats and anyone planning to get out of HK in the next 10 years, crap for locals and anyone planning to stay and retire in HK.

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