Exposure to Equities via regular contributions

Discussion in 'Investments' started by gnf_ireland, Jan 6, 2017.

  1. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    598
    If a couple got themselves into a position whereby their mortgage was effectively cleared (nominal amount remaining) and pension contributions were maxed out for both parties - what would the extertise on AAM suggest as suitable regular long term investment options.

    The horizon would be >15 years, as ideally it would be a SKI club fund (Spending Kids Inheritance).

    The most suitable would allow monthly payments (ideally similar to a regular savings account around 750 euro a month) but also support one off contributions both initially and periodically over the years.

    Is the only real option in Ireland something like a Life Assurance Company LifeSave scheme or are there other suitable alternatives out there?

    Given the regular contributions, a fee per execution would not be suitable per contribution. It would be better to build up the funds for a year and then make a single 9k investment contribution once a year.

    Taxation wise, I am guessing most suitable products will work off the Exit Tax/Income Tax model than the CGT Model, unless I look at non-EU domiciled ETF's (but again this would not be suitable for regular contributions)
     
  2. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,209
    One strategy is to increase (or maintain) the level of equity exposure in your (tax advantaged) pension accounts and to plough any additional (after tax) savings into (tax exempt) State savings products.

    Bear in mind that there is good reason to increase the amount you have in "safe" investments as your investment horizon starts to shrink (because the probability that equities will outperform cash/bonds increases substantially over longer time periods).
     
  3. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    598
    @Sarenco

    Understand and agree with you, but if we take an average life expectancy of around 80 years (78 male and 82 female), we have close to a 40 year horizon to work with. I am all for reducing equity exposure as we get older, but at 41 I am not sure that is what I should be considering :)

    You can assume we would have sufficient 'safe' investments as well.

    I am just wondering how I might get the exposure? I am wondering if there is anything similar to an ISA in Ireland that could be leveraged, or any plans to make them available?
     
  4. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,209
    No, I'm afraid there's no equivalent to an ISA in Ireland.

    One (admittedly conservative) rule of thumb is to maintain your age in bonds - so that would currently put you at 60% in equities, 40% in bonds. Alternatives on this theme are to subtract your age from 110 (or 120) to arrive at the percentage of your portfolio to invest in equities.

    However, these are just rules of thumb - ultimately it's all about your own personal need, willingness and ability to take equity risk. Only you can decide where you want to position yourself on the risk/reward spectrum.

    Also, bear in mind that if your are making regular contributions to a portfolio (as opposed to a lump sum investment) your (hopefully growing) won't all be invested for anything like 40 years.

    If you really feel the need to invest after-tax money in taxable equity investments, I think UK investment trusts are a reasonable option if you want to avoid exit tax/US estate tax risk. Something like Foreign & Colonial Investment Trust plc (the oldest collective investment vehicle of them all) would give you exposure to a diversified global equity portfolio at a fairly reasonable cost.
     
  5. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    598
    Thanks for the tip - I will look into it

    Its not a case of feeling the need to. Once the financial review is complete the pension contributions will be maxed out. The remaining funds either go on deposit or invested (unless I go on a spending spree), and don't like the idea of everything on deposit at current rates. I feel I can take a level of risk with the money
     
  6. sunnydonkey

    sunnydonkey Frequent Poster

    Posts:
    97
    Why not just buy an equity every two months, for example?. Stick to large bluechip dividend payers. After a couple of years when you have a portfolio of 10 or 12, you can top up what you have or adjust your portfolio. If current affairs interests you, you will find that this will grow into an interesting and profitable hobby.
    Tax on investments in Ireland is certainly not encouraging but try not to let tax issues affect your investment decisions.
     
  7. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    598
    If say I was looking to invest 750 a month, this would mean looking at making a purchase every 2-3 months, at say 1500/2000 euro a time. I am guessing someone like TD Investing at 20 euro flat fee a trade would be an option here - or use one of the cheaper online versions.

    The question is would this be a better option that say Zurich LifeSave option using funds? I guess it all depends on the costs associated to Zurich LifeSave or similar
     
  8. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,586
    For simplicity (in terms of tax and managing the investment risk) I would suggest something like the Zurich Life product.

    Buying direct shares yourself can be messy.
     
  9. SBarrett

    SBarrett Frequent Poster

    Posts:
    1,938
    The regular saver market is pretty small in Ireland. The best product out there is the Zurich Life one, the rest are more expensive. I've been paying into their Dividend Growth fund since 2009 and it's done very well. They now have a Blackrock Global Equity index fund if you want a passive strategy.


    Steven
    www.bluewaterfp.ie
     
  10. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,586
    Snap. Dividend Growth Fund up 17.5% last year!
     
  11. Fella

    Fella Frequent Poster

    Posts:
    263
    Tell me more ! What kind of charges for these funds are these no loss relief / exit tax funds ?
     
  12. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,586
    Last edited: Jan 7, 2017
    Investing in something because it did well is generally a bad idea.

    The cost is generally 1%.

    There is no loss relief and the tax rate is 41% on gains made when exiting or accumulated gains every 8 years.
     
    Last edited: Jan 7, 2017
  13. Duke of Marmalade

    Duke of Marmalade Frequent Poster

    Posts:
    1,524
    The disclosure document actually shows the cost at 2% p.a. It is difficult to see how the costs can be less than this but the fact is that in today's very low return environment that is a very high charge. I think the only economic option these days is DIY.
     
  14. Fella

    Fella Frequent Poster

    Posts:
    263
    I'd never invest because it did well in the past I'm a firm believer in efficienct markets and I'll generally buy anything that has enough money traded to become efficient. All I care about is low costs and the spread between bid and ask.

    The reason I asked the question tbh was because I see SBarret saying he's invested in this since 2009 and I figured he was a shrewdie as he gives investment advice and I found it confusing why he would choose this over just buying shares himself.
     
  15. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,586
    I don't think that any of us have the resources to research share purchases ourselves.
     
  16. Fella

    Fella Frequent Poster

    Posts:
    263
    I think you don't need to the markets already priced it for you.
     
  17. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    598
    The only 'disadvantage' I associate to the Zurich option is the fact I have my pension with them, and therefore invested in the same exact funds (by enlarge). I have Dividend Growth in my pension (as does my wife in her's) but if its good enough for pensions, its good enough for investments

    Absolutely agree. There used to be Quinn Life and Rabo Direct serving this market but they are now gone as options. I would really love to see an ISA type product available to work with here. I am surprised we have not followed the UK on that (since we try and follow them in so many other ways)

    Yes, this is most definitely a negative with investment funds. I really would like to see their taxation moved back in line with shares, whereby loss relief could occur and subject to capital gains. May not happen for a while though.

    I wonder is there room to negotiate on the annual management charges? I know there is for pensions, so wondering if this would be any different ?
     
  18. sunnydonkey

    sunnydonkey Frequent Poster

    Posts:
    97
    If you were buying a car you would read the brochures, know the specs, look at the reviews etc.

    It's exactly the same for shares. Educate yourself about the company and its business, look at its annual report, check (cynically) the discussion boards and alternative opinions. Everything you need is online. You dont need to read up on every share, just the ones that interest you, and you will find that, over time, you will develop a healthy knowledge. Don't depend on analyst recommendations or newsletters, but try to work out why they have arrived at their conclusions and then consider opposing angles. All this is something that you will either interest you or will not. If it doesnt interest you, stick to index funds or the like rather than investing in individual shares.
     
  19. SBarrett

    SBarrett Frequent Poster

    Posts:
    1,938
    I have no interest in researching companies to assess whether they are good value buys or not. And I certainly don't have the skill to buy at the correct price, so will probably buy at a higher price than someone with great knowledge of trading.

    I am fully aware that the regular saver plan is expensive but I am outsourcing all the work I don't want to do to Zurich and that comes at a cost. Trading relatively small premiums each month won't be that cheap either.


    Steven
    www.bluewaterfp.ie
     
  20. Dman35

    Dman35 Frequent Poster

    Posts:
    38
    I believe investandsave.ie only charge 1% p.a. and they have access to a number of Zurich funds.

    I am not connected in anyway to investandsave..