In Canada, in a cash account, 50% of the capitial gain will be added to your income and then be taxed at your personal marginal tax rate (higher total income, higher marginal rate). In a tax-deferred retirement account (similar to 401K), the amount you withdraw from the account in a particular year will be considered your income, and then be taxed at your personal marginal tax rate. In both cases, personal marginal tax rate can be anywhere between 20% to 45% depending on how high your yearly total income is.
That’s why 20s/early 30s is NOT the time for sacrificing your life working like a dog for money. Youth is our best leverage. Live your youthful years to the fullest and worry about money starting from mid-late 30s. People who tell you men’s value peak at 40s have no idea of reality.
I am 38 y old and I was living from paycheck to paycheck. So I have started investing from 0 eurs, now I am about 35k, it is going slow, but the more I have the more I want to save and invest. Some months I can contribute 1000 euros, some none. But hey that is life, it is never too late learning to invest smart. Cheers❤
It is 1 year in Slovakia. I hope it stays this way. I guess, politicians make law for themselves in the first place. We don't pay VAT on gold, but on silver yes. 🤔
I felt the same way when I was younger. The solution is to delay gratification and “front load” your investments, to have the max amount growing for as long as possible. I went minimalist for 3 years, cutting expenses, not going out, and worked overtime every week. This let me get to $100k in 3 years.
@@epbrown01 That is excellent planning ahead, good on you & I hope it works out well. I am not younger anymore, however now I am now in a position for the first time in my life to consider these extra strategic options. Yesterday was the best day to start, today is the next best day to start. I made that choice a few months back. I really enjoy buying nothing except essentials & that includes shares. I can't complain even though my investments are minimal in comparison to yours. I already know to not compare, it kills any joy I have from seeing my £50 up on my investment so far :)
@@epbrown01I’ve been doing the same thing. Cut social expenses greatly, selling back all of my vacation time for 5 years, and investing it all. I need to make up for time I took for granted. It’s working so far. Good luck to you.
I put in 20k into various assets three years ago and flipped into over six figures and still going. I’ve always been an advocate of investing because it has been rather rewarding. I hope to attain financial freedom soon. One more thing, I always look forward to your content brother, keep up the good work.
I invested in some stocks myself using pure speculation. Long story short, I blew my account and lost it all with one wrong move. Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $10k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now with over 81k in roi, I sit back and just reinvest at intervals while I handle my other businesses.
Inflation is typically compounded over time. This is similar to how interest compounds, where each year's inflation rate builds upon the previous year’s inflated amount.
In Hungary you have to "lock up" your insvestment account for 6 years (you can trade on the account but you cannot withdraw a penny), then you get 0% tax. It is a great way for long-term investment
I like the construct however I have low trust in the government they keep it up. There is a history of violatoon of terms from their side. They may change it when they need the tax.
5 месяцев назад+4
If they do indeed keep these rules, the system is fantastic for investors!
Yeah this system is pretty much good idea, however the same government nationalized private pensions 13 years ago to the state pension. So I am somewhat sceptic, and keeping other options alive due to lack of trust.
@@Daikini0that is true indeed, and I have the same fear. Hungarian government has not been the most trustworthy in the past decades. I remember having had to fight to keep my private pension fund back then. It is a shame.
5 месяцев назад+1
Wow that sounds truly insane. Got to diversify your private retirement savings in some way then I guess?
I am 44 years old and I currently have €3 million invested in a Vanguard global ETF. I withdraw 3% per annum (€90,000), adjusted for inflation each year. Hopefully this will last forever, but if the market crashes I have 4 years cash available.
@@moneymo6417 During my 20s and 30s I saw the money rolling in so I worked like crazy to keep my clients happy. I walked around Mayfair in London 2 weeks ago and felt poor! A decent apartment is £3 million plus. I could never afford to live there unless I expand my company. Unfortunately my health isn’t great so I’m trying to keep my stress levels under control. Stress is the biggest killer.
In the United States the state I live in has no federal income tax and my long term capital gains are below 15%. Short-term gains are below 21%. 26% is theft!!!! Great content!
With a good investment plan that ensures steady incomes without any doubts I am prepared for a well organized retirement. I started investing 3 years ago and so far, I am making a good yield on my dividend.
It’s not rocket science. I got into the stock market and started investing in some stocks. Long story short, I blew my account and lost it all with one wrong move. Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $52k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now with over 271k in roi, I sit back, and just reinvest at intervals while I handle my other businesses.
Thank you for this tip. I mailed him. Did my due diligence on him before we scheduled a chat. Also, brilliant resume I must say! I intend on getting started right away.
Another thing to consider is that 10%/year was recorded in a world where people are having families and the population is growing. We are quickly moving to a world where people aren't having kids and population is going to start collapsing. So I tend to assume a lower return rate going forward. Nobody ever considers that.
5 месяцев назад+12
I once did a video on where the return from stocks actually comes from - it was titled "Why the Stock Market Goes Up" if I remember correctly. You might want to watch it as population growth is only one of the drivers.
That's just not correct.. India and other third world countries will continue to have more kids, and we get that immigration, you see that in Europe and North America.. if we don't have kids we get immigration. Just because people that lived all their lives in a first world country just have to accumulate wealth and enjoy life 100% instead of having kids. Other cultures and people that just immigrated to these countries will still have more than 1 to 2 kids per family
@@diogor8968 overall world population growth is still way lower vs post world war 2 period and it is declining. China for example will have negative population growth from 2050 onwards. So that means unit growth of production will have lesser people in the world to sell to.
I usually don’t comment. But this information is something most so called gurus dont explain. Thanx for the breakdown and providing genuine/ useful information
I am ready for a well-organized retirement with a solid investment plan that guarantees consistent incomes without a doubt. I began investing three years ago, and I have made a respectable yield on my dividend.
Investors embracing the idea that abruptly cooling inflation will put interest rate hikes on ice. During recessions your dividend gains or income reduces. Speaking to a certified market strategist can help with navigating this downturn.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over $2.8million.
I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
Annette Christine Conte is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment...
I live in Belgium. There is no capital gains tax, which in my view is obviously the only appropriate level of taxation for money that you invested after it was taxed already because of income tax. You can only be taxed so many times!
3 месяца назад+1
That's a very valid point, yet countries with no capital gains taxes are somewhat rare.
For now, I pay no taxes at all, because Canada has a Tax Free Savings Account. Only taxes that would eat into returns would be withholding tax on dividends from foreign US stocks
One wouldn't normally sell all of their portfolio at once when they reach retirement age, so the largest part of their portfolio would remain in the market for a longer time and taxes are only taken on the part one sells
5 месяцев назад+3
That's 100% correct. Thanks for pointing this out - I just assumed one sells at one point in time for illustrative purposes.
Also as far as I know, you can have your capital gains taxed as if it was income instead, if that would lead to less taxes than the ~26%. Which can probably save quite some money after retirement.
I am in Brazil. No taxes over dividends, but capital gains are taxed over a flat 15% rate for stocks. If you sell less than 20k Reais (approximately 4k US dollars) in stocks over a month, there are no capital gains tax, so you can cashout little by little and pay no taxes.
5 месяцев назад+2
That's pretty decent, right? I'd take this system!
In fact, here in Italy we pay 26% on capital gains and 26% on dividends, furthermore there is a capital charge on all deposited capital of 0.2% per year. It depends on the country risk, on the public services offered, on the public debt, on the political class, etc.etc.
My wife and I now own eight 2-bedroom apartments in Romania and we rent them all. We did that by starting with two and investing the rent money + some of our own money in the stock market (BVB - Romanian stock market). Here, the tax is 1% if you hold it longer than 1 year and 3% under 1 year. We just took out everything and bought another apartment as soon as we could afford it and put a new rent to work in the stock market. We are now investing about 5k euros/month looking forward to our 9th apartment. This is compounding for us, making sure inflation doesn't eat our profits this way. Your 2%/year is wishful thinking...the average over 10 years is about 3.3% and it will probably be more in the future. Owning real estate and renting it will always go up with inflation prices and no recession will make a dent in my net worth.
In Germany 1000€ of capital gains per year can be tax free. That's it. There are many voices demanding to raise this amount to at least 10k and/or reducing taxes on retirement funds.
For those closer to retirement, I’d look at treasury bills, there’s (almost) no risk, but they have a rather small return (3-5%) although this return is tax free. The reason I recommend this is because your portfolio might’ve grown on average 10% each year but now that you’re ready to use the money within said portfolio, you probably don’t want it dropping 20-40 percent one year. Edit: From 1959 to 2023, the average rate for 52-week treasury bills was 4.68%
Treasury bills are not tax free in the United States. You still pay Federal income tax on that. They are tax free for state income taxes but I live in a state that has no income tax so I get nothing except a tiny rate I can beat with a HY savings account.
good informative video. My view point on the different factors are different. Factor1: 80000 fee is 30yrs is okay by me. Factor2: taxes apply, if I redeem all, at once. Redemption should be based on a goal Factor3: is a real risk, a sequence return risk!!
5 месяцев назад+2
I do not disagree with you here. Thanks for commenting.
Totally agree. Still it is a fantastic way of saving compared with anything only having stomach. I already adjust the contribution as salary increases every year.
Estonia If the portfolio is cashed out, the positive difference goes under income tax - 20% of the profit. Same for the dividends, if portfolio pays them. Taxes can be delayed when the money up to a certain sum stays in the special investor account (and reinvested). For pension fund money, there are some deductions
You calculated the tax part wrong. If more then 50% of the assets in a fond are shares, 30% of the gains in germany are tax free. This is the case in all " normal" etfs. So the tax number is way lower.
In Ireland the exit tax rate for a mutual fund is 41%. Capital gains tax on individual shares is 33%. Tax on drawdowns from pension funds is the income tax rate.
In jamaica there is no capital gain tax on stocks but there is 15% dividends tax. Pensions gains are not taxed but income earned from pension is still taxable at the income tax rate
5 месяцев назад+1
Sounds solid! I guess you are happy with the way it is?
You just showed the worst case scenario for taxes. Realistically why would you liquidate all your assets at once? Not only it is a bad tax decision but you would also stop the compound effect. If you are smart and only sell a small percentage each year (4% rule rings a bell?) you can tax it as income at a much lower tax rate.
Long term (investments held for more than a year) capital gains rate depends on your income for that year. If you are single, the brackets are as follows, based on your total income for that calendar year: 0% if your income is $0-$47,025 15% if your income is $47,026-$518,900 20% if your income is $518,901 or more. There's also a net investment tax of 3.8% that is added to the percentages above for anyone making more than $200,000 per calendar year. Also, there's a concept here called qualified dividends which are dividends from American companies that you have held for more than 60 days. When you receive dividends from these companies, these qualified dividends are taxed at the same rate as long term capital gains. All of these assume you live in a U.S. state that doesn't tax income. If the state taxes income, and you happen to live in a high tax state, e.g. California, you can add on another 12.30% if you are making more than $698,271 per year.
I live in Hungary, capital gains tax was 15% for a long time. Since the frozen EU funds for Hungary, the government increased it to 28% and they push their bonds in media harder than ever. We fortunately have a government-supported trading account type called Long-term Investment Contract which lasts for 5 years and your investments are tax-free. It isn't very easy, because you can only deposit money in the first year, so you run 5 accounts simultaneously and have to sell your investments and rebuy them every year, but at least it's tax-free. Also, investing in Hungary is insanely rare. Many people hold their money in cash or just on bank accounts with 0% interest. I liked the video, thank you! Finally a EU based English speaking finance channel I found!
Compounding really works best. When you have a lot of money to compound. Starting from zero makes compounding seem inconsequential.
4 месяца назад+6
That's the hard part. It is not inconsequential, because you have to start at some point. Just like everyone growing a social media account at some point starts with 0 (ZERO) followers, (almost) every investor will start small too.
Very true! I do agree! I started late. But i did start in my late 30's. So you do have to start somewhere. Just in the beginning its such a daunting task. But once the snowball starts to pick up steam. It makes starting worth it!
In the UK the capital gains tax rate is 10% if you earn not much, and 20% if you earn more than about £50k per year. What the government website does not reveal is what tax will be applied if your capital gain is huge as per your example. HOWEVER there are two 'schemes' that completely and legitimately avoid CGT, one is to use a pension account (e.g. a SIPP) and all the gains including any dividends are untaxed. Additionally the government reimburses tax paid on contributions into the pension account although tax is applied as you eventually start to withdraw from your pension. The second is to use an independent savings account (ISA) which is also tax free, not subject to CGT and not subject to tax on dividends, also you can withdraw any amount at any time from an ISA without having to pay tax. The government does not provide any reimbursements for contributions into an ISA. CAVEAT; the new Labour government is about to reveal a budget (in October) and many observers expect the government will raid pensions and savings in some way. So you should review the situation later in the year.
3 месяца назад+2
I like the UK system. Fingers crossed for my UK subscribers that it will remain as it is for many more years.
I'm based in the UK and I own 5 unit trust global index tracking funds. I hold these inside an account known as an ISA, which is a tax free product. Therefore it is free from dividen taxation and capital gains tax. Here, we are allowed to save up to £20,000 per tax year. Those rules could change in the future.
5 месяцев назад+4
Good point regarding current vs. future regulations. But from the comments I've been reading, the UK seems to have one of the most investor-friendly systems.
@RobCLynch I'm also based in the UK. Do you mind sharing the 5 unit trust global index tracking funds you mentioned and how well they're performing for you?
Although we have a capital gains tax in America, if you put your money into a Roth IRA it’s tax-free. Only issue is this money cannot be withdrawn until you’re 59.5 years old otherwise you pay a penalty fee and taxes. And there’s also a limit on how much you can invest (currently I believe it’s $6,500 per year)
Great video on this topic, on keeping things in mind on the investment journey!! In India, where I am, capital gains are taxed at 15% for an asset held for
5 месяцев назад+2
Thank you Pula. Yeah, if you read the other comments, those regulations are rather favorable. I'd take them! ;-)
In the US if you have IRA account you pay no taxes tax free account can withdraw tax free after 59 1/2. Tradition IRA you do pay taxes depending on how much taxable income you have at the time you retire.
Fair points. The issue I have with your critiques is that you are hyper critical one way but not the other. 1. Yes inflation will hit your money like a truck, but it was going to do that if you invest it, save it or light it on fire (well I guess not the last one but you get what I mean). Inflation is hitting it regardless of what you do with your money so to use that as a "con" against compounding interest doesn't make sense 2. Capital gains doesn't impact all accounts the same. What if you have a company ira 401k there's no cap gains taxes or an HSA so not all of that pot of money will be hit with cap gains tax. I don't disagree with the video, just if we are putting guardrails on things, put all of them on.
4 месяца назад+1
I didn't intend to come across as super critical. I think stocks are a fantastic wealth creation tool and the most attractive asset class out there!
Nice explanation. Also one more poin of "loses" in country with own currency. Taxes counts and pays in local currency. In case of devalvatio tax grows. It will be easier explain on example: bought stock and sell with same price 100 USD. But local currency lost 20% against USD. So prices in local currencu were like 300 buy and 360 sell. So earn 0 USD but should pay taxes from 60 local coins
I'm living in poland :D General icome tax is 19% and dividends are taxed at source... but polish tax law is on of the hardest to understand and there are so many edge cases that you have to be aware of. i.e. Divident from US : 15% at source, 15% federal, 4% general income tax difference (19% polish general - 15% US income tax) making in total 34%!
In the US, if the investor opens a retirement account called a ROTH IRA, they pay tax on the money they initially put into the account but then all capital gains are tax free. They do pay a withdrawal fee if they want to withdraw money from the account before retirement age of 59 1/2. The other IRA pays taxes at the time of withdrawal and does tax the capital gains. If the investor invests in their own private brokerage account and they buy stock and sell it within a 1-year period, then they will pay the highest capital gains tax. If they hold the stock for over a year though, then they pay a lesser capital gains tax which is based on their income. If they make less then 46k per year then they pay 0% tax, and if they make between 46k and 78k they pay 15% capital gains tax. and it increases the more the investor earns, but of course there are other ways to reduce the taxes and capital gains earned.
If you invest in an ETF, let‘s say in the S&P500, isn‘t this a certain protection against inflation? Because companies increase prices etc. to deal with inflation?
5 месяцев назад+1
Of course. Stocks are arguably THE greatest protection against inflation (only beaten by an investment in your skillset).
thank you for the research and example. i would be very interested to hear about taxes in europe, when you hold etf, stocks, which brokers to use, ets:)
In the UK we have ISAs that are free of tax. Pensions that can suffer 0% tax with the right withdrawal planning or if you don’t know what you are doing 45% tax. Pensions are subject to personal allowance of £12,570 at 0%. You can also take 25% tax free withdrawals. If you do trigger tax charges they are 20%, 40% and 45%. It’s very achievable to withdraw a gross amount of £50,270 and only pay an effective rate of tax of around 7%.
The way the market can fluctuate is a harsh reality. For example, if you were saving for 30 years as in the example with the goal of using that money in say, 2010 or so, you would be pretty upset by what had just happened.
One lesson is to consult with a tax attorney and financial advisor. Their expertise will pay for itself 100,000 times over.
5 месяцев назад+5
This is certainly true for the very good ones; but most certainly not for everyone. I'm sure many people here can share some of the bad advice they've received from financial advisors (be wary of the incentives some may have).
Excellent points. I’ve been a victim of that. I make sure to only use fee-only fiduciary advisors and I will never pay an advisor assets under management.
In România can choose between: 1% tax for capital gain if you hold it for at least 1 year or 3% if you hold the instrument less than 1 year - but they won't care about loses, they only tax the profits OR... you can choose 10% on capital tax but you can deduct your loses if you have sell any negative positions Dividend are taxed in the country of the stock, so that depends a lot - but for Romanian stocks it is 8%
41% every 8 years on ETFs on unrealised gains in Ireland. Although if you have a limited company there’s no limit on pension contributions which you can invest tax free up to 2 million. So no income tax and no capital gains tax on the growth. Best fees though are around 0.75%. Sequence of returns risk can go both ways you can just as easily have an outcome that’s far in excess of the average anticipated value as less.
4 месяца назад+2
Taxes on unrealized gains are just ludicrous in my humble opinion. Seems unfair that entrepreneurs have a loophole and employees do not. What do you think?
For funds containing more than 50% stocks (so almost all ETFs) 30% of the gains are free, which results in roughly 18% total tax rate (Teilfreistellung).
Yes, yes, yes. I agree 100 percent with all of your comments. When You Tuber's are using these type of graphs and charts, my "pet issue" is the use of a constant monthly investment amount over a persons entire 40-year career. As for myself, I suggest investing these amounts from a person's take-home pay as a minimum: in your 20's, save 5 percent; in your 30's, save 10 percent, in your 40's, save 15 percent; in your 50's, save 20 percent; and in your 60's, 25 percent (smile ... smile).
True. Not everyone can/will do it. However, people who tend to be frugal optimizers, try to flip the script and invest as much as you can before buying new car, house, and having kids. 15-20 years later they will be able to quit their jobs or work at their leisure.
@@diydad5067 Wait a minute... To me it looks like most "rich" young people online are working more the more they make so no can't expect them to "work at their leisure"....
@@donaldlyons17 I think it depends on the person. Hedonic adaptation or lifestyle creep is real so the more they make the more they spend because of the erroneous logic -I work hard so “I deserve it.” In my book, you can only “afford” something if your asset provides you income to buy you the stuff. Until then I would keep my lifestyle in check, work hard and stack them up.
Czech Republic. 15 % tax on dividends 15 % tax on capital gains; but, there is a time-test applied to shares and ETFs (only those, no other investments): if you hold them for 3+ years, then there is 0 % tax for capital gains.
I would say so! Also the higher assets you accumulate in your own company, the less you pay as taxes when you pay yourself with company dividends. Basically 75% of the dividend is tax exempt as long as dividend is not higher than 8% of your company assets. Say your company has 0.5M€, the 8% is 40,000€ on you pay taxes only for 10,000€. Not bad!
5 месяцев назад+1
@@danielegianetti5599 Interesting model! I actually think the Scandinavians make some smart political decisions when it comes to the world of stocks and government rules.
In Finland for normal person the tax rate is 30% for under 50 000 e and 32% for over 50 000 e, unless you have your own company and exploit the holding company loophole. Finland has definitely not made smart decisions.
Hi Rene! In my country I have the luxury of not having to pay taxes on stock earnings as long as certain conditions are met: The main ones are that these earnings are not be allowed to be above 50% of your total income earning and the other one is being forced to hold stocks for at least 6 months before selling. I am new to the market and my impression is, that not being able to sell at any time could make the difference between making a lot of money (even if you play taxes) or no money at all. On the other hand I see a lot of people holding on for stocks for more than 6 months on average. So what would you rather favour: Having flexibility to sell at any time below 6 months and paying taxes for that, or picking stocks to hold longer than 6 months and to avoid taxes on sales? thx for a short feedback!
5 месяцев назад
Tough to answer this question in general because it would depend on a lot of factors. Generally speaking this system sounds pretty nice - I'd take it. I very rarely sell investments after six months or less (and if I do, it's because I made a mistake and thus there will at best be minimal gains). So I wouldn't worry about it too much.
SO what you do is what I am doing which is Pay the £1000 into a pension. In the UK the government will top that up by 40% (as I am a hgiher rate taxpayer but if lower rate it is still 20%) and then you can draw down 25% tax free when you get to retire. No CGT but you do have to pay tax on the taxable amount thereafter. The other alternative is to put the money into an ISA and then you get it all tax free and no CGT.
3 месяца назад
Yeah, my understanding is that the UK has a pretty investor-friendly system!
The problem with capital gains and dividends taxes is that those should be progressive taxes. You want to have it, because you don't want to have oligarchs, but there should be an amount that is tax free. In Poland we have stupid situation where short term gains (no retirement) have 19%. At the same time for real estate rental you have 8,5% - 12,5% progressive tax. Not hard to guess what people are doing with the money. Instead of investing it in stocks, ETFs or bonds, they are buying flats for rental which stressed the market prices.
4 месяца назад+1
Thanks for sharing Bartomiej! I'm not going to start a stock vs. real estate debate here but I get what you are saying. Ultimately, the price one pays for an asset affects expected returns.
There a few issues with this video: 1. The ETF mentioned in the video has an unreasonably high expense ratio which is NOT normal. Usually broad market ETFs have an expense ratio of 0.03-0.05%. For example for VTI (and most Vanguard ETFs) it's 0.03% 2. A lot of countries do NOT have a capital gains tax and you are free to change your residency to another country if you do not want to pay the tax
5 месяцев назад+2
I'd say TERs of 0.03% are very rare, so I don't think assumed crazy high fees. Of course you can adjsut the numbers accordingly. And of course capital gains taxes vary. This was just one example (Germany) and I think I made this quite clear? I found it quite interesting to read the comments and learn more about the different tax system all around the world. I encourage you to take a look at them too.
how is 0.03% rare? It's the industry standard. In fact, many funds charge even less, Charles Schwab charges 0.02% expense ratio on their S&P 500 ETF. Fidelity charges 0% for their S&P 500 ETF.
I think you can always workaround the tax. If you want to retire at 60 in your home country, just invest inside of your retirement account. I think most western countries have a 0% tax retirement account, from which you can only withdraw at retirement age. I know Canada and US have such accounts, but you'd need to look up if Germany has one. If you want to retire at 30-40, then it might be better to change a residency to a low tax country with low or no capital gains. But yeah if you want to retire early in your home country of Germany, then your investments will get a big haircut from capital the capital gains gains, no arguing here, I'm just sharing the alternatives I would look into
Don't forget to consider external risks over 30 years. A lot can go wrong: the bank holding your assets could fail, the country could face invasion or international isolation, the currency could collapse, and physical assets might be stolen. Security costs are high. Historically, there have been few times and places where you could safely save for 30 years.
Romania: 1 or 3% (if you hold your investment for at least one year/ less than one year) and the broker has one headquarter in the country. In this case, you cannot subtract loses. Otherwise, you have a 10% tax on the profits of the year. Divident tax is 8%. You have to pay some additional "health" tax if your total income surpasses 6, 12 or 24 minimum wage salaries. After 24 salaries that tax does not increase. There are some rules. Still, they are not that bad if I compare them with some other countries.
You cannot run from inflation or taxes but you can increase your lifestyle now and still build wealth and compound using income investing. Unfortunately, the 26% tax in Germany on dividends makes this really harder than it should be. I think 15% is more adequate.
5 месяцев назад+2
Personally, I'm not a big fan of dividend-focused strategies anyway if your goal is to build wealth.
Fees, Taxes, Inflation and whether you invest when the market is at a boom so money doesn't grow too fast or at a low so your money grows faster. All relevant points but you should take into consideration people's risk as well. There's no debt fund that gives 10%. Debt funds save your principal amount. In Equity if the market crashes then it has a chance to wipe your principal quite badly. But there is nothing better to do for investments.
3 месяца назад+1
I assumed one is dollar-cost averaging, making market timing assumptions largely irrelevant. I didn't get the point you made concern debt quite frankly.
In Croatia, if you hold something like a stock/ crypto, something from the financial market for more than 2 years you pay 0% tax on capital gains. You can move money around, you just can't cash out.
I have been putting money on a monthly basis since like 2010 into one of those founds. They wanted an input fee. And promised growth of 3x over the course of 30 years. Also adding a clause that it is not guaranteed etc etc. In the past 14 years, I am down by like 5% and if include the input fee, I am down like 8%. Now to stock market is generally considered to rise 5 - 10% each year. With all the crashes in the past 14 years, I should be up at least 20%. For example, if the fund managers bought 2k worth of shares in March 2009, I should be - roughly speaking - up around 400% on those particular 2k. The conclusion I came to is that they take the capital from the people, then they can trade with that capital making much more gains because 2% gain on a trade when you have 2mil compared to 800mil is completely different.
Thank you for this video, Regarding your last question. I live In Saudi Arabia and we don't have income tax, but we have 15% additional tax to the products. However as a Moslem I must take 2.5% of my woth every year for poor people and we call it " Zakah " so my total return will reduce from 9.8 to 7.3 at least. If I was investing in US stocks I will have to pay also US income tax on the dividends. In the end I will come out with 4% maybe, so that doesn't worth the stock market risks .
I live in Brazil and capital gains can be taxed at a rate of 15% for 0,9 million US dollars (exchange rate of August 2024) and it can get as high as 22,5% for capital gains above 5 million US dollars. There is an exemption if you cash out a small amount which is as of today around 3,5 thousand US dollars.
What's the capital gains tax rate in your country?
In Canada, in a cash account, 50% of the capitial gain will be added to your income and then be taxed at your personal marginal tax rate (higher total income, higher marginal rate).
In a tax-deferred retirement account (similar to 401K), the amount you withdraw from the account in a particular year will be considered your income, and then be taxed at your personal marginal tax rate.
In both cases, personal marginal tax rate can be anywhere between 20% to 45% depending on how high your yearly total income is.
@@Allen-L-Canada Thanks for sharing!
I live in Belgium and for now it is still 0% !!
@@NicoDGr 41 percent ireland on etfs
26,375% in Germany
When I was young, I had no money. But after decades of hard work, I am no longer young.
LOL-That joke never gets old.
@@Kitten_Stomper good one! 😉
I was bought up with nothing and I still have most of it left. To make a small fortune it helps if you start with a large fortune.
That’s why 20s/early 30s is NOT the time for sacrificing your life working like a dog for money. Youth is our best leverage. Live your youthful years to the fullest and worry about money starting from mid-late 30s. People who tell you men’s value peak at 40s have no idea of reality.
@@uropyhow old are you may I ask?
Thanks I bought Kardden and I can't be more happy about it
Swapped my alts for BTC and Kardden. They are ramping it up
hows your Crapto doing?
@@KrustyKlown Crypto is good if you time the market by halving events. I am curranty at 2x, expecting about 5x
I am 38 y old and I was living from paycheck to paycheck. So I have started investing from 0 eurs, now I am about 35k, it is going slow, but the more I have the more I want to save and invest. Some months I can contribute 1000 euros, some none. But hey that is life, it is never too late learning to invest smart. Cheers❤
Nice work, keep it up!
Hopefully your Government won’t steal too much of it 😢
@@christopherpoole2185 First 1000 euro is tax free, after that 26.5%
@@christopherpoole2185usually the govts that tax more also provide better essential services.
@@christopherpoole2185 they are all crooks😆
In Czechia we have 0% tax on stocks(etfs) if you hold them at least 3 years.
15% tax on dividends.
That's awesome!
You can immigrate. ;)
It is 1 year in Slovakia. I hope it stays this way. I guess, politicians make law for themselves in the first place. We don't pay VAT on gold, but on silver yes. 🤔
That 's not bad 👍
Same in Russia for 5 year investment. But you risk giving all of your stocks to government if they wish it.
Very educative video. Nobody talks about the taxes we have to pay on our investments, it's a shame...
Kardden Token and amazon signed a partnership. It will blow up once it hits mainstream.
I learned from this video. The human lifespan is too short.
Haha. Got to adjust your lifestyle if you want to enjoy the power of compounding to the fullest.
I felt the same way when I was younger. The solution is to delay gratification and “front load” your investments, to have the max amount growing for as long as possible. I went minimalist for 3 years, cutting expenses, not going out, and worked overtime every week. This let me get to $100k in 3 years.
@@epbrown01 That is excellent planning ahead, good on you & I hope it works out well. I am not younger anymore, however now I am now in a position for the first time in my life to consider these extra strategic options. Yesterday was the best day to start, today is the next best day to start. I made that choice a few months back. I really enjoy buying nothing except essentials & that includes shares. I can't complain even though my investments are minimal in comparison to yours. I already know to not compare, it kills any joy I have from seeing my £50 up on my investment so far :)
@@epbrown01I’ve been doing the same thing. Cut social expenses greatly, selling back all of my vacation time for 5 years, and investing it all. I need to make up for time I took for granted. It’s working so far. Good luck to you.
@@epbrown01I'm glad you said 3 yrs. Life is to short to live frugally for long.
Thanks, please make another video about Kardden I prefer Kardden that is strong
Kardden movement begins and everyone is like acting crazy. Let's bring it up!
I put in 20k into various assets three years ago and flipped into over six figures and still going. I’ve always been an advocate of investing because it has been rather rewarding. I hope to attain financial freedom soon. One more thing, I always look forward to your content brother, keep up the good work.
How has your journey investing been? What assets did you invest in?
I invested in some stocks myself using pure speculation. Long story short, I blew my account and lost it all with one wrong move. Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $10k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now with over 81k in roi, I sit back and just reinvest at intervals while I handle my other businesses.
That's your view. In my experience, there is no such formula, it is nearly impossible to achieve success with investing. It’s all just gambling.
I just turned 47. I hope it's not too late for me to get started. How can I connect with him?
Hermanw jonas that’s his gmail okay
Inflation is typically compounded over time. This is similar to how interest compounds, where each year's inflation rate builds upon the previous year’s inflated amount.
In Hungary you have to "lock up" your insvestment account for 6 years (you can trade on the account but you cannot withdraw a penny), then you get 0% tax. It is a great way for long-term investment
I like the construct however I have low trust in the government they keep it up. There is a history of violatoon of terms from their side. They may change it when they need the tax.
If they do indeed keep these rules, the system is fantastic for investors!
Yeah this system is pretty much good idea, however the same government nationalized private pensions 13 years ago to the state pension. So I am somewhat sceptic, and keeping other options alive due to lack of trust.
@@Daikini0that is true indeed, and I have the same fear. Hungarian government has not been the most trustworthy in the past decades. I remember having had to fight to keep my private pension fund back then. It is a shame.
Wow that sounds truly insane. Got to diversify your private retirement savings in some way then I guess?
Kardden Token is next atleast 40x coin, upswing better than Kardden at primetime
I am 44 years old and I currently have €3 million invested in a Vanguard global ETF. I withdraw 3% per annum (€90,000), adjusted for inflation each year. Hopefully this will last forever, but if the market crashes I have 4 years cash available.
You're doing extremely well! Congrats.
Thank you, I still worry about the future. I actually have dyslexia so it makes life a struggle
@carlyndolphin Mind if I ask what your secret is to this insane wealth?
@@moneymo6417 During my 20s and 30s I saw the money rolling in so I worked like crazy to keep my clients happy. I walked around Mayfair in London 2 weeks ago and felt poor! A decent apartment is £3 million plus. I could never afford to live there unless I expand my company. Unfortunately my health isn’t great so I’m trying to keep my stress levels under control. Stress is the biggest killer.
Vwce?
All guys stacking Kardden Token before next bull are smart apes for sure
The Kardden KRN will overtake doge and SHIB so easy
Belgium, no capital gains tax, but 30% withholding tax on dividends. Logic dictates to avoid income investing.
Yeah compounding etfs and buyback stocks
I'd take those tax rules
What a distraction of effective capital allocation from the government 😮
Less than the US charges at the high end of non qualified dividends 🤷♀️
Try tax evasion
In the United States the state I live in has no federal income tax and my long term capital gains are below 15%. Short-term gains are below 21%. 26% is theft!!!! Great content!
With a good investment plan that ensures steady incomes without any doubts I am prepared for a well organized retirement. I started investing 3 years ago and so far, I am making a good yield on my dividend.
How has your journey investing been? What assets did you invest in?
It’s not rocket science. I got into the stock market and started investing in some stocks. Long story short, I blew my account and lost it all with one wrong move. Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $52k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now with over 271k in roi, I sit back, and just reinvest at intervals while I handle my other businesses.
@@Pambegay How can I connect him? Just clocked 46, and I hope it's not too late for me. I just want to have a stable financial life.
Hermanw jonas that’s his gmail okay
Thank you for this tip. I mailed him. Did my due diligence on him before we scheduled a chat. Also, brilliant resume I must say! I intend on getting started right away.
I am from Portugal. The actual tax is 28% but if you hold more than 8 years can reduce to 19% with the new law implemented a few weeks ago.
E para dividendos?
Another thing to consider is that 10%/year was recorded in a world where people are having families and the population is growing. We are quickly moving to a world where people aren't having kids and population is going to start collapsing. So I tend to assume a lower return rate going forward.
Nobody ever considers that.
I once did a video on where the return from stocks actually comes from - it was titled "Why the Stock Market Goes Up" if I remember correctly. You might want to watch it as population growth is only one of the drivers.
Robots……problem solved
That's just not correct.. India and other third world countries will continue to have more kids, and we get that immigration, you see that in Europe and North America.. if we don't have kids we get immigration. Just because people that lived all their lives in a first world country just have to accumulate wealth and enjoy life 100% instead of having kids. Other cultures and people that just immigrated to these countries will still have more than 1 to 2 kids per family
@@diogor8968 overall world population growth is still way lower vs post world war 2 period and it is declining. China for example will have negative population growth from 2050 onwards. So that means unit growth of production will have lesser people in the world to sell to.
@@Fear.of.the.Dark. AI alone should boost growth in every sector
I usually don’t comment. But this information is something most so called gurus dont explain. Thanx for the breakdown and providing genuine/ useful information
I appreciate that!
I am ready for a well-organized retirement with a solid investment plan that guarantees consistent incomes without a doubt. I began investing three years ago, and I have made a respectable yield on my dividend.
Investors embracing the idea that abruptly cooling inflation will put interest rate hikes on ice. During recessions your dividend gains or income reduces. Speaking to a certified market strategist can help with navigating this downturn.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over $2.8million.
I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
Annette Christine Conte is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment...
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.
I live in Belgium. There is no capital gains tax, which in my view is obviously the only appropriate level of taxation for money that you invested after it was taxed already because of income tax. You can only be taxed so many times!
That's a very valid point, yet countries with no capital gains taxes are somewhat rare.
For now, I pay no taxes at all, because Canada has a Tax Free Savings Account. Only taxes that would eat into returns would be withholding tax on dividends from foreign US stocks
I hope you appreciate it! Sounds amazing.
Thank you for the information this was fantastic.
Glad it was helpful!
One wouldn't normally sell all of their portfolio at once when they reach retirement age, so the largest part of their portfolio would remain in the market for a longer time and taxes are only taken on the part one sells
That's 100% correct. Thanks for pointing this out - I just assumed one sells at one point in time for illustrative purposes.
Also as far as I know, you can have your capital gains taxed as if it was income instead, if that would lead to less taxes than the ~26%. Which can probably save quite some money after retirement.
Such a high value video. thank you so much
Thank YOU for the kind words.
I am in Brazil. No taxes over dividends, but capital gains are taxed over a flat 15% rate for stocks. If you sell less than 20k Reais (approximately 4k US dollars) in stocks over a month, there are no capital gains tax, so you can cashout little by little and pay no taxes.
That's pretty decent, right? I'd take this system!
In fact, here in Italy we pay 26% on capital gains and 26% on dividends, furthermore there is a capital charge on all deposited capital of 0.2% per year. It depends on the country risk, on the public services offered, on the public debt, on the political class, etc.etc.
My wife and I now own eight 2-bedroom apartments in Romania and we rent them all. We did that by starting with two and investing the rent money + some of our own money in the stock market (BVB - Romanian stock market). Here, the tax is 1% if you hold it longer than 1 year and 3% under 1 year. We just took out everything and bought another apartment as soon as we could afford it and put a new rent to work in the stock market. We are now investing about 5k euros/month looking forward to our 9th apartment. This is compounding for us, making sure inflation doesn't eat our profits this way. Your 2%/year is wishful thinking...the average over 10 years is about 3.3% and it will probably be more in the future. Owning real estate and renting it will always go up with inflation prices and no recession will make a dent in my net worth.
No capital gains tax if you invest in a UK ISA, which allows a £20000/annum investment.
Awesome!
Germany doesn't have anything like this? Ouch
@@smithers4420 Indeed ... ouch!
In Germany 1000€ of capital gains per year can be tax free. That's it. There are many voices demanding to raise this amount to at least 10k and/or reducing taxes on retirement funds.
For those closer to retirement, I’d look at treasury bills, there’s (almost) no risk, but they have a rather small return (3-5%) although this return is tax free. The reason I recommend this is because your portfolio might’ve grown on average 10% each year but now that you’re ready to use the money within said portfolio, you probably don’t want it dropping 20-40 percent one year. Edit: From 1959 to 2023, the average rate for 52-week treasury bills was 4.68%
Treasury bills are not tax free in the United States. You still pay Federal income tax on that. They are tax free for state income taxes but I live in a state that has no income tax so I get nothing except a tiny rate I can beat with a HY savings account.
good informative video. My view point on the different factors are different.
Factor1: 80000 fee is 30yrs is okay by me.
Factor2: taxes apply, if I redeem all, at once. Redemption should be based on a goal
Factor3: is a real risk, a sequence return risk!!
I do not disagree with you here. Thanks for commenting.
Very good video, this is seldom talked about, and very true!
Totally agree. Still it is a fantastic way of saving compared with anything only having stomach. I already adjust the contribution as salary increases every year.
Perfect! Thanks for commenting.
Estonia
If the portfolio is cashed out, the positive difference goes under income tax - 20% of the profit. Same for the dividends, if portfolio pays them. Taxes can be delayed when the money up to a certain sum stays in the special investor account (and reinvested). For pension fund money, there are some deductions
In the Netherlands it is 36% tax on capital gains, probably one of the worst rates worldwide
Definitely, one of the higher rates I saw among the comments I read below the video.
France : 30 % flat tax on gains
Very very high
Point 4 is for sure heavily underestimated, and periods of 5-10 years with sub-average return values will have a huge impact !
Unfortunately, passive investors have very little control over this factor.
yes of course, I just wanted to underline your point, which has to be considered, when "calculating" the real outcome of the investment
You calculated the tax part wrong. If more then 50% of the assets in a fond are shares, 30% of the gains in germany are tax free. This is the case in all " normal" etfs. So the tax number is way lower.
In Ireland the exit tax rate for a mutual fund is 41%. Capital gains tax on individual shares is 33%. Tax on drawdowns from pension funds is the income tax rate.
In jamaica there is no capital gain tax on stocks but there is 15% dividends tax. Pensions gains are not taxed but income earned from pension is still taxable at the income tax rate
Sounds solid! I guess you are happy with the way it is?
For those relatively small monthly investments we in the UK use an ISA and USA Roth IRA - no cap gains...
You just showed the worst case scenario for taxes. Realistically why would you liquidate all your assets at once? Not only it is a bad tax decision but you would also stop the compound effect. If you are smart and only sell a small percentage each year (4% rule rings a bell?) you can tax it as income at a much lower tax rate.
In Finland direct capital gain tax
is 30% and over 100k€ is 34% while you can open investment account, you will pay it some day anyway.
In the US the capital gains can be 0% but up to 23.8% (based on income level) plus state income tax that can range from 0-10%.
Thanks for sharing! How high is it for you personally?
Long term (investments held for more than a year) capital gains rate depends on your income for that year. If you are single, the brackets are as follows, based on your total income for that calendar year:
0% if your income is $0-$47,025
15% if your income is $47,026-$518,900
20% if your income is $518,901 or more.
There's also a net investment tax of 3.8% that is added to the percentages above for anyone making more than $200,000 per calendar year.
Also, there's a concept here called qualified dividends which are dividends from American companies that you have held for more than 60 days. When you receive dividends from these companies, these qualified dividends are taxed at the same rate as long term capital gains.
All of these assume you live in a U.S. state that doesn't tax income. If the state taxes income, and you happen to live in a high tax state, e.g. California, you can add on another 12.30% if you are making more than $698,271 per year.
I live in Hungary, capital gains tax was 15% for a long time. Since the frozen EU funds for Hungary, the government increased it to 28% and they push their bonds in media harder than ever.
We fortunately have a government-supported trading account type called Long-term Investment Contract which lasts for 5 years and your investments are tax-free. It isn't very easy, because you can only deposit money in the first year, so you run 5 accounts simultaneously and have to sell your investments and rebuy them every year, but at least it's tax-free.
Also, investing in Hungary is insanely rare. Many people hold their money in cash or just on bank accounts with 0% interest.
I liked the video, thank you! Finally a EU based English speaking finance channel I found!
Compounding really works best. When you have a lot of money to compound. Starting from zero makes compounding seem inconsequential.
That's the hard part. It is not inconsequential, because you have to start at some point. Just like everyone growing a social media account at some point starts with 0 (ZERO) followers, (almost) every investor will start small too.
Very true! I do agree! I started late. But i did start in my late 30's. So you do have to start somewhere. Just in the beginning its such a daunting task. But once the snowball starts to pick up steam. It makes starting worth it!
In the UK the capital gains tax rate is 10% if you earn not much, and 20% if you earn more than about £50k per year. What the government website does not reveal is what tax will be applied if your capital gain is huge as per your example. HOWEVER there are two 'schemes' that completely and legitimately avoid CGT, one is to use a pension account (e.g. a SIPP) and all the gains including any dividends are untaxed. Additionally the government reimburses tax paid on contributions into the pension account although tax is applied as you eventually start to withdraw from your pension. The second is to use an independent savings account (ISA) which is also tax free, not subject to CGT and not subject to tax on dividends, also you can withdraw any amount at any time from an ISA without having to pay tax. The government does not provide any reimbursements for contributions into an ISA.
CAVEAT; the new Labour government is about to reveal a budget (in October) and many observers expect the government will raid pensions and savings in some way. So you should review the situation later in the year.
I like the UK system. Fingers crossed for my UK subscribers that it will remain as it is for many more years.
I'm based in the UK and I own 5 unit trust global index tracking funds. I hold these inside an account known as an ISA, which is a tax free product. Therefore it is free from dividen taxation and capital gains tax. Here, we are allowed to save up to £20,000 per tax year. Those rules could change in the future.
Good point regarding current vs. future regulations. But from the comments I've been reading, the UK seems to have one of the most investor-friendly systems.
@RobCLynch I'm also based in the UK. Do you mind sharing the 5 unit trust global index tracking funds you mentioned and how well they're performing for you?
I recomend the lifestrat 100 and the global developed world ex uk accumulation fund. Both these have done well the last 10 years. @@MrHenners2908
Although we have a capital gains tax in America, if you put your money into a Roth IRA it’s tax-free. Only issue is this money cannot be withdrawn until you’re 59.5 years old otherwise you pay a penalty fee and taxes. And there’s also a limit on how much you can invest (currently I believe it’s $6,500 per year)
Great video. People often miss those important points when calculating returns from compounding. Thanks a lot!
Very easy to overlook indeed. It doesn't change the fact that stocks are the greatest wealth building tool in the world though.
Also include inflation and buying power, that would further reduce tangible profit
I did?
Great video on this topic, on keeping things in mind on the investment journey!!
In India, where I am, capital gains are taxed at 15% for an asset held for
Thank you Pula. Yeah, if you read the other comments, those regulations are rather favorable. I'd take them! ;-)
Finland and 34% capital gains tax👍
Thanks for sharing. That's pretty high. Was the rate always that high?
In the US if you have IRA account you pay no taxes tax free account can withdraw tax free after 59 1/2. Tradition IRA you do pay taxes depending on how much taxable income you have at the time you retire.
Thanks for sharing.
Fair points. The issue I have with your critiques is that you are hyper critical one way but not the other.
1. Yes inflation will hit your money like a truck, but it was going to do that if you invest it, save it or light it on fire (well I guess not the last one but you get what I mean). Inflation is hitting it regardless of what you do with your money so to use that as a "con" against compounding interest doesn't make sense
2. Capital gains doesn't impact all accounts the same. What if you have a company ira 401k there's no cap gains taxes or an HSA so not all of that pot of money will be hit with cap gains tax.
I don't disagree with the video, just if we are putting guardrails on things, put all of them on.
I didn't intend to come across as super critical. I think stocks are a fantastic wealth creation tool and the most attractive asset class out there!
Nice explanation. Also one more poin of "loses" in country with own currency. Taxes counts and pays in local currency. In case of devalvatio tax grows. It will be easier explain on example: bought stock and sell with same price 100 USD. But local currency lost 20% against USD. So prices in local currencu were like 300 buy and 360 sell. So earn 0 USD but should pay taxes from 60 local coins
Good point!
I'm living in poland :D General icome tax is 19% and dividends are taxed at source... but polish tax law is on of the hardest to understand and there are so many edge cases that you have to be aware of.
i.e. Divident from US : 15% at source, 15% federal, 4% general income tax difference (19% polish general - 15% US income tax) making in total 34%!
Great video, finally someone point that out!
Thanks!
the most fair approach and yet the ultimate king of meme is Kardden
2:10 if you want to get right to it.....
Thanks.
In the US, if the investor opens a retirement account called a ROTH IRA, they pay tax on the money they initially put into the account but then all capital gains are tax free. They do pay a withdrawal fee if they want to withdraw money from the account before retirement age of 59 1/2. The other IRA pays taxes at the time of withdrawal and does tax the capital gains.
If the investor invests in their own private brokerage account and they buy stock and sell it within a 1-year period, then they will pay the highest capital gains tax. If they hold the stock for over a year though, then they pay a lesser capital gains tax which is based on their income. If they make less then 46k per year then they pay 0% tax, and if they make between 46k and 78k they pay 15% capital gains tax. and it increases the more the investor earns, but of course there are other ways to reduce the taxes and capital gains earned.
Greece - 0% tax on both capital gains and dividends for UCITS ETFs and domestic stocks
Greece is killing it! Nice weather and no capital gains ... what else could you wish for? ;-)
Low taxes in Greece... financed largely by Germany 😂
This is the best video ever made on the reality on returns of stocks
Oh wow. That's a big compliment! I take it ... thank you
If you invest in an ETF, let‘s say in the S&P500, isn‘t this a certain protection against inflation? Because companies increase prices etc. to deal with inflation?
Of course. Stocks are arguably THE greatest protection against inflation (only beaten by an investment in your skillset).
informative thanks.
Glad it was helpful!
thank you for the research and example. i would be very interested to hear about taxes in europe, when you hold etf, stocks, which brokers to use, ets:)
Check out my mentorship program
The point you are making about inflation is true and overlooked a lot. Just adjust the amount you invest and slightly try to outpace inflation.
100% - thanks for commenting Marco. Where are you from?
The Netherlands
Great video! One famous technique to avoid the taxes and the sequence risk is "buy borrow and die". A good topic for a future video.
Never heard of it. But I will look into it!
Inheritance tax is 0?
In the UK we have ISAs that are free of tax. Pensions that can suffer 0% tax with the right withdrawal planning or if you don’t know what you are doing 45% tax. Pensions are subject to personal allowance of £12,570 at 0%. You can also take 25% tax free withdrawals. If you do trigger tax charges they are 20%, 40% and 45%. It’s very achievable to withdraw a gross amount of £50,270 and only pay an effective rate of tax of around 7%.
Switzerland. No tax for private investors and low inflation. Very appropriate in my view 😁
Haha! Very appropriate ;-)
The way the market can fluctuate is a harsh reality. For example, if you were saving for 30 years as in the example with the goal of using that money in say, 2010 or so, you would be pretty upset by what had just happened.
One lesson is to consult with a tax attorney and financial advisor. Their expertise will pay for itself 100,000 times over.
This is certainly true for the very good ones; but most certainly not for everyone. I'm sure many people here can share some of the bad advice they've received from financial advisors (be wary of the incentives some may have).
Excellent points. I’ve been a victim of that. I make sure to only use fee-only fiduciary advisors and I will never pay an advisor assets under management.
So, if they charge $500, then their advice will end up being worth $50,000,000. That's fantastic! Even better if they charge $1000!!
In România can choose between:
1% tax for capital gain if you hold it for at least 1 year or 3% if you hold the instrument less than 1 year - but they won't care about loses, they only tax the profits
OR... you can choose
10% on capital tax but you can deduct your loses if you have sell any negative positions
Dividend are taxed in the country of the stock, so that depends a lot - but for Romanian stocks it is 8%
So realized losses are not recorded?
Under the first system, NO
But if you buy&hold ETFs long term there will likely be no loses
$1000 a month investment in 30 years is too small. It'll be price of a Big Mac. A Big Mac was less than a $1 30 years ago
at least they will have a bigmac. what will you have?
41% every 8 years on ETFs on unrealised gains in Ireland.
Although if you have a limited company there’s no limit on pension contributions which you can invest tax free up to 2 million. So no income tax and no capital gains tax on the growth. Best fees though are around 0.75%.
Sequence of returns risk can go both ways you can just as easily have an outcome that’s far in excess of the average anticipated value as less.
Taxes on unrealized gains are just ludicrous in my humble opinion. Seems unfair that entrepreneurs have a loophole and employees do not. What do you think?
Yeah I think it’s hugely unfair. It’s almost impossible to build wealth as an employee in Ireland.
isn't there a 30% tax free? So it is more likely 26.365% x 0.7 tax in Germany
No, around 1,000 Euros a year can be withdrawn without paying taxes but that's about it.
For funds containing more than 50% stocks (so almost all ETFs) 30% of the gains are free, which results in roughly 18% total tax rate (Teilfreistellung).
Around 26% is the maximum. You can choose Günstigerprüfung. If you live in your own home and have a tax consultant things are not as bad.
@@fIysohigh exactly this. Couldn't remember the German name, thanks!
Yes, yes, yes. I agree 100 percent with all of your comments. When You Tuber's are using these type of graphs and charts, my "pet issue" is the use of a constant monthly investment amount over a persons entire 40-year career. As for myself, I suggest investing these amounts from a person's take-home pay as a minimum: in your 20's, save 5 percent; in your 30's, save 10 percent, in your 40's, save 15 percent; in your 50's, save 20 percent; and in your 60's, 25 percent (smile ... smile).
You have to flip that around by investing more at younger age rather than later because time will allow your earlier contributions to compound more.
In theory that's correct diydad, in practice most can contribute more the older they get :D
True. Not everyone can/will do it. However, people who tend to be frugal optimizers, try to flip the script and invest as much as you can before buying new car, house, and having kids. 15-20 years later they will be able to quit their jobs or work at their leisure.
@@diydad5067 Wait a minute... To me it looks like most "rich" young people online are working more the more they make so no can't expect them to "work at their leisure"....
@@donaldlyons17 I think it depends on the person. Hedonic adaptation or lifestyle creep is real so the more they make the more they spend because of the erroneous logic -I work hard so “I deserve it.” In my book, you can only “afford” something if your asset provides you income to buy you the stuff. Until then I would keep my lifestyle in check, work hard and stack them up.
This is a great sales pitch for Roth IRA's
It is! This wasn't my intention though! :D I should pitch it to the German government.
I wish you luck. One would think they'd have something like that.
Czech Republic.
15 % tax on dividends
15 % tax on capital gains; but, there is a time-test applied to shares and ETFs (only those, no other investments): if you hold them for 3+ years, then there is 0 % tax for capital gains.
Finland, and I invest through my own company: 20% on stock gains, dividends, same 20% also for corporate profits
That's alright, isn't it?
I would say so! Also the higher assets you accumulate in your own company, the less you pay as taxes when you pay yourself with company dividends. Basically 75% of the dividend is tax exempt as long as dividend is not higher than 8% of your company assets. Say your company has 0.5M€, the 8% is 40,000€ on you pay taxes only for 10,000€. Not bad!
@@danielegianetti5599 Interesting model! I actually think the Scandinavians make some smart political decisions when it comes to the world of stocks and government rules.
In Finland for normal person the tax rate is 30% for under 50 000 e and 32% for over 50 000 e, unless you have your own company and exploit the holding company loophole. Finland has definitely not made smart decisions.
@@kristo5521 if you read my comments above I specified that I own my company
Hi Rene! In my country I have the luxury of not having to pay taxes on stock earnings as long as certain conditions are met: The main ones are that these earnings are not be allowed to be above 50% of your total income earning and the other one is being forced to hold stocks for at least 6 months before selling. I am new to the market and my impression is, that not being able to sell at any time could make the difference between making a lot of money (even if you play taxes) or no money at all. On the other hand I see a lot of people holding on for stocks for more than 6 months on average. So what would you rather favour: Having flexibility to sell at any time below 6 months and paying taxes for that, or picking stocks to hold longer than 6 months and to avoid taxes on sales? thx for a short feedback!
Tough to answer this question in general because it would depend on a lot of factors. Generally speaking this system sounds pretty nice - I'd take it. I very rarely sell investments after six months or less (and if I do, it's because I made a mistake and thus there will at best be minimal gains). So I wouldn't worry about it too much.
Moldova, 6% capital gains tax, here we have the smaller one in Europe
Yeah, that definitely one of the lower tax rates mentioned so far.
SO what you do is what I am doing which is Pay the £1000 into a pension. In the UK the government will top that up by 40% (as I am a hgiher rate taxpayer but if lower rate it is still 20%) and then you can draw down 25% tax free when you get to retire. No CGT but you do have to pay tax on the taxable amount thereafter. The other alternative is to put the money into an ISA and then you get it all tax free and no CGT.
Yeah, my understanding is that the UK has a pretty investor-friendly system!
The problem with capital gains and dividends taxes is that those should be progressive taxes. You want to have it, because you don't want to have oligarchs, but there should be an amount that is tax free.
In Poland we have stupid situation where short term gains (no retirement) have 19%.
At the same time for real estate rental you have 8,5% - 12,5% progressive tax. Not hard to guess what people are doing with the money. Instead of investing it in stocks, ETFs or bonds, they are buying flats for rental which stressed the market prices.
Thanks for sharing Bartomiej! I'm not going to start a stock vs. real estate debate here but I get what you are saying. Ultimately, the price one pays for an asset affects expected returns.
There a few issues with this video:
1. The ETF mentioned in the video has an unreasonably high expense ratio which is NOT normal. Usually broad market ETFs have an expense ratio of 0.03-0.05%. For example for VTI (and most Vanguard ETFs) it's 0.03%
2. A lot of countries do NOT have a capital gains tax and you are free to change your residency to another country if you do not want to pay the tax
I'd say TERs of 0.03% are very rare, so I don't think assumed crazy high fees. Of course you can adjsut the numbers accordingly.
And of course capital gains taxes vary. This was just one example (Germany) and I think I made this quite clear?
I found it quite interesting to read the comments and learn more about the different tax system all around the world. I encourage you to take a look at them too.
how is 0.03% rare? It's the industry standard. In fact, many funds charge even less, Charles Schwab charges 0.02% expense ratio on their S&P 500 ETF.
Fidelity charges 0% for their S&P 500 ETF.
I think you can always workaround the tax. If you want to retire at 60 in your home country, just invest inside of your retirement account. I think most western countries have a 0% tax retirement account, from which you can only withdraw at retirement age. I know Canada and US have such accounts, but you'd need to look up if Germany has one.
If you want to retire at 30-40, then it might be better to change a residency to a low tax country with low or no capital gains.
But yeah if you want to retire early in your home country of Germany, then your investments will get a big haircut from capital the capital gains gains, no arguing here, I'm just sharing the alternatives I would look into
Don't forget to consider external risks over 30 years. A lot can go wrong: the bank holding your assets could fail, the country could face invasion or international isolation, the currency could collapse, and physical assets might be stolen. Security costs are high. Historically, there have been few times and places where you could safely save for 30 years.
Kardden Token time! This thing is lifting up in ways nobody did before
Romania: 1 or 3% (if you hold your investment for at least one year/ less than one year) and the broker has one headquarter in the country. In this case, you cannot subtract loses. Otherwise, you have a 10% tax on the profits of the year. Divident tax is 8%. You have to pay some additional "health" tax if your total income surpasses 6, 12 or 24 minimum wage salaries. After 24 salaries that tax does not increase. There are some rules. Still, they are not that bad if I compare them with some other countries.
Interesting. Sounds very reasonable.
Adjusting for inflation: you are the first person I have seen to use 2%, most people use 3%.
That's a fair point. It really varies depending on where you live.
Clearly Kardden was a right choice. Hope to learn more from you this is pure knowledge
You cannot run from inflation or taxes but you can increase your lifestyle now and still build wealth and compound using income investing. Unfortunately, the 26% tax in Germany on dividends makes this really harder than it should be. I think 15% is more adequate.
Personally, I'm not a big fan of dividend-focused strategies anyway if your goal is to build wealth.
Italy Has also 26% and there is no Free €1000 so each one is Taxed 26%
In Belgium we pay ZERO capital gains tax on stock investments. We DO pay 30% on our dividends.
Fees, Taxes, Inflation and whether you invest when the market is at a boom so money doesn't grow too fast or at a low so your money grows faster. All relevant points but you should take into consideration people's risk as well. There's no debt fund that gives 10%. Debt funds save your principal amount. In Equity if the market crashes then it has a chance to wipe your principal quite badly. But there is nothing better to do for investments.
I assumed one is dollar-cost averaging, making market timing assumptions largely irrelevant. I didn't get the point you made concern debt quite frankly.
In Croatia, if you hold something like a stock/ crypto, something from the financial market for more than 2 years you pay 0% tax on capital gains. You can move money around, you just can't cash out.
I have been putting money on a monthly basis since like 2010 into one of those founds. They wanted an input fee. And promised growth of 3x over the course of 30 years. Also adding a clause that it is not guaranteed etc etc. In the past 14 years, I am down by like 5% and if include the input fee, I am down like 8%. Now to stock market is generally considered to rise 5 - 10% each year. With all the crashes in the past 14 years, I should be up at least 20%. For example, if the fund managers bought 2k worth of shares in March 2009, I should be - roughly speaking - up around 400% on those particular 2k. The conclusion I came to is that they take the capital from the people, then they can trade with that capital making much more gains because 2% gain on a trade when you have 2mil compared to 800mil is completely different.
Thank you for this video, Regarding your last question.
I live In Saudi Arabia and we don't have income tax, but we have 15% additional tax to the products. However as a Moslem I must take 2.5% of my woth every year for poor people and we call it " Zakah " so my total return will reduce from 9.8 to 7.3 at least.
If I was investing in US stocks I will have to pay also US income tax on the dividends. In the end I will come out with 4% maybe, so that doesn't worth the stock market risks .
I live in Brazil and capital gains can be taxed at a rate of 15% for 0,9 million US dollars (exchange rate of August 2024) and it can get as high as 22,5% for capital gains above 5 million US dollars. There is an exemption if you cash out a small amount which is as of today around 3,5 thousand US dollars.