Replies to post #38069 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Hi K.

Some ETF's benchmark to a net of 30% US withholding tax based index. So if a 2% dividend yield the 'benchmark' is 0.6% lower than the 'index'. That provides the impression that the actual fund much more closely matches the benchmark.

Ireland as for the UK only pay 15% US withholding tax, so they're quids-in (in the money) there. Better still they might partake in stock lending - which can entail lending the stock to a US party the day before x-dividend and then having the stock returned on the x-dividend day together with a cash payment in return for having 'lent' the stock that might compare to the full dividend that the US party was paid (no withholding tax deducted). So even more quids-in.

Sure does help to make tracking the 'benchmark' that bit easier. Some funds can even cost in and profit even with a 0% expense ratio (fund management trading fees and costs are typically absorbed by the fund (taken out of dividends)).

Oooooh look how closely we track the (net of a 30% lower dividend) benchmark ... and how low our fees are. All a bit of a illusion when the benchmark is lower than the total return index and they're benefiting from security lending 'tax mitigation' that borders on illegal tax-evasion.

The best of course is shares itself. Buying in several sectors based on Value seems nice to me

A nice little AIM-like portfolio might be to merge sectors into 5 larger core sectors, and equally weight 5 stocks in of each of those sectors. 25 stocks, 4% single stock risk. 20% sector weightings.

Then once each year for each sector sell down (profit take to realign winners to the average (or median) individual stock weighting) the best performing stock and pool those funds. Then share the funds back out to add to those stocks that had relatively declined, so as to re-raise the biggest losers closer back to equal weighting levels, and doing so in a manner that steered sector weighting back towards 20% weighting in each of the 5 sectors.

Diverse, equal weighted stocks, equal weighted sectors, periodically rebalanced so-to-speak. But doing so with relatively little trading activity (costs) and moderately low levels of single stock risk.