Key Post Summary of Stock Market Investment Costs
- Thread starter landlord
- Start date
Brendan Burgess
Founder
- Messages
- 53,643
Are the Investment Companies, REITs?
I hadn't thought that the ETF tax situation was as clear as you make it out to be.
I hadn't thought that the ETF tax situation was as clear as you make it out to be.
After reading Gillens book 3 steps to investment success twice! I am more familiar with the terminology now. As I understand it....
The 2 main types of funds quoted on the stock exchange are
ETFs exchange traded funds and investment company's or closed ended funds.
A listed investment company owns a portfolio of investments and you buy them as you would shares on the stock exchange.
An ETF exchange traded fund is a listed low cost passively managed index tracker, which tracks for example the FTSE 100.
A REIT real estate investment trust is a company that owns and manages property on behalf of shareholders. I wasn't referring to REITS in the table as I don't know anything about their associated costs.
The ETF tax issue has now been clarified.
[broken link removed]
Also these guidance notes from revenue from April 2015
http://www.revenue.ie/en/about/publications/exchange-traded-funds-guidance-note.pdf
Last edited:
Thanks Brendan. I couldn't figure out how to reproduce it in that form. Is that a moderator only facility?
To be precise, an ETF is an open-ended investment fund, the shares in which are listed and traded on one or more stock exchanges. Unlike a regular open-ended mutual fund, only certain investors (essentially large financial institutions) can subscribe for shares directly from the fund and end-investors acquire their interests on the secondary market.
ETFs are typically passively managed index funds but there are actively managed ETFs - the distinguishing feature of ETFs, as compared to other fund structures, is the manner in which units can be bought and sold - not their investment policy.
Investment trusts (ITs) are closed-ended investment companies (in the sense that they have a fixed number of shares in issue) that hold securities or other investable assets and their shares are traded on stock exchanges in much the same way as ETFs. However, because there are a fixed number of shares in issue they will typically trade at a premium or discount to the net asset value (NAV) of their underlying holdings. ITs will commonly hold income reserves and can borrow funds to smooth out distributions to investors (unlike ETF shares which simply fluctuate in value in line with the NAV of the underlying fund assets).
A REIT is a particular type of investment trust that holds rental properties and benefits from certain tax advantages if they comply with certain conditions (largely related to the distribution of the bulk of their rental income in the form of distributions to shareholders).
RichInSpirit
Registered User
- Messages
- 1,182
IG do stockbroking now at £6 per trade if you meet certain criteria.
Thanks Landlord, much apprieciated the tax analysis.
So in the case of ETFs (Irish Domiciled) which attraches a tax on gain(disposal) of 41% which is bad! vs share CGT (33% + PRSI +USC), a difference of 8%. but you don't have to pay PRSI (4%) and USC (7%, althought there is a scale) on the gain. I'm I correct in thinking the tax differences almost cancel out for ETFs, or does gross rollup really result in a bad tax deal? I must confess I can't get my head around the tax impact (good or bad) on gross rollup.
My preference is to invest in ETFs for the low cost and divesification factors, but just not sure how bad the tax part really is??
So in the case of ETFs (Irish Domiciled) which attraches a tax on gain(disposal) of 41% which is bad! vs share CGT (33% + PRSI +USC), a difference of 8%. but you don't have to pay PRSI (4%) and USC (7%, althought there is a scale) on the gain. I'm I correct in thinking the tax differences almost cancel out for ETFs, or does gross rollup really result in a bad tax deal? I must confess I can't get my head around the tax impact (good or bad) on gross rollup.
My preference is to invest in ETFs for the low cost and divesification factors, but just not sure how bad the tax part really is??
Perhaps someone can help with this analysis.
If if one was to invest 1,000 Euro in one of each the following :
An Irish share
A UK share
A U.S. share
A listed investment trust
A EU ETF
A US ETF
If each were to rise in value by 10% in the year and considering average management costs for the cheap tracker ETFs of say .3% and .7% for the investment trust. After all taxes considering no dividends, which one would you be better off with?
Last edited:
Another very important thing to consider is currency exchange rates, the recent strengthening of euro/sterling has eroded some gains in my UK shares
Last edited:
You're absolutely right the last few days I've been re-doing the table at the start of this thread accounting for approximate currency conversion costs for shares or ETFs denominated in other countries currencies.
I am guessing very roughly .5% conversion cost for a cheap online conversion company?
I doubt this is correct. Your gain (or loss) is the change in value of the share plus the change in the exchange rates. If you paid for your shares in euro, the increase in value of sterling vs the euro will increase your returns in euro terms.
For example, if you bought a share at say 5.68 GBP this time last year and today the share is now worth 6.56 GBP, you have a gain of 15% in GBP terms. But as you paid for the share in euro, last year you paid 6.9889 EUR for the share at the prevailing GBP/EUR exchange rate.
In the past year sterling has increased in value relative to the euro. If you sold today you would get 8.9932 EUR for the share at the current GBP/EUR exchange rate.
As the euro has decreased in value relative to sterling your gain in euro terms is 28%. So you are getting a double gain, one from the increase in the value of the share and one from the increase in value of the currency in which the share is denominated relative to the euro.
Brendan Burgess
Founder
- Messages
- 53,643
Done.
RichInSpirit
Registered User
- Messages
- 1,182
Found another broker while searching for something else based in the netherlands that's very very cheap.
www.Degiro.ie
www.Degiro.ie
I looked at the site.
2 euro a transaction, execution only to buy and sell shares or ETF's.....looks very cheap !!!
But there's always a catch !!
On the homepage where it quotes those fees look underneath the 2 Euro in very very small writing. It says "+.04%". As in an extra 40 Euro for example a 10,000 Euro share purchase.
Its not in that small writing come on now! ETFs at E2 + .02% means you can buy E1000 worth of ETF at E2 + .02% = E2.20, which is .22% overall. That would actually make euro cost averaging viable....
Article in times about it: http://www.irishtimes.com/business/...irish-stocks-for-little-more-than-2-1.2242776
Article in times about it: http://www.irishtimes.com/business/...irish-stocks-for-little-more-than-2-1.2242776
You haven't seen how thick my glasses are!!
And 0.04% works out at €4 on 10 grand
You're absolutely right....thanks must've got the decimal point in the wrong place. Once again please refer to my earlier post regarding the thickness of my glasses ha ha
I still don't think I would leave TD Waterhouse for a less well known broker.