Episode 024 – Case Study Part 1: How to Pick a Broker, ETFs and Protect Yourself From Taxes
This episode is our first ever case study! We talk with Nicolas, a Romanian living in the Netherlands who has a few questions about ETFs and wants to learn the non BS way to get started with investing. This one is Part 1, Part 2 is coming out next week!
What we talk about:
- Who Nicolas is
- Nicolas’ goals and current situation
- Where to get started with brokers
- The importance of starting simple
- How to assess ETFs
- Protecting yourself from taxes
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Finding the right broker
One of Nicolas’ biggest issues is that he doesn’t know which broker to start with. He opened a DeGiro account but didn’t know exactly what to look for.
Mathias recommends checking out a comparison site for your country. An example in the UK would be The Monevator, and in the Netherlands it would be Mijnbroker . He also says to keep a look out for hidden fees – such as possibly paying fees on dividends coming from the US.
Starting simple
Nicolas’ is goal is to be able to ‘set it and forget it’. He wants to put his money into a broker and not have to worry and check it every day.
I (Araminta) am still a beginner and recommend starting with something simple and easy like index funds or ETFs. Then, once you have a few years of experience and feel comfortable with your situation, you can nerd out like Alvar and get a bit more specific.
As Mathias says, you want to go one asset class at a time.
Assessing ETFs
Sounds nice and simple – but how do I pick which ETF or index fund to invest in?
Mathias says these are a few things you want from your ETF:
- The cheaper the better
- The more global the better (more likely to exist in 10 years)
He also says it depends what your ETF strategy is – whether it’s diversify with one fund, or to focus on different sectors with different funds.
Alvar also makes the distinction between the ongoing charge of the broker and the expense ratio of the ETF; two separate fees which you will have to pay, so make sure they’re cheap!
Tax protection
In the Netherlands, most people open a tax protected account through their employer. However, as Alvar says, that means that money is locked up until you are of age to retire.
For this reason, it’s important to have a combination of tax sheltered and unsheltered accounts, depending on what you want to do with that money (buy a house, go travelling, reach FI, etc).
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Links
Woohoo! So that was Part 1… stay tuned for Part 2 next week 😉