WEALTH CARE

I have about 3 million baht extra in my pocket now that I can use to pay off my mortgage. But since the interest rate on my mortgage isn't that steep, I think I may lose an opportunity to make money from my funds if I spend it all on the mortgage. Where should I put the money to make a higher return than the interest I'm paying on my mortgage?

_ MongkolANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA It's always nice to have 3 million baht lying around looking for a home. First, I would suggest you set up a rainy-day or emergency fund equal to five or six months' worth of living expenses if you do not have one already. Second, you need to analyse your monthly cash flow. If it is positive and quite secure, i.e. you earn more than you spend and your job is fairly secure, then you can look for longer-term investment options than bank deposits.

Mind you, interest rates on fixed deposits are actually not bad nowadays. You can easily get 3-4% per year, depending on different maturities. But if you are looking for something higher, then you have to take more risk and be willing to invest for the longer term. When I say longer term, I mean at least five years or more.

A well-diversified portfolio should comprise stocks, bonds and real assets such as commodities and real estate. Investing in a low-cost diversified portfolio such as the SET50 Index Fund should be a good starting point. You should also look into gold exchange-traded funds, selected property funds and foreign-investment funds.

I am a foreigner working in Thailand (I have a work permit). I am doing forex trading online, with my broker in the UK. When I make a profit and bring the money to Thailand, do I need to pay tax on this income? If so, how much do I have to pay?

_ S. SathishkumarANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA It all depends on your nationality and residency. Since I am not a UK tax expert, I can only give you the basics. Most assets are liable to capital gains tax when you sell or dispose of them. These include shares, property, business assets and personal possessions _ whether they're in the UK or elsewhere. But some assets are exempt such as your car; personal possessions worth up to 6,000 pounds (293,000 baht) each; stocks and shares held in tax-free investment savings accounts such as ISAs and PEPs; UK government or "gilt-edged" securities; and funnily enough, foreign currency you bought for your own or your family's personal use outside the UK. I am not really sure whether forex-trading profit would come under this exemption. So you need to consult with a tax accountant or lawyer on this.

Individuals living in the UK are entitled to an annual tax-free allowance (known as the "annual exempt amount"), which allows you to make a certain amount of gains each year before you have to pay tax. The exempt amount for 2011-12 is 10,600 pounds. However, you will not get the annual exempt amount if you are not domiciled in the UK, i.e. you were born in another country and intend to return there. Issues of domicile and tax on foreign gains are complicated. A lot depends on the facts of each case and on your specific circumstances.

The 2011-12 capital gains tax rates are 18% and 28% for individuals, depending on the total amount of your taxable income. Since Thailand has a double-tax treaty with the UK, any after-tax profit you bring into Thailand will not be taxed again.

I'd like to ask for a tip on buying RMFs and LTFs. Is there a proper proportion between RMF and LTF investments, or does it matter? People at the bank suggest I buy them throughout the year, say 5,000 or 10,000 baht every quarter or month, but I don't understand why.

_ DiaANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA Both LTFs and RMFs offer generous tax deduction benefits: 500,000 baht or a maximum of 15% of your gross annual income for each type of fund, but the limit on RMFs also includes other provident fund contributions. So if your cash flow permits, I would recommend you maximise your tax deductions by buying both types of funds to the limits allowed.

When investing in the stock market, "time in the market" is more important than timing the market. In other words, do not worry about things that are beyond your control, namely share price movements.

The question I get asked the most is: "When is the best time to buy stocks?" And the answer I always give is when you have the money. For salaried folks, it's usually the end of each month. This is where a technique called dollar cost averaging (DCA) becomes really useful.

DCA buys a fixed amount of a particular investment on a regular schedule regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high. DCA lessens the risk of investing a large amount in a single investment at the wrong time. For example, you decide to purchase 100 baht worth of XYZ each month for three months. In January, XYZ is worth 33 baht, so you buy three shares. In February, XYZ is worth 25 baht, so you buy four shares this time. Then in March, XYZ is worth 20 baht, so you buy five shares.

In total, you purchased 12 shares for an average price of 25 baht each.

The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through wealthcare@bangkokpost.co.th or the TFPA's webboard at www.tfpa.or.th