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Where do you start with US shares

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
1nvest
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Re: Where do you start with US shares

#318547

Postby 1nvest » June 15th, 2020, 1:16 pm

gryffron wrote:BTW: Whilst I accept it may be more tax efficient to keep your US stocks outside an ISA, actually reporting foreign dividends on your tax form can be a right pain, and can be avoided completely by keeping them in an ISA/SIPP.

Never found it to be difficult myself. Just have to keep a record of the £/$ rate at the time of dividend amounts received. Tick the foreign income section, and it prompts you to enter the holdings and amount of dividends received. Little different to reporting UK dividends.

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Re: Where do you start with US shares

#318619

Postby webbm00 » June 15th, 2020, 4:53 pm

gryffron wrote:
webbm00 wrote:I've found the W8-Ben form on the EQi site but the withholding tax makes a difference on the dividend received. But as US shares typically are lower yielding this make less difference and I'm ok with lower yield shares as long as the TR is good

You may well find that you don't have the choice. Most of the UK discount brokers will ONLY allow you to buy US stocks after you have submitted a valid W8BEN. That's because it would make their admin more difficult to have to track customers who have and who haven't separately.
(Doesn't apply to UK based funds tracking US stocks)

BTW: Whilst I accept it may be more tax efficient to keep your US stocks outside an ISA, actually reporting foreign dividends on your tax form can be a right pain, and can be avoided completely by keeping them in an ISA/SIPP.

Gryff


I don't always use all my ISA allowance so they are likely to end up there.

if I buy VWRL which is quoted in GBP I assume I will get GBP dividends but will these be USD dividends with withholding tax converted to GBP or just GBP dividends?

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Re: Where do you start with US shares

#318653

Postby mc2fool » June 15th, 2020, 6:53 pm

webbm00 wrote:I don't always use all my ISA allowance so they are likely to end up there.

if I buy VWRL which is quoted in GBP I assume I will get GBP dividends but will these be USD dividends with withholding tax converted to GBP or just GBP dividends?

A reasonable assumption but wrong. VWRL (somewhat bizarrely) pays out dividends in USD. https://www.vanguardinvestor.co.uk/inve ... tributions

Unless your broker offers a USD currency account -- and always if it's in an ISA -- your broker will convert the USD dividends to GBP, at whatever exchange rate they do. US withholding tax only applies to the US holdings.

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Re: Where do you start with US shares

#318675

Postby webbm00 » June 15th, 2020, 9:18 pm

mc2fool wrote:
webbm00 wrote:I don't always use all my ISA allowance so they are likely to end up there.

if I buy VWRL which is quoted in GBP I assume I will get GBP dividends but will these be USD dividends with withholding tax converted to GBP or just GBP dividends?

A reasonable assumption but wrong. VWRL (somewhat bizarrely) pays out dividends in USD. https://www.vanguardinvestor.co.uk/inve ... tributions

Unless your broker offers a USD currency account -- and always if it's in an ISA -- your broker will convert the USD dividends to GBP, at whatever exchange rate they do. US withholding tax only applies to the US holdings.


So no withholding tax as the ETF is GBP based but the dividends will be subject to the whims of the USD GBP exchange rate.

I know this is a crystal ball type question but do we expect the exchange rate to the USD to get better after Brexit or maybe the US trade deal is done?

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Re: Where do you start with US shares

#318690

Postby mc2fool » June 15th, 2020, 10:03 pm

webbm00 wrote:So no withholding tax as the ETF is GBP based but the dividends will be subject to the whims of the USD GBP exchange rate.

No, there's no withholding tax on the dividends VWRL pays out 'cos it isn't US domiciled; being listed in GBP is irrelevant.

You're not totally free from them though, 'cos you will suffer some withholding taxes indirectly, as VWRL has to pay them on the dividends it receives from its US holdings. VWRL is Irish domiciled and there's a US/Ireland tax treaty which reduces the withholding tax on US stock dividends from 30 to 15 per cent. There may, or may not, also be withholding taxes on dividends from other countries that VWRL holds stocks from.

The dividends VWRL pays out will be subject to the USD GBP exchange rate, but of course the dividends VWRL receives will also be subject to exchange rates from their native currency to USD.

I know this is a crystal ball type question but do we expect the exchange rate to the USD to get better after Brexit or maybe the US trade deal is done?

"Better"? Better for who?

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Re: Where do you start with US shares

#318734

Postby webbm00 » June 16th, 2020, 8:33 am

mc2fool wrote:
webbm00 wrote:So no withholding tax as the ETF is GBP based but the dividends will be subject to the whims of the USD GBP exchange rate.

No, there's no withholding tax on the dividends VWRL pays out 'cos it isn't US domiciled; being listed in GBP is irrelevant.

You're not totally free from them though, 'cos you will suffer some withholding taxes indirectly, as VWRL has to pay them on the dividends it receives from its US holdings. VWRL is Irish domiciled and there's a US/Ireland tax treaty which reduces the withholding tax on US stock dividends from 30 to 15 per cent. There may, or may not, also be withholding taxes on dividends from other countries that VWRL holds stocks from.

The dividends VWRL pays out will be subject to the USD GBP exchange rate, but of course the dividends VWRL receives will also be subject to exchange rates from their native currency to USD.

I know this is a crystal ball type question but do we expect the exchange rate to the USD to get better after Brexit or maybe the US trade deal is done?

"Better"? Better for who?


Sorry I should have thought through both question more before posting. I'm trying to decide which of VWRL, VWRD, VWRP and VWRA is the best way to go from a fees, tax and returns perspective

So the difference between investing in VWRL (GBP) and VWRD (USD) is that when I trade there will be an additional exchange rate conversion for VWRD. Both are domiciled in Ireland so are treated the same from a withholding tax point of view on dividends received by them and there is no withholding tax on dividends I receive but there is still an exchange rate conversion on VWRD

As I don't need the income at the moment I could buy VWRP instead of VWRL which would remove the USD GBP exchange issue for the dividends but I'm not sure if having the dividends and deciding what I want to invest them in is better than having the exchange rate risk

The USD GBP exchange rate question was based on the rate being good for USD to GBP conversions at the moment and hence good for USD based dividends and wondering if that is likely to get worse in the future

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Re: Where do you start with US shares

#326943

Postby 1nvest » July 17th, 2020, 8:59 pm

ii cater for holding multiple currencies within the same account and provide access to a wide global range of markets (stocks). Other brokers likely also do similar but ii is one I am personally familiar with.

Selection wise, 10 stocks across 5 sectors is good enough, for instance ...

https://tinyurl.com/y5du97uz

Equal weighted = 10% per stock risk, a index such as the FT100 can hold 10% in a single stock.

Of that example set, half can be bought/held via the London Stock Exchange, so its also a 50/50 countries equal split. As others have indicated holding US stock outside of ISA avoids repeated currency conversion costs, a exception is BRK (Berkshire Hathaway) as that pays no dividends, so just the single currency conversions whenever you buy/sell.

The above link is US$ based, so the FRED https://fred.stlouisfed.org/series/DEXUSUK is a useful link for £/$ figures. For RPI inflation use the ons https://www.ons.gov.uk/economy/inflatio ... /chaw/mm23

For that 5 sectors, 10 stocks I set

GSK/AZN = pharmaceuticals
JNJ/Unilever = consumption
BP/RIO = commodities
MSFT/AAPL = tech
JPM/BRK = Banking/Insurance

as the equal weighted stock and sector diversity. Select whichever stocks/sectors you might alternatively prefer.

Many of those firms have economies larger than some countries, and with global presence. Unilever for instance sells in 190 different countries. It's also nice holding a set of stocks that are listed in the US as services such as portfoliovisualizer make charting etc. that much easier.

You'll have to fill in a W8BEN form every now and then, a relatively simple task, and that will have otherwise 30% US dividend withholding tax reduced down to 15%. US stocks tend to prefer to retain more/pay lower dividends as a tax efficiency measure, which means their stocks tend to appreciate in price more (higher yield/lower share price appreciation ... or lower yield/faster share price appreciation ... tends to wash).

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Re: Where do you start with US shares

#327088

Postby Avantegarde » July 18th, 2020, 4:24 pm

If you really must plump for the US economy, which is at the mercy of the barbarian Trump, then your best starting place is a S&P 500 tracker fund. It will be very cheap and you will be able to use it as a benchmark for any other US-orientated funds/ITs that catch your eye.


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