If you purchase ETFs monthly, each purchase is seen as entirely separate, with it's own deemed disposal calculation. After 8 years, you will be calculating deemed disposals every month.
If you purchase ETFs monthly, each purchase is seen as entirely separate, with it's own deemed disposal calculation. After 8 years, you will be calculating deemed disposals every month.All the ETfs that I am considering are accumulating, so it should make tax calculations easier since the dividends are automatically reinvested into the fund.
Please could you elaborate how/why computing the exit tax and/or the deemed disposal tax is a nightmare? I am seeing this phrase all the time, yet nobody bothers to explain why it is the case. I haven't seen a single post trying to explain how it is computed but everybody just assumes that it is a nightmare, so I would love to learn more about that.
I already have a pension pot albeit not max out yet. The point I was making in this post was to invest on a short time, not a long term commitment like the pension. For the record, in pension I am already investing in world equities.
Leaving money in a bank account (unless it is an emergency fund) isn't a savvy move as inflation will gradually eat it up.
I don't believe and I don't have a mortgage thankfully as it is the worth financial decision someone can make. As Robert Kiyosaki said in his book Rich Dad Poor Dad, a mortgage is a liability as it takes money away from you instead of putting it in your pocket.
Gordon. Just to tease this out Say your paying Zurich !% pa. to manage your investment.My Dad and I have all of our surplus money invested in Zurich’s International Equity fund. Eagle Star/Zurich have consistently delivered for us.
The thing with ETFs is that despite the tax involved, they are not the worst investment vehicles out there. The Zurich investment bonds, IrishLife Pinnacle is also terrible. Both of them charge high AMC and offer active funds with the aim to beat the market and we know that this isn't true in the long term. Plus, they're also subject to deemed disposal tax.There are many aspects of what you’re doing that I’d disagree with.
A mortgage isn’t a bad thing, ETFs are a minefield to be avoided, I wouldn’t invest at all until I’m maxing out my AVCs, and investments shouldn’t be short-term.
Assuming you did sell after 10 years, this is what your spreadsheet will look like for the first year of monthly purchases. If you didn't sell you would have a column at Year 16, 24, etc.I haven't seen a single post trying to explain how it is computed but everybody just assumes that it is a nightmare, so I would love to learn more about that.
| A | B | C | D = A * (C - B) | E = D * 41% | F | G = A * (F - B) | H = G * 41% | I = H - E | |
| Purchase date | Nb of shares | Price @ Year 0 | Price @ Year 8 | Gain | Tax, where >0 | Price @ Year 10 | Gain | Tax, where >0 | Net tax to pay |
01/01/2024 | |||||||||
01/02/2024 | |||||||||
01/03/2024 | |||||||||
01/04/2024 | |||||||||
01/05/2024 | |||||||||
01/06/2024 | |||||||||
01/07/2024 | |||||||||
01/08/2024 | |||||||||
01/09/2024 | |||||||||
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01/11/2024 | |||||||||
01/12/2024 |
A mortgage is a liability yes but you have to look at the alternative which is rent, which in Ireland takes even more money away. Robert Kiyosaki talks about the US market which is very different to here. He's also been involved in multiple scams, including flogging dodgy property investments!All the ETfs that I am considering are accumulating, so it should make tax calculations easier since the dividends are automatically reinvested into the fund.
Please could you elaborate how/why computing the exit tax and/or the deemed disposal tax is a nightmare? I am seeing this phrase all the time, yet nobody bothers to explain why it is the case. I haven't seen a single post trying to explain how it is computed but everybody just assumes that it is a nightmare, so I would love to learn more about that.
I already have a pension pot albeit not max out yet. The point I was making in this post was to invest on a short time, not a long term commitment like the pension. For the record, in pension I am already investing in world equities.
Leaving money in a bank account (unless it is an emergency fund) isn't a savvy move as inflation will gradually eat it up.
I don't believe and I don't have a mortgage thankfully as it is the worth financial decision someone can make. As Robert Kiyosaki said in his book Rich Dad Poor Dad, a mortgage is a liability as it takes money away from you instead of putting it in your pocket.
Finally, my point on the mortgage is simply down to the math involved. It's a pity that society makes us believe that buying a house is a good thing and yet very few seems to know the amount of money that they will be spending on interests for example.
The math is the same regardless of the country where the mortgage is drawn. The reason people think that mortgages are cheaper is simply because they don't take into account the interests that they're spending to get a longer payment period. Also, rents are the maximum you can expect to pay for a house whereas the mortgages are the minimum.A mortgage is a liability yes but you have to look at the alternative which is rent, which in Ireland takes even more money away. Robert Kiyosaki talks about the US market which is very different to here. He's also been involved in multiple scams, including flogging dodgy property investments!
I know that I paid a maximum of 100K interest over 22 years. I can now live in this accommodation for the rest of my life with a life expectancy of about 30 to 35 years. I now own an asset of about 480k that at some point I could sell or pass on to my offspring. It wasn't free. It ultimately cost me about €540 and it still generates costs that I wouldn't have if I rented. I have been lucky and unlucky as I bought at the height of the Celtic tiger so my current property is barely worth more than I paid but I had a good tracker mortgage. I have absolutely 0 understanding of what you mean by the bold sentence. At the end of the day, I need to accommodate myself. So I can pay rent that are the maximum you can expect for a house and own nothing or pay a mortgage which is the minimum and eventually own a house. I could probably invest this 480 K and get a decent return on it to pay for rent (though not that easy in Ireland). But I didn't have that amount 22 years ago, I only had about 45k, so no investment would have allowed me to pay for my rent.The math is the same regardless of the country where the mortgage is drawn. The reason people think that mortgages are cheaper is simply because they don't take into account the interests that they're spending to get a longer payment period. Also, rents are the maximum you can expect to pay for a house whereas the mortgages are the minimum.
Robert Kiyosaki isn't the only one against mortgages, they're loads of others. As long as the money to buy comes from a dividend made from an investment then it is a terrible financial decision. Unfortunately, the media portrays the view that buying a house is a good decision. Very few even know how much they spend on interests for instance let alone all the other fees.
So unless you're buying a house with the dividends made from an investment then it is a terrible decision.
The math is absolutely not the same. In the US there is plentiful supply of rental properties and there are also many cities you can feasibly move to. You could easily have a situation where you're paying a lot less to rent and can invest the savings in a tax-efficient way. You say there's many others against mortgages, have you got any Irish examples? In Ireland not only is it near impossible to find rent that is lower than what a mortgage would cost, there are also pretty much no options that don't involve heavy taxation other than pension. I hear you on the point that people don't factor in the interest cost and that's true to an extent but it still makes absolutely no sense to rent in Ireland long-term. I agree that shouldn't be the situation but it's hard to see it changing given the track record.The math is the same regardless of the country where the mortgage is drawn. The reason people think that mortgages are cheaper is simply because they don't take into account the interests that they're spending to get a longer payment period. Also, rents are the maximum you can expect to pay for a house whereas the mortgages are the minimum.
Robert Kiyosaki isn't the only one against mortgages, they're loads of others. As long as the money to buy comes from a dividend made from an investment then it is a terrible financial decision. Unfortunately, the media portrays the view that buying a house is a good decision. Very few even know how much they spend on interests for instance let alone all the other fees.
So unless you're buying a house with the dividends made from an investment then it is a terrible decision.
Thank you, this is extremely helpful.Assuming you did sell after 10 years, this is what your spreadsheet will look like for the first year of monthly purchases. If you didn't sell you would have a column at Year 16, 24, etc.
In your annual tax return you will sum up the tax in the 12 rows. You will have one of these sheets for each calendar year of purchases.
A B C D = A * (C - B) E = D * 41% F G = A * (F - B) H = G * 41% I = H - E Purchase date Nb of shares Price @ Year 0 Price @ Year 8 Gain Tax, where >0 Price @ Year 10 Gain Tax, where >0 Net tax to pay
This thread seems to have been hijacked by the nonsense debate about mortgages, so I will post my last answer to it and move on to the original issue about investing in ETFs.So, you don’t have a mortgage because you choose to rent rather than own your home. Right?
I think that’s a terrible decision in an Irish context but I doubt anyone will convince you otherwise.
Would you prefer to make mortgage payments of €2k per month for 25 years or pay rent of €2k per month for 50 years? The answer should be obvious.I you spend 400k to buy a house, on a 25-year term with just 4% interest rate, your monthly payment will be 2111 euros and at the end of the repayment you will have paid 233.404 euros in interests alone.
I started investing monthly in a S&P 500 tracker last year. If I worried too much about the tax and deemed disposable I probably wouldn't have done it. Be aware of the deemed disposable and deal with it if you are still holding in 8 years time. if you want to be super organised create a spreadsheet and update once a year.
So far the ETF is up 15% and I am not worrying about tax due.
Edit: I have 30 + years until retirement. I am likely going to need funds in 10-15 years, so overpaying mortgage, investing in pension doesn't help that.
Thanks for sharing this table, this is exactly what I was looking for!Assuming you did sell after 10 years, this is what your spreadsheet will look like for the first year of monthly purchases. If you didn't sell you would have a column at Year 16, 24, etc.
In your annual tax return you will sum up the tax in the 12 rows. You will have one of these sheets for each calendar year of purchases.
A B C D = A * (C - B) E = D * 41% F G = A * (F - B) H = G * 41% I = H - E Purchase date Nb of shares Price @ Year 0 Price @ Year 8 Gain Tax, where >0 Price @ Year 10 Gain Tax, where >0 Net tax to pay
Thanks a lot for that. So if I earn 50k per year what rate would be applied to USC and the Income tax on the Bond interests?1. Yes, at Year 16 and 24 you subtract the tax you already paid at Year 8 and 16. You are not taxed twice on the same gain.
2 & 3. As neither of these are ETFs, it's a different tax regime. You can learn about the different taxes on Revenue's website but in brief:
- Bond interest is taxed Income tax and USC, the rates depend on your annual income.
- Deposit interest is taxed DIRT at 33%.
- Both are taxed PRSI at 4% if your total unearned income is more than €5000.
- You need to report them in your annual tax return.
I never said that you should rent forever. My point is this: if the money used to buy a house is entirely from your salary then it is a terrible decision, if any part (or better the whole sum) comes from the dividends of an investment then it is a smart move.Would you prefer to make mortgage payments of €2k per month for 25 years or pay rent of €2k per month for 50 years? The answer should be obvious.
Also, inflation will gradually reduce the real cost of mortgage repayments and gradually increase the real cost of the corresponding rental payments.
Anyhoo, you originally asked which ETF for €100 per month.
In my opinion, the answer is none.
Unless you like filling in a spreadsheet on a monthly basis and filing tax returns, it’s just not worth the hassle for the expected after-tax return for such small sums. Your time also has a cost, unless you like working for free.
The better approach is -
(a) buy a home that is suitable for your long-term needs;
(b) maximise tax-relieved pension contributions for your age; and
(c) pay down debt, including mortgage debt, ahead of schedule.
However, if you still want to invest your after-tax savings in an ETF on a monthly basis, I would invest in an ETF that tracks a global index like MSCI World.
I have no idea what companies will outperform in the future, so I would stick with the global market consensus.