00049 Short: Questions from Taiwanese investors: Are 00662's internal expenses a problem? Tax issues with sub-brokerage and overseas brokers. CLEC Investment and Finance Channel, September 29, 2023

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Hi Everyone, I Am the C-L-E-C Announcer

00049 Short Topic: Taiwan Investor Questions: Is 00662's Internal Fee a Problem? Tax Issues With Sub-Brokerage and Overseas Brokers. September 29, 2023, CLEC Investment Channel.

https://docs.google.com/file/d/19ypRsfNUkN4oMw_Lmhboo_orwgzPwr2K/edit?usp=docslist_api&filetype=msword

Hi everyone, I am the C-L-E-C announcer.

Today we discuss Taiwan investor questions: is 00662's internal fee a problem, and what are the tax issues with sub-brokerage and overseas brokers?

First look at the attached performance comparison. Do not blindly follow others, and do not repeat ignorant claims. There is a lot of nonsense outside.

For the most recent two-year performance, see the QQQ and 00662 comparison chart on the screen.

00662 performance: +82%

QQQ performance: -72%

For the five-year performance comparison between QQQ and 00662:

00662 performance: +166%

QQQ performance: -149%

Some Taiwan investors continue to question the supposedly higher internal fees of Taiwan-issued Nasdaq 100 index fund 00662.

Why not use sub-brokerage to buy QQQ directly? Should performance not be better? Or why not open an overseas brokerage account and invest in QQQ to save more fees?

To answer these recurring questions, we made a video to explain the issues clearly. In the future, if anyone has questions about this area, please watch that video.

1. If 00662 Has Higher Internal Fees, Does That Mean Performance Must Be Worse?

Fund investment performance is simply the current market price minus your purchase cost. That is performance, meaning your profit.

00662 outperforming QQQ already proves that higher fees do not necessarily mean worse performance. Considering fees without looking at the right product and actual performance is rigid textbook thinking. Performance is what matters, and performance is already after fees.

Based on the two-year and five-year price performance charts, common sense tells you the answer. If you buy 00662 with NT$10,000 and sell for NT$18,200, you make NT$8,200. If you buy QQQ with the same NT$10,000 and can only sell for NT$17,200, which one is better?

The two-year performance gap is 6%. Over five years, 00662 beats QQQ by 11.4%. Which is better? Look for yourself and do not drift with the crowd.

There is no separate issue of fees hurting performance here. Profit is selling price minus purchase cost. Fees never appear separately in your trading price. If 00662's fees harmed performance, that would show up in investment performance. Since 00662's performance is not worse than QQQ's, the fund manager's fees did not hurt 00662 performance. The fund manager has alpha and has managed it well.

When 00662 was issued in 2016, its first year or two had tracking error because the fund size was small and it also had to hedge with futures and options, so efficiency was lower. That was why I did not recommend it then.

Now the fund is larger and trading volume is bigger. The futures and options hedge is more efficient and no longer hurts tracking error; sometimes it can even improve returns.

Many people are influenced by ordinary books, rigid bookish thinking, and so-called stock market experts who do not know their own ignorance. They repeat that fees affect performance like parrots. This is not absolute; you must study and verify it yourself.

Second, sub-brokerage, overseas brokerage accounts, and even many offshore funds sold by banks, such as Franklin, BlackRock, and JPMorgan funds, generate overseas income. Taiwan's Alternative Minimum Tax applies after the NT$6.4 million exemption, and amounts above the exemption are taxed at 20%.

We Previously Discussed an Article: A Taxpayer Made NT$48 Million in US Stocks, Almost Gave It Back the Next Year, and Still Received Nearly NT$15 Million in Back Taxes and Penalties

So do not use sub-brokerage to invest in stocks and do not open overseas brokerage accounts.

Third, we also insist that people should not open brokerage accounts in the United States. In addition to Alternative Minimum Tax issues, there is also estate tax. For non-US persons, US assets are subject to a 40% estate tax. If you pass away, it is very difficult for family members to cross the ocean and claim the estate. Many people eventually give up US estates because it is not easy: many documents, lawyers, certifications, and fees can exceed the asset value.

Summary:

1. Taiwan investors should use Taiwan dollars to invest in Taiwan-issued 00662 and 00646.

2. Taiwan investors should not use sub-brokerage to invest in US stocks, should not buy offshore funds, and should not use a VPN to open US brokerage accounts. These create trouble and do not provide special benefits.

3. Buying Taiwan-issued 00662 and 00646 directly in Taiwan lets you later pledge assets and borrow for retirement living. It has many advantages: no need to leave your home market, supports regular investing, avoids those tax and estate-tax problems, makes trading easy, has low fees, and can be pledged.

Investing in 00662 and 00646 in Taiwan has many advantages. Stop thinking about sub-brokerage and overseas brokers.

That is today's sharing.

Thank you for watching. If you like this topic, please like, subscribe, share, and repost. You are also welcome to share your thoughts and experience in the comments.

Draft: James.

Thank you for your support. See you next time.