11 Jan 2021
Does buying and selling ETFs work similar to stock, ie buy low sell high? What are the indicators to consider when choosing ETF? Expense ratio? Any indication when to exit or when it fails?
Is the 30% tax significant? Or is Ireland domiciled ETFs at 15% better? Why still buy US ETFs though?
Generally, people advocate buying and holding ETFs as this often increases your chances of coming out profitable at the end of the holding period. Trading ETFs is possible but generally less recommended. This is largely due to the smaller moves that ETFs tend to make compared to their constituents (which is an important factor in trading as it drives fast returns).
In considering ETFs, for me I choose based on holdings, liquidity and expense ratio. If you're doing index investing, you can just look at expense ratio and liquidity since the holdings are largely the same as long as the ETFs track the same index.
Regarding tax implications, I do think most people will recommned the Irish domiciled versions such as CPSX and IWDA. Some people still choose to buy US based ones (VOO, IVV, VXUS, VEU) due to higher liquidity in general or broker limitations (FSMOne, TD Ameritrade, Tiger Brokers all have no access to UK markets). Another possible reason to buy US ETFs outright could be because there are just no Irish-domiciled variants of these ETFs. The ARK funds or ICLN are some examples.
Thanks for the good info everyone! Just wanted to value add to other readers. A common interest people have is to advocate and go for Irish Domiciled ETFs, as Chris mentioned, to reduce tax. And that is fantastic!!
However, do remember the dividends on many ETFs such as ARK funds, S&P500 ETFs or QQQ do not actually have that high dividend yield. The 15% tax relief switching from US to Irish ETFs may save less than you think. Of course, saving something is better than nothing right?
However, do remember to compare the spread between bid/ask price (sell/buy)
The % difference may shock you that you may actually be saving much more on ETFs with better spreads than focusing on reduce tax. Of course, if you can find the best of both worlds, that will be fantastic! So, do compare ETFs form both countries and calculate what's best, it all depends on what funds or indexes you are trying to track as well.
Happy investing/trading everyone!
Yes works the same way, buy low sell high. THe only difference is the risk is more spread out since ...
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