Etfs versus direct shares

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KOW

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Hard to avoid many articles buy the hay stack not the needle etc. Say deemed disposal 41% on ETF against capital gains say after 10-15 yrs time frame.
Has anyone looked at actual figures or can share example/experience on buying the haystack or sticking with individual shares diversified across many sectors in relation to above time frame.
 
KOW said:
Hard to avoid many articles buy the hay stack not the needle etc. Say deemed disposal 41% on ETF against capital gains say after 10-15 yrs time frame.
Has anyone looked at actual figures or can share example/experience on buying the haystack or sticking with individual shares diversified across many sectors in relation to above time frame.
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Or purchase ETFs taxed under general tax principles (CGT)
 
KOW said:
sticking with individual shares diversified across many sectors
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There's arguably a third way - buy already diversified conglomerate shares that operate like index/ETF proxies. The links of Berkshire Hathaway or other holding companies that operate in a similar fashion. Diversification with CGT taxation in one.
 
ClubMan said:
There's arguably a third way - buy already diversified conglomerate shares that operate like index/ETF proxies.
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BRK does not operate like a proxy for an index fund - not even close.

Something like 40% of BRK’s underlying share portfolio is held in a single stock.

I’m not saying it’s necessarily a bad investment, but BRK is nothing like an index fund.
 
Sarenco said:
Which requires the services of a highly-paid manager, thus defeating the primary attraction of ETFs…
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How does having an investment manager defeat the primary attraction of diversification relative to a single stock or concentrated stock portfolio?
 
Is there a specific example of one that is taxed under general tax principles, and why?
 
So I am eager to stay away from financial advisers. From Mr Vanguard himself RIP to Warren Buffet they advise against paying fees and just buying the Haystack. I appreciate they are talking from an American position somewhat. Tax and costs are much better in the USA.
Getting back to our little shamrock and lets just say to help out a simple soul like myself, Over a 10/15 year period with a diversified porfolio of shares would my shares not have to perform very badly in order not to come out ahead of just lets say a roll up ETF paying 41%.
 
I'm not really clear what question(s) you're asking.
On the tax issue - over an 8 year investment timeframe for simplicity - the tax on growth of an ETF versus a basket of shares is 41% versus c. 33% - so the ETF is at an 8% "disadvantage".
So if you have a basket of shares that mirrors the composition of the ETF and both generate similar returns then you might expect to be 8% ahead with shares.
What other information are you looking for?
 
That's too simplistic, the ETF is also benefitting from gross roll-up so it's not paying tax on dividends.

The basket of shares are paying up to 52% income tax on dividends each year so the difference would be less than 8%.
 
The question OP is asking is whether the benefits/drawbacks of gross roll-up are enough to offset the 8% tax difference.
 
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@KOW
It's a complex question, with the outcome depending on lots of different variables. There's a pretty healthy discussion in the first few posts in the following thread which should give an understanding:

Key Post - Which is better gross roll up or CGT investments?

From Steven Barrett: https://www.bluewaterfp.ie/investments/which-is-better-gross-roll-up-or-cgt-investments/ Assuming 5% dividends a year and 5% capital gains - net of all charges! After 8 years: 1. CGT Fund at 28.75% tax: €179,005 2. Deemed disposal €169,789 3. CGT Fund at 52% tax...
www.askaboutmoney.com
 
ClubMan said:
I'm not really clear what question(s) you're asking.
On the tax issue - over an 8 year investment timeframe for simplicity - the tax on growth of an ETF versus a basket of shares is 41% versus c. 33% - so the ETF is at an 8% "disadvantage".
So if you have a basket of shares that mirrors the composition of the ETF and both generate similar returns then you might expect to be 8% ahead with shares.
What other information are you looking for?
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Thanks folks replies to date. What I am doing at the moment is trying to clear in my own mind how to invest in equities spread over the next say two years. Averaging in.
I have used Stephen who posts on AAM to set up my pension in other words no problem paying for services required.
Regarding equity investment I would not use an adviser unless I required a specific service thats just me.
Brendan has for years advised to buy I think 10 big hitters and hold forever. At this stage I agree with holding a portfolio of shares but a much larger amount. My tax on div. would be at lower rate. Another reason why direct investment may be best,
My investment would be for 10yrs plus with a strong possibility I may never need the funds.
So really looking to tease things out.
 
Corola said:
That's too simplistic, the ETF is also benefitting from gross roll-up so it's not paying tax on dividends.

The basket of shares are paying up to 52% income tax on dividends each year so the difference would be less than 8%.
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That’s too simplistic

The US makes up around 60% of the world. Dividend income received by a European fund suffers a withholding tax of 15% on US shares which can’t be offset against exit tax so each €1 of dividend income comes in at 85c and then you pay 41% on it so you are down to 50.15 cents for each €1 received. Effectively paying income tax at a rate of 49.85% on European funds except If they are domiciled in Lux in which case the withholding tax is 30.%
 
Ok, point taken.

Although you don't pay 41% on the 85c on receipt of the dividend, you pay it on the 85c +/- any subsequent growth in the fund at the first disposal.

49.85% would be the effective rate for a distributing fund, but for an accumulating fund it's not counting the extra earning potential of deferring the tax until disposal.
 
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