Tax Efficient Geographically Diverse Investing Strategy

By Arvalarva (Own work) [CC0], via Wikimedia Commons

Sleep per Day: (Target) 7h30m / day (Actual) 7h29m / day (97 day average)

I mentioned that I prefer Divided Wide Moats versus Non-Dividend Wide Moats even though a lot of the returns is consumed by the 30% withholding tax I have to pay as a non-US citizen.

I also mentioned that I like to be geographically diverse with my investments.

And I realized both preferences don’t need to be mutually exclusive.

What if for my dividend growth stocks I only invested in Non-US Dividend Wide Moats (specifically HK and UK, which has 0% dividend withholding tax) and for US stocks I invested in Non-Dividend Wide Moats?

So something like (hypothetical portfolio):


[50% Dividend Growth]

British American Tobacco – UK (12.5% weighting)

MTR Corporation – HK (12.5% weighting)

Hong Kong Exchanges and Clearings – HK (12.5% weighting)

Cheung Kong Infrastructure – HK (12.5% weighting)

[50% Non-Dividend]

Berkshire Hathaway – US (12.5% weighting)

Markel – US (12.5% weighting)

White Mountains – US (12.5% weighting)

Alleghany – US (12.5% weighting)


 

It’s an intriguing concept.

But of course, in terms of execution I won’t exclude US Dividend Growth Wide Moats. If the post-tax potential returns is higher than my conservative discount rate, it should still be captured.

It’s just that whenever stocks that fit the aforementioned criteria (Non-US Dividend Growth Wide Moat and US Non-Dividend Wide Moat) are available, I’d be willing to bend my max. 6.25% weighting rule to overweight the stocks. I’m also open to the idea to sell existing stocks which require hefty dividend withholding tax to make such overweight purchases if cash runs out.

[Disclaimer]

Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)

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