Investing for Anyone: a low-stress and effective way to invest your savings | Hacker News Reader

Investing for Anyone: a low-stress and effective way to invest your savings

blog.strnisa.com

13 pointsstrnisa8 comments

Great post. A couple questions:

1. Stop losses seem to work [1]. Would it make sense to update your strategy accordingly -- even on indices?

2. Research from the Wharton School of the University of Pennsylvania [2] shows that the buy-and-hold returns of the 500 original firms outperformed the returns on the continually updated S&P 500 index. Could we push the low-stress model a step further and buy the content of current indices instead of the indices themselves?

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=968338

[2] https://rodneywhitecenter.wharton.upenn.edu/wp-content/uploa...

Thanks for sharing this info! I'll look into it.

There is some bad advice in here if you're in the UK. The worst is:

> The bonds, too, should be bought through ETFs rather than directly.

UK gilts are free of CGT, but only if you hold them directly. If you buy an ETF that holds gilts you'll be paying unnecessary tax.

But also:

> Have various other properties, like [...] are accumulating (if possible).

If you buy an accumulating fund then you don't get to use your dividend allowance, but the accumulated part is still taxed as income, which you have to break out from the capital gain and pay tax on separately. So you're making your taxes more complicated and (unless you're already using your dividend allowance elsewhere) you're paying unnecessary tax.

I don't see how you're making your taxes more complicating by accumulating: you have literally nothing to declare every year (at least in France) until you actually sell.

No particular comment regarding the lost dividence allowance -- I was not aware of it.

In the UK, if you buy an accumulating ETF, then the dividends that your share of the ETF receives are considered to be income to you, even though it is automatically reinvested and not directly paid out to you. And thus you have to pay income tax on the dividends that you never see, which is more annoying to calculate than if you just pay income tax on dividends that are directly paid out to you.

And when you finally come to sell, your capital gain calculation is complicated because you now have to account for all these small purchases that you never directly made.

I was not aware of that, thanks for sharing. That does seem to make things more complicated.

Yes, various details depend on the tax juristiction. Thank you for pointing out UK specifics. In the UK, there are also ISAs, which can be used to reduce tax on investments.

For example, accumulating ETFs make sense in many EU countries, because often there is no dividend allowance and so dividends just gets taxed as income.

Several countries also have a system by which the capital gains tax decreases with the length of the investment, which means that accumulating ETFs make even more sense in that case.

He did qualify his selections for being domiciled in Ireland. I think the taxation rules are different for him because of this.

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