Locally we have the Satrix listed Nasdaq ETF (JSE code: STXNDQ) and in US there is the Invesco Nasdaq ETF (Nasdaq code: QQQ).
Ultimately they both track the same underlying index, the Nasdaq 100. But there are differences.
Benefits of Satrix Nasdaq on the JSE?
- It’s local used with local money.
- It can be added into a tax-free account.
- Dividends automatically reinvested, may or may not be a perk for you.
Benefits of Invesco Nasdaq on the US?
- The TER is 0.2%, expensive for a US ETF, but below the 0.48% TER for the locally listed
- Pays out dividends
- As it trades in US$ with your offshore money, you only pay tax on the QQQ move – not any currency moves.
This last post is important.
The local Satrix Nasdaq ETF tracks both he Rand exchange rate and Nasdaq price. Rand strength will weaken the price while Rand weakness adds to the price. If the Rand weakens (which over th long-term it will) that weakness adds to your gain and is hence taxed accordingly.
Buying the US listed QQQ ETF the price only move by the underlying index, not the currency. So profit is not impacted by the Rand and hence potentially a lower tax bill when you exit.
Of course if you’re buying in a tax-free account, it makes no difference as you pay zero tax.
So buy the Nasdaq offshore or local? It boils down to tax.
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.