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Post by realisedurgency on Aug 20, 2019 18:05:22 GMT 7
Thank you Fletch for the detailed replies. I'm surprised to see that the ITs in Singapore have such low fees. And having a portfolio be simple is what I'm looking for, and again I agree that more European exposure would suit someone from Europe better.
However, I'm always very sceptical of past performance as the only rationale for choosing funds. I always think of a dice game where 6 is top percentile returns and 1 is bottom, and getting 1000s of people to roll the dice 10 or 20 times, you end up with a bell curve of performance, some will have rolled a lot of 6s and be the superstars of the game, but we know what happens if we continue the game.
Are there other reasons why you chose those particular ITs from Baillie Gifford? Could a similar portfolio be created with lower-cost ETFs?
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Post by Fletchsmile on Aug 20, 2019 19:14:52 GMT 7
Thank you Fletch for the detailed replies. I'm surprised to see that the ITs in Singapore have such low fees. And having a portfolio be simple is what I'm looking for, and again I agree that more European exposure would suit someone from Europe better. However, I'm always very sceptical of past performance as the only rationale for choosing funds. I always think of a dice game where 6 is top percentile returns and 1 is bottom, and getting 1000s of people to roll the dice 10 or 20 times, you end up with a bell curve of performance, some will have rolled a lot of 6s and be the superstars of the game, but we know what happens if we continue the game. Are there other reasons why you chose those particular ITs from Baillie Gifford? Could a similar portfolio be created with lower-cost ETFs? The ITs are listed on the London Stock Exchange. I just happened to buy them thru my broker in Singapore.
I understand your point with rolling dice. But when it comes to fund management it's not so random. A bit like a football match. If you know nothing about the teams then each has in theory and equal hance of winning as there are two teams in it, with a draw being an equal weighted probability result. So 1/3 chance each of win, lose or draw. But then if you see top of the league Man City are playing an average club in 10th position or bottom club in 20th, all of a sudden those probabilities need to change. Particularly if you know about the players, coach etc etc.
In the same way, Baillie Gifford are a quality fund management house.
The individual fund managers at BG for each fund also have long track records in the industry, so plenty of experience. For SMT, James Anderson has been managing the fund since 2000. The other 2 fund managers about 4.5 and 3 years with their particular funds, aren't that long, though if you look back thru their careers, they graduated about 20 years ago. Each fund also has a primary manager and a deputy manager.
It's worth looking at discrete performance for 12 month periods to see how often they beat their peers, as well as cumulatively. You can also look at things like their ratios for alpha (value add), quartile performance etc.
The funds have also been around for decades. MNKS for 90 years and SMT for 110 years. So again a different proposition to new/ fashionable/ unproven funds.
You can also look at things like their portfolio strategy, how they manage the portfolio, top holdings, number of holdings (eg whether concentrated for impact or wide spread for diversification) etc. Various websites like Trustnet, Hargreaves Lansdown, Morningstar allow you to look into them and read articles on what you're buying.
Part of it for me is just knowing of the funds for years and watching consistently good performance from them. Reading about them over years etc. So built up experience.
Yes you could create a portfolio of passive low cost index ETFs. But remember while they may be passive in nature, you make active choices about which to buy. So for example how would you choose a geographical or sector split in the ETFs you pick to start with? That's an active choice. Or would it be better to let the likes of BG choose those geographic splits or sector splits based on their views of global markets?
Those 3 are actively managed funds, so even if you used low cost ETFs to create say a similar weighted cheaper exposure geographically and by sector today, they will change theirs over time to suit market conditions/ views etc. How and when would you change your ETF holdings? if at all.
If someone has zero knowledge and not interested to actively choose funds, or can't be bothered, doesn't want to spend the time, picks at random, etc, then low cost ETFs are likely a better option fund.
But if someone is prepared to put in some time effort, and research, and try and identify funds or trusts with potential that can start to move the odds in your favour of not picking an average fund. That's a strategy I've followed for over 30 years. As you build up knowledge and experience you see funds that are worth paying a little more for, as they offer perhaps better opportunities for returns. Of course, I get it wrong sometimes, but overall I'd say my picks turn out better than average in the long term.
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Post by Fletchsmile on Aug 20, 2019 19:25:57 GMT 7
... worth noting also that I'm aware that other posters on here hold MNKS and SMT, and they get discussed on various threads from time to time. I know they also do their own research, form and share their own opinions etc Discussions aren't afraid to highlight shortcomings as well as positives.
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Post by eldivino on Aug 20, 2019 21:41:17 GMT 7
The ITs are listed on the London Stock Exchange. I just happened to buy them thru my broker in Singapore. For someone earning THB in TH, the only way to buy those funds would be to open an account with StanChar in SG? Are you aware of any ways to buy them in Thailand (I.e., without having to go through currency conversions), or at least a low-cost online broker (I assume a StanChar account would come with maintenance fees etc.)? Slightly related question, how do you determine in what regions you want to invest more? I understand that most passive funds take market capitalization or GBP to weight regions and countries. If you divert from that, how would you do it?
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Post by realisedurgency on Aug 20, 2019 22:11:57 GMT 7
Point taken on good track records being closer to football team success than a hot run in a casino-esque game. Not that hot runs can’t exist in football or fund management, a la Leicester and <insert lucky fund manager>. Some teams will have long runs at the top, some are almost permanent fixtures such as Barcelona and Madrid. I wish I knew more of the fund and fund manager equivalents outside of Berkshire and Warren Buffet. I guess that’s where decades of experience and research comes in handy. For someone like me with close to zero years experience how can I tell alpha from variance or luck? Let’s say I start with a couple of long term top performers (maybe some of the ones suggested), one starts to perform below the index for say 5 years the other above, it may be variance and the following 5 years their performances may be opposite. Bull markets in some sectors may change to bear markets and vice versa, or bull markets may go on and on. Would I need knowledge equivalent to a full time fund manager to properly assess such a situation? Fund managers are after all asking themselves the same questions, was our under/over performance luck or due to good/poor decisions? I know it’s guesswork and you can’t really know but the following are important questions: How many hours a week of research and reading would it take to get me up to speed? How much better are my returns likely to be? Let’s say I can get an average of 8% pa return with a lot of researching and work, and 6% pa without. 70000 * .08 = 5600 70000 * .06 = 4200 A difference of 1400. If I’m spending 5 hours a week researching that is 260 hours a year which works out at 5.38/hour. Since my hourly is a lot more than that I’m better off working overtime until my fund grows to the point where the increased return from research gives a better hourly than my day job. Feel free to update with better ballpark figures. I could be over estimating the amount of hours needed to get up to speed.
Yes you could create a portfolio of passive low cost index ETFs. But remember while they may be passive in nature, you make active choices about which to buy. So for example how would you choose a geographical or sector split in the ETFs you pick to start with? That's an active choice. Or would it be better to let the likes of BG choose those geographic splits or sector splits based on their views of global markets?
Those 3 are actively managed funds, so even if you used low cost ETFs to create say a similar weighted cheaper exposure geographically and by sector today, they will change theirs over time to suit market conditions/ views etc. How and when would you change your ETF holdings? if at all.
Good point. Investing in active funds could turn out to be a more passive form of investment than a complicated portfolio of ETFs that you have to manage.
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Post by eldivino on Aug 20, 2019 22:21:41 GMT 7
Investing in active funds could turn out to be a more passive form of investment than a complicated portfolio of ETFs that you have to manage. That’s not passive investing anymore then though. I think the idea behind passive investing is exactly that you don’t try to beat the market (by making active decisions) because the belief goes (and the research shows) that most active funds fail to outperform the market. That’s why you invest in either one All-World ETF (where you don’t have to manage anything at all) or several regional ETF (e.g., NA, EU, APAC, EM) where the only active management is by weighing the regions differently and do a regular rebalancing.
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Post by realisedurgency on Aug 20, 2019 22:32:00 GMT 7
Investing in active funds could turn out to be a more passive form of investment than a complicated portfolio of ETFs that you have to manage. That’s not passive investing anymore then though. I think the idea behind passive investing is exactly that you don’t try to beat the market (by making active decisions) because the belief goes (and the research shows) that most active funds fail to outperform the market. That’s why you invest in either one All-World ETF (where you don’t have to manage anything at all) or several regional ETF (e.g., NA, EU, APAC, EM) where the only active management is by weighing the regions differently and do a regular rebalancing.But isn't the bolded part where the unavoidable active choices Fletch was referring to slip in? At a very minimum active choices have to be made on the initial allocation and how often you will rebalance.
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Post by Fletchsmile on Aug 21, 2019 0:36:32 GMT 7
... I know it’s guesswork and you can’t really know but the following are important questions: How many hours a week of research and reading would it take to get me up to speed? How much better are my returns likely to be? Let’s say I can get an average of 8% pa return with a lot of researching and work, and 6% pa without. 70000 * .08 = 5600 70000 * .06 = 4200 A difference of 1400. If I’m spending 5 hours a week researching that is 260 hours a year which works out at 5.38/hour. Since my hourly is a lot more than that I’m better off working overtime until my fund grows to the point where the increased return from research gives a better hourly than my day job. Feel free to update with better ballpark figures. I could be over estimating the amount of hours needed to get up to speed.
Yes you could create a portfolio of passive low cost index ETFs. But remember while they may be passive in nature, you make active choices about which to buy. So for example how would you choose a geographical or sector split in the ETFs you pick to start with? That's an active choice. Or would it be better to let the likes of BG choose those geographic splits or sector splits based on their views of global markets?
Those 3 are actively managed funds, so even if you used low cost ETFs to create say a similar weighted cheaper exposure geographically and by sector today, they will change theirs over time to suit market conditions/ views etc. How and when would you change your ETF holdings? if at all.
Good point. Investing in active funds could turn out to be a more passive form of investment than a complicated portfolio of ETFs that you have to manage. Hard to say how much time to spend on these things. Depends also how much time you want to put in.
Maybe others on here can chip in with the time they spend.
Once I've selected funds and set things up though I don't make many changes. Monitoring only needs a couple of hours a month if that. Some people do less. After that its just reading what I feel like. When working full time, I spent less time. Now no longer working I spend more. But investing is also something I'm interested in generally anyway.
Investing isn't about regularly chopping and changing that's trading. You need to give your long term investments time and patience, as there'll be ups and downs along the way
Also depends how many funds you choose. If you picked say half a dozen funds, while the initial set up may take a while, monitoring doesn't take that much. Unless there is a significant reason to change/ something in the reason I originally chose to invest then I see no need to change. I'm OK with a fund having a bad year too. It happens - no fund does well all the time.
I pick active funds and then just let the manager get on with it, with just monitoring from time to time how things are going. Similar to how I would manage staff at work. Not second guessing and analysing their every move. I do use the odd passive tracker / index fund too and again once picked leave it for a while unless something significant changes.
When looking at the difference in performance it may not seem worth it for a single year. But the real differences come with compounding. That 1,400 for a single year may not be worth it. But if you're now early 30's and looking for say 30 years, it isn't just 1,400 a year or say 42k.
8% a year over 30 years will compound to over 10 times your original investment as 1.08^30 x 70k = 704k
6% a year over 30 years will compound to about 5.7 time your original investment as 1.06^30 x 70K = 402K
So over 30 years you're talking 300K difference. A few years after that you'd have double the value.
Of course, picking the wrong funds can also go the other way, and you could underperform the index significantly.
There's no one simple answer. It depends on so many variables: your aims and objectives, what you'd be happy with as a return, attitude to risk, time horizons, how much time you want to spend etc etc etc
If you want a 7% p.a. return and you make that over 5 years. You've achieved your objectives. Does it really matter what the index did? There will always be something you could have done better whichever way you go. Conversely if you aimed for a 7% p.a. return and made 5% p.a. is it really a comfort that your passive fund performed in line with the index? or even that your active fund made 5% when the index made 4%. In both those cases I would be looking into why and what I might need to change (if anything) to improve and achieve my objectives, rather than my relative performance vs an arbitrarily chosen index.
The key at the end of the day is understanding why you've chosen what you you have, and being comfortable with the decision and the results and your life in general.
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chiangmai
Crazy Mango Extraordinaire
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Post by chiangmai on Aug 21, 2019 13:01:46 GMT 7
If you're brand new to investing it can be quite a journey, without doubt, luck plays a large part. One part of the picture is the learning curve you have to climb and it can take a lot of time to understand all the components and how they fit together - the second part of the picture is the state of the market when you enter it. When you put the two parts together you realize that even slightly poor investment choices can appear to be good ones in a buoyant market, conversely, really sound choices can appear to be bad choices during a downturn. For the novice and inexperienced investor trying to separate your investment choices from the condition of the market is not easy but most likely you'll come down on the side of any loss being down to your lack of skill rather than the market itself. All of which is why, as has been said previously, you really do have to make your choices and give them time and don't do as some silly people do and constantly try to tweak things, that doesn't work, believe me! FWIW if I had to have the past five years over again I wouldn't even begin to entertain the idea of selecting my own funds, especially not when there are the likes of Hargreaves Lansdowne type sites that have already done the analysis and selection for you. Unless I was a natural whizz at fund selection and had a brain the size of a small planet I'd head for the HL top 50 list and select half a dozen that gave me global diversification, job done. Other posters here will see things differently but you must be aware that many of them have been investing for many many years, have worked in the industry for much of their lives or have brokers to guide them.
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Post by Fletchsmile on Aug 21, 2019 15:43:05 GMT 7
The ITs are listed on the London Stock Exchange. I just happened to buy them thru my broker in Singapore. For someone earning THB in TH, the only way to buy those funds would be to open an account with StanChar in SG? Are you aware of any ways to buy them in Thailand (I.e., without having to go through currency conversions), or at least a low-cost online broker (I assume a StanChar account would come with maintenance fees etc.)? Slightly related question, how do you determine in what regions you want to invest more? I understand that most passive funds take market capitalization or GBP to weight regions and countries. If you divert from that, how would you do it? You could buy such funds via any broker. SCB Singapore I use as convenient for me as: have priority banking, a relationship for many years, can borrow against them. There are no maintenance / holding fees unlike some brokers.
Others brokers such as interactive brokers would be fine. Just need someone that can access LSE for you.
You could also buy thru a broker in Thailand. The accounts are generally aimed more at Thai people, but foreigners with reasonable net worth can access. The charges for dealing are higher, but if you don't buy/sell often then that will be less important. I know Asia Plus would accept me as a client, and I could use them. I don't know what their minimum criteria are to be honest, but when I told them some numbers for me and asked if they take foreigners they quite keen.
Whichever broker you use, wherever in the world, as the ITs mentioned were in GBP you would have currency conversion costs. You could of course access European stock exchanges and invest in EUR for different investments.
As to geographies to invest. I set ranges for our investments. Bearing in mind I live in Thailand and come from UK, and may go back to the UK. I will also have Thai education fees for years to come, so have more Thai equities than most people. I also have views on particular markets etc, so adjust from time to time. My Asia exposure is high relative to most people, as it includes: Thailand (host country and where we will be for large periods), Asia, Singapore and there will be also some in global too
Here's my current matrix as an example:
%Fund TARGET Target Min Max ACT Loc Type Total Total Total TH INV&TRA 30.0% 25.0% 35.0% 33.3% GL INV&TRA 18.0% 12.0% 22.0% 19.5% UK INV&TRA 15.0% 10.0% 20.0% 13.7% AS INV&TRA 12.0% 9.0% 15.0% 10.6% EU INV&TRA 8.0% 5.0% 10.0% 9.0% EM INV&TRA 7.0% 4.0% 9.0% 4.3% US INV&TRA 5.0% 3.0% 9.0% 3.0% SN INV&TRA 4.0% 3.0% 5.0% 4.5% FR INV&TRA 0.5% 0.0% 3.0% 0.6% JP INV&TRA 0.5% 0.0% 5.0% 0.6% CO INV&TRA 0.0% 0.0% 2.0% 0.0% AU INV&TRA 0.0% 0.0% 1.0% 0.0% Grand Total 100.0% 71.0% 136.0% 99.3%
I do the same for sectors: equity, fixed income, property, multi-asset, derivatives etc. I need to be mindful that multi-asset and mixed funds will contain equities, fixed income, property etc
%Fund TARGET Min Max ACT Class Total Total Total EQU 70.0% 65.0% 85.0% 75.5% FIC 10.0% 7.0% 15.0% 7.4% PRP 10.0% 6.0% 12.0% 8.7% MUL 7.0% 4.0% 12.0% 4.6% DRV 3.0% 1.0% 5.0% 3.1% MXD 0.0% 0.0% 5.0% 0.0% GLD 0.0% 0.0% 5.0% 0.0% COM 0.0% 0.0% 2.0% 0.0% Grand Total 100.0% 83.0% 141.0% 99.3%
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Post by Fletchsmile on Aug 21, 2019 15:50:55 GMT 7
.... FWIW if I had to have the past five years over again I wouldn't even begin to entertain the idea of selecting my own funds, especially not when there are the likes of Hargreaves Lansdowne type sites that have already done the analysis and selection for you. Unless I was a natural whizz at fund selection and had a brain the size of a small planet I'd head for the HL top 50 list and select half a dozen that gave me global diversification, job done. Other posters here will see things differently but you must be aware that many of them have been investing for many many years, have worked in the industry for much of their lives or have brokers to guide them. I also use HL's top 50 list. It's by no means a be all and end all, but it's one factor I consider in choosing funds. Generally if on there it is a plus in things I consider.
I don't find their Welath 50 as useful as the W 150 list used to be with wider choices, but still refer to it. There are some odd choices on the W50 so it's not the only thing I use.
You can also look at sites like AJ Bell, Best Invest, Fidelity, etc which are other providers like HL, which all list their own top funds. Then there are sites like Trustnet and MorningStar which grade funds by stars etc. Again not ends in themselves but worth considering.
As CM has said these sites have already done a lot of analysis. You can also read why they like a particular fund and see if that fits with what you are looking for or makes sense for you. Bit like having subordinates at work do analysis and summaries of key things you need to know about as their boss. You don't want to do all the work yourself, nor re-invent the wheel
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Post by rgs2001uk on Aug 21, 2019 20:50:17 GMT 7
That’s not passive investing anymore then though. I think the idea behind passive investing is exactly that you don’t try to beat the market (by making active decisions) because the belief goes (and the research shows) that most active funds fail to outperform the market. That’s why you invest in either one All-World ETF (where you don’t have to manage anything at all) or several regional ETF (e.g., NA, EU, APAC, EM) where the only active management is by weighing the regions differently and do a regular rebalancing.But isn't the bolded part where the unavoidable active choices Fletch was referring to slip in? At a very minimum active choices have to be made on the initial allocation and how often you will rebalance. I suppose the first question to ask is, why are you considering investing in the stock market? Second question, what do you hope to gain? To answer you bit about rebalancing, dont expect all markets to behave the same way all the time. Its all to do with a balanced portfolio, look at the whole, not the sum of the parts. Not mentioned, once you have placed your bets, will you be adding to them on a monthly basis? This is only my personal opinion, but I will make it crystal clear, you can use whatever language you want, investing etc etc, you are gambling, can you live with that? You say you have 70k to invest, would it cost you sleepless nights, if after investing, your portfolio was only worth lets say 50k? I dont know how secure your job is, but at your age, you should be looking at capital growth rather than regular income, eg a pensioners portfolio will differ from a young working guy such as yourselfs portfolio. I dont know if you work for a large MNC and what type of pension they offer, if available, I would consider investing in a company pension fund. From my point of view, I would slice the investment market into the following slices, USA, UK, Europe, Asia, and Emerging Markets, I wouldnt allocate equal sharings in each market, these days I no lonegr hold Asia or Emerg Markets. Myself, I tend to stick with the tried and tested, old established Invest Trusts with a proven track record, I do concede, past performance is no indicator, I suppose it boils down to, in whom do you place your trust?
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Post by rgs2001uk on Aug 21, 2019 21:51:47 GMT 7
A quick google search gives me this, www.goodbody.ie/I dont know anything about them, but what I would be looking for is an independant, old established stockbroker firm, I wouldnt touch things such as Barclays wealth, HSBC etc etc. I understand your relucatance to travel home and seek advice, but one word cannot be over emphasised, trust, no doubt you will be given the usual bs forms to fill in, know your customer, common reporting standards etc etc, but a sit down and an explanation of what you want, and what your stockbroker can deliver is well worth the airfare cost alone, been there done that. Not mentioned, and I see it more and more these days, do you have a TIN, tax identification number? I read about farangs bitching and moaning about opening thai bank accounts, try walking in off the street in the uk and try opening a bank account, almost impossible.
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Post by realisedurgency on Aug 22, 2019 16:40:11 GMT 7
But isn't the bolded part where the unavoidable active choices Fletch was referring to slip in? At a very minimum active choices have to be made on the initial allocation and how often you will rebalance. I suppose the first question to ask is, why are you considering investing in the stock market? Second question, what do you hope to gain? To answer you bit about rebalancing, dont expect all markets to behave the same way all the time. Its all to do with a balanced portfolio, look at the whole, not the sum of the parts. Not mentioned, once you have placed your bets, will you be adding to them on a monthly basis? This is only my personal opinion, but I will make it crystal clear, you can use whatever language you want, investing etc etc, you are gambling, can you live with that? You say you have 70k to invest, would it cost you sleepless nights, if after investing, your portfolio was only worth lets say 50k? I dont know how secure your job is, but at your age, you should be looking at capital growth rather than regular income, eg a pensioners portfolio will differ from a young working guy such as yourselfs portfolio. I dont know if you work for a large MNC and what type of pension they offer, if available, I would consider investing in a company pension fund. From my point of view, I would slice the investment market into the following slices, USA, UK, Europe, Asia, and Emerging Markets, I wouldnt allocate equal sharings in each market, these days I no lonegr hold Asia or Emerg Markets. Myself, I tend to stick with the tried and tested, old established Invest Trusts with a proven track record, I do concede, past performance is no indicator, I suppose it boils down to, in whom do you place your trust?
The stock market is likely where I can get the best capital growth long term. I'm comfortable with the idea of having my 70k be worth 50k a year later. But there are numbers that would make me a little uneasy, seeing it cut in half to 35k or worse would make me nervous. I'm aware of market crash history and how markets do bounce back though.
I will be earning Thai baht, but not a great salary really and there is no pension fund available via work. I intend on using my Thai income to max out LTFs and RMFs. I will still have money to spare after that which I can use to add to my portfolio. This will require me taking a hit on currency conversions. I'm more likely to add to a portfolio on a quarterly basis as monthly the sums would be quite small.
After investing in LTFs and RMFs I will have roughly 300k baht to put elsewhere each year.
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Post by realisedurgency on Aug 22, 2019 16:51:03 GMT 7
A quick google search gives me this, www.goodbody.ie/I dont know anything about them, but what I would be looking for is an independant, old established stockbroker firm, I wouldnt touch things such as Barclays wealth, HSBC etc etc. I understand your relucatance to travel home and seek advice, but one word cannot be over emphasised, trust, no doubt you will be given the usual bs forms to fill in, know your customer, common reporting standards etc etc, but a sit down and an explanation of what you want, and what your stockbroker can deliver is well worth the airfare cost alone, been there done that. Not mentioned, and I see it more and more these days, do you have a TIN, tax identification number? I read about farangs bitching and moaning about opening thai bank accounts, try walking in off the street in the uk and try opening a bank account, almost impossible. Here is a fee comparison between brokers available in Ireland:
DeGiro haven't been around as long but have significantly cheaper fees. From trying to register online, I would need to register as an Irish resident and can't use my Thai address. But registering as an Irish resident would make me subject to higher WHT. I have an Irish tax number(PPS) but I don't have a Thai TIN yet.
Not keen to travel home for this especially. Also it depends on the difficulty of opening an account. Can that sit down be accomplished via phone?
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