YouTube Comment Question: No Fund Has Long-Term Performance Better Than QQQ. Is It Better to Open a U.S. Brokerage Account?
The reply compares buying QQQ through U.S. brokers, Taiwan sub-brokerage, and Taiwan fund platforms, including fee, estate tax, and overseas income considerations.
YouTube comment question
[No fund has long-term performance better than QQQ. Is it better to open an account directly with a U.S. broker? What should you pay attention to when opening a U.S. brokerage account?] Easy Investment Chat CLEC Investment Channel. Post date: July, 07, 2020
Question:
Hello Teacher James. According to the performance charts you showed in class, long-term performance is still better for QQQ than for Franklin Technology Fund and JPMorgan growth or technology funds. QQQ also does not charge management fees, transaction fees, and other expenses. If I usually use Firstrade or eToro in Taiwan to buy U.S. stocks and index funds for long-term investment, should I just invest all available money in index investing and not buy Taiwan funds? What is your suggestion?
Reply:
Correct. In terms of performance, opening a U.S. brokerage account directly and buying QQQ has the best performance. I do not recommend eToro because it has no protection. I prefer Charles SCHWAB, and Firstrade is also acceptable. If you have not yet opened a U.S. account, I strongly recommend opening a Charles SCHWAB account.
Second is buying QQQ through sub-brokerage at a Taiwan securities firm.
The difference between the two, besides Taiwan charging transaction fees, is that assets in a U.S. account may be taxed at 40% if they become an estate. Taiwan sub-brokerage does not have this estate-tax issue. Estate tax may not be the main short-term consideration, but it is worth paying attention to long term.
If you use CHARLES SCHWAB, you may be able to buy ordinary funds registered outside the United States. Franklin also has non-U.S.-registered funds. This can avoid the U.S. estate-tax issue. But performance is the same as buying in Taiwan and will not beat QQQ, so there is no need to do this extra step.
Also, you can open a joint account. If one spouse passes away, the other can handle the account, and may, I only say may, avoid estate issues. Although U.S. tax law says that when one party in a joint account is gone, estate tax should still be paid first before it is legal. Some people are not discovered and have already transferred assets away. But I must state that this is not legal.
In short, asset issues do not have simple solutions.
Taiwan sub-brokerage has transaction-fee issues, but does not have U.S. estate issues, Taiwan overseas capital-gains issues, or overseas-asset repatriation issues.
Opening an account in the United States is more efficient for investing, but it involves Taiwan overseas income issues, overseas-asset repatriation issues, U.S. estate-tax issues, and one-third withholding on dividends.
Opening an account directly in Taiwan with Franklin or FundRich to buy funds has somewhat lower performance, but can have no transaction fees or custody fees, dividends are not withheld by one-third, and there are no overseas-asset issues or U.S. estate-tax issues.
The above analyzes the pros and cons of different investment channels. Use it as a reference and see which method suits you better.
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