Investment Portfolio Split

T

Techhead

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I have been slowly building a portfolio of shares and savings over the last few years.

I am getting some income from interest(no much these days) and dividends from shares.

Majorityof my portfolio is weighted to savings at crappy rates :)

I would like to have some steady income from investments when I approach retirement age. I am in my mid 30's.

I am ok with some risk and riding out volatility. Just wondering what kind of split other folks are working with? Thanks
 
If your investment horizon is 30 years (and you genuinely mean that) then shares have proven to be the best long-term investment vehicle. All of such investments should be widely diversified into shares.

As to how much should be set aside or what other purpose you may be planning for your savings in the future, you'd need to give a lot more information as to what you expect to do in the coming years, your employment status etc.

For the record, I'm 37 and 80% of my savings are in equities and 20% in deposits/savings schemes. Owning my own home is a medium term goal.
 
Thanks for the reply rob. I am comfortable with an 80/20 split. I have invested in individual stocks - lately moving towards dividend paying as I like the idea of a quarterly payment.

I have avoided ETF in Euro due to the 7 year rule and the questions around US ETF have put me off.

Do you pick indices or just pick great companies like coke and GE with long track records?
 
I don't want to barge in on this but general electric went through a rough patch a few years ago with big falls in share price due to its exposure to financials. You would never think it from its name. If you were a shareholder then it was far from certain that it would come out the other end. There are no guarantees in the stock market just look at the Volkswagen scandal the bellwether of German industry. There is no such thing as a safe stock
 
Thanks Joe. Point taken. Going back to my original question. I was just curious how much of a split people have in the markets roughly at any given time. I am personally all about buying stocks for the long term with dividends and have dipped my toes in but I am hesitant to go "All in"
 
joe sod said:
I don't want to barge in on this but general electric went through a rough patch a few years ago with big falls in share price due to its exposure to financials. You would never think it from its name. If you were a shareholder then it was far from certain that it would come out the other end. There are no guarantees in the stock market just look at the Volkswagen scandal the bellwether of German industry. There is no such thing as a safe stock
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Or even closer to home, Bank of Ireland. How many people ploughed their money into BoI shares as they were "blue chip" and paid dividends? There's never any certainty that a dividend is paid every year.

Then there's the tax element of getting a regular dividend. You are taxed at your marginal rate. Under gross roll up, the dividend is reinvested without triggering a tax liability.

Steven
www.bluewaterfp.ie
 
"Under gross roll up" is this only for Dividend/Income Funds?

Is there specific funds that allow an investor to use up "accrued CGT losses"?

Thx. M
 
Your bog standard insurance company fund or funds through fund platforms are all gross roll up. If a share is sold within the fund the profit is reinvested with no CGT. You do pay 41% tax on growth on the way out though.

They are not liable to CGT so you can't offset accrued CGT losses.

Steven
www.bluewaterfp.ie
 
Yes, investments such as Berkshire Hathaway (which doesn't pay a dividend) or US ETFs (which pay dividends) or UK Investment Trusts (which generally pay dividends).

Gains made on all of above investments can soak up capital losses.
 
SBarrett said:
Or even closer to home, Bank of Ireland. How many people ploughed their money into BoI shares as they were "blue chip" and paid dividends? There's never any certainty that a dividend is paid every year.

Then there's the tax element of getting a regular dividend. You are taxed at your marginal rate. Under gross roll up, the dividend is reinvested without triggering a tax liability.

Steven
www.bluewaterfp.ie
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was bank of ireland ever " blue chip " ?

its a very small bank by global standards
 
galway_blow_in said:
was bank of ireland ever " blue chip " ?

its a very small bank by global standards
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Sure wasn't Ireland the centre of the universe back then!! Perception is something that changes a lot when it comes to investment. For a long time, Irish banks were viewed as "blue chip". After the crash, we realised that they weren't and there were a lots of other, bigger banks than BoI and AIB ;)

Steven
www.bluewaterfp.ie
 
Techhead said:
I have been slowly building a portfolio of shares and savings over the last few years.
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A brave move, you would benefit from diversifcation far more if you were investing in funds rather than individual shares (albeit they might not offer you the opportunity for a regular income).

Techhead said:
..I would like to have some steady income from investments when I approach retirement age. I am in my mid 30's.
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If the requirement for income as you approach retirement could be deferred until you actually retire, then I'm forced to ask - why not invest through a pension vehicle and get the tax break as you invest, along with the gross roll up while you remain invested ?
 
Hi Techhead

A few observations.

Do you own your own home - if not, then your investment horizon is a lot less than 30 years. Buying a home should be your first investment priority.

If you have a home, have you paid off your mortgage? If it's a tracker mortgage, then investing in shares is the right idea. If it's not a tracker mortgage, then you should be paying down your mortgage rather than investing in shares. You get a guaranteed tax-free, cost-free and risk-free return of 3.5% by paying down your mortgage. In fact, the benefits of paying down your mortgage are so high, than some would suggest that you should even pay down a tracker mortgage.

MrEarl said:
why not invest through a pension vehicle and get the tax break as you invest, along with the gross roll up while you remain invested ?
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Only if you have bought a home and paid down your mortgage to a very comfortable level or have a vert cheap tracker mortgage.



You are right to invest directly in shares rather than a fund, assuming you have around 10 shares. It's only a small part of your overall wealth, and you have the capacity for the slightly increased risk. Investing directly in shares is better from a tax point of view and from a costs point of view.

Techhead said:
I would like to have some steady income from investments when I approach retirement age.
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Techhead said:
I have invested in individual stocks - lately moving towards dividend paying as I like the idea of a quarterly payment.
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Not sure why you would like income which is taxed at 50% which you will probably use to invest again in more shares. In retirement, you want wealth. You can sell some shares when you need cash.
 
Techhead said:
Do you pick indices or just pick great companies like coke and GE with long track records?
Click to expand...

joe sod said:
There are no guarantees in the stock market just look at the Volkswagen scandal the bellwether of German industry.
Click to expand...

joe sod said:
general electric went through a rough patch a few years ago with big falls in share price
Click to expand...

SBarrett said:
How many people ploughed their money into BoI shares as they were "blue chip" and paid dividends?
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Nothing long with General Electric over a 30 year horizon:
upload_2016-9-12_8-22-3.png


Thirty years ago, it was $3. Today it's $33. That is an 8% annual cumulative return. I assume that there were dividends on top of that. Of course, over a 16 year horizon, you would have lost half you money. But over 18 year or more, you are ahead.

As you buying a portfolio of shares, you will pick a few duds, (I lost c. 90% of my investment in AIB) but you will also pick many more which will do very well.(I more than doubled my money in DCC, Ryanair, Aryzta )

As you are building a portfolio over time, you are getting further diversification. You will buy some shares at their highs and they will fall. But you will buy many more at lows.

The volatility in shares which the above graph demonstrates puts a lot of people off shares and they miss out on long term returns as a result or else they pay big costs to fund managers.

Brendan
 
Brendan Burgess said:
....You are right to invest directly in shares rather than a fund, assuming you have around 10 shares. It's only a small part of your overall wealth, and you have the capacity for the slightly increased risk. Investing directly in shares is better from a tax point of view and from a costs point of view.
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Mr. Burgess,

I do not agree with you on all of that.

Firstly, how can you have any sort of reasonable diversification with something like 10 shares ? Consider geographical locations, currency risk, industry sectors, growth or value shares, high yield etc. etc. Sorry, but my view is that initially the fund approach is far better than a small selection of shares from a risk point of view, given the immediate benefit of diversification.

Following from that, your point about the cost is debateable. I fully accept that some funds are a "rip off", but equally not all when you consider the benefits of access to immediate diversifaction without direct acquisition costs (and annual stockbroker account charges) for every share in a fund portfolio, the ease of administration, access to professional resources within the fund etc. By all means, let the buyer beware but in this day and age, costs are far more transparent than they were historically so it's relatively easy to compare fund costs.

Is an ETF tracking say the S&P500 a compromise, between the traditional unit linked type funds which you might be thinking of and buying a few shares directly from time to time with the high overheads relative to the transaction size, concentration risk etc ?

I would be interested in reading a little more on your thoughts from the tax perspective, if you would be so kind.
 
Sadly I dont have a tracker. I am on a variable rate with another 24 yrs to go. I hear your point regarding the mortgage and I 100% agree but its tough to give those guys any more money a month:). illogical I know :).

Agree with you Brendan regarding dollar cost averaging, in fact the shares I have done well on were the ones I dollar cost averaged!.
 
MrEarl said:
Firstly, how can you have any sort of reasonable diversification with something like 10 shares ?
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Hi Mr Earl. This has been discussed often and I realise that the majority view is that you should have millions of shares through a fund.
http://www.askaboutmoney.com/threads/is-ten-irish-shares-enough.8375/

The reality is that the OP has only a part of his wealth in shares and so each individual share will be only a small part of his overall wealth.

Agree that costs are lower now, but I just don't see any benefit from paying them, when you don't need to. The fund has costs too. So it's not that you are simply paying the ETF annual charge and that a direct investor is paying stamp duty and transaction costs.

Do the tax advantages favour directly buying shares over ETFs?
 
Brendan Burgess said:
Agree that costs are lower now, but I just don't see any benefit from paying them, when you don't need to. The fund has costs too. So it's not that you are simply paying the ETF annual charge and that a direct investor is paying stamp duty and transaction costs.
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To put these costs into perspective, Vanguard's flagship S&P500 ETF (VOO) has a total expense ratio of only 0.05% (the Irish domiciled version has a TER of 0.07%).

It's true that the fund incurs additional portfolio trading costs that are not reflected in the TER but these are more than offset by security lending income received by the fund - the total return of VOO has been within 0.04% of the S&P500 since inception.

0.04% of €10,000 is €4 - a fairly trivial cost for gaining exposure to such a major component of the global equity market.
 
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