# Information on Index Mutual Funds in Ireland? (My first investment)



## Cian McCann (18 Jan 2016)

Hi,

I just got my first job and I am going to invest 1000 euro a month into a fund which tracks the S&P 500. 

So far my best bet seems to be going with investing into an ETF which hedges USD back into EUR each month to minimize the effect of currency movements since I am living in Ireland. An example of an ETF I am looking into is "iShares S&P 500 EUR Hefged UCITS ETF", which has an expense ration of 0.45%:

So far everything seems to check out for me that it would be a good way to invest my money apart from the broker fee which I would have to pay each month since its an ETF.

So basically my question is how do I go about finding information on Mutual Funds rather than an ETF? 
I got advice where I was told since I am living outside the US I should try Barclays who offer a similar fund to Vanguards Mutual Fund for tracking the S&P 500 but I can find out information on other places which could offer a Mutual Fund like I can when I google ETF's.

Should I contact places like Barclays and RaboDirect directly and ask them for information? They do not seem to have it all displayed on their websites or maybe there is another way to go about getting information? Maybe some of you might be able to recommend some good institutions to start with?

Any help would be appreciated and thanks for reading.


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## Gordon Gekko (18 Jan 2016)

Tax is likely to be the killer in this case.

Irish and European domilciled ETFs are suboptimal.

You need to go for a US domiciled ETF which will attract CGT treatment rather than "fund tax" treatment.


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## cremeegg (18 Jan 2016)

I am no expert on this but I would query why you want to "minimise the effects of currency movements". These movements are as likely to work in your favour as against you, and it will undoubtedly cost you money to hedge.


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## Cian McCann (18 Jan 2016)

Gordon Gekko said:


> Tax is likely to be the killer in this case.
> 
> Irish and European domilciled ETFs are suboptimal.
> 
> You need to go for a US domiciled ETF which will attract CGT treatment rather than "fund tax" treatment.



Thanks for the reply Gordon.

Is there a particular name or type or US domiciled ETF which attracts CGT that I need to look out for? Before I looked at the "iShares S&P 500 EUR Hefged UCITS ETF", I looked at the Vanguard VOO ETF, would that be an example of a fund which attracts CGT rather than "fund tax" like on the iShares ETF I mentioned?

 The tax system on ETF's seems hard to grasp.


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## landlord (18 Jan 2016)

Cian McCann said:


> Hi,
> 
> I just got my first job and I am going to invest 1000 euro a month into a fund which tracks the S&P 500.
> 
> ...




Considering NON hedged S@P 500 ETFs can have total expense ratios (TERs) as low as 0.05% you will have to ask yourself if hedging is really worth the extra expense.
See this link....
http://etfdb.com/equity-etfs/closer-look-at-sp-500-options/

As for the various costs involved see this link.......

http://www.askaboutmoney.com/threads/summary-of-stock-market-investment-costs.194304/

n.b.
UCITS ETFS are those domiciled in the EU.
Non UCITS ETFS are domiciled outside the EU.
The link above will show you the difference in the tax structure of each. 

Also all of vanguards ETFs are non-EU ETF's, therefore tax at 33% etc....


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## galway_blow_in (18 Jan 2016)

Cian McCann said:


> Hi,
> 
> I just got my first job and I am going to invest 1000 euro a month into a fund which tracks the S&P 500.
> 
> ...



i wouldnt bother going with the hedged etf , those companies are alway dollar denomiinated anyway so a degree of currency flucuation will be felt , the hedged etf will be much less liquid


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## landlord (18 Jan 2016)

A quick query guys....When one talks about the liquidity of a fund are you talking about how easy it is to sell it.
In reality how does this physically affect you when you try to sell it.
If the share price is for example $50 per share  (the ask price) and liquidity is an issue, would you on sale potentially only find a bidder at a much lower $40 per share. I keep hearing the word "spreads" on Bloomberg.  Does a large spread mean a big difference between the ask and bid price I.e. a less liquid fund?


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## Cian McCann (18 Jan 2016)

cremeegg said:


> I am no expert on this but I would query why you want to "minimise the effects of currency movements". These movements are as likely to work in your favour as against you, and it will undoubtedly cost you money to hedge.



I thought it seemed like a better approach. If the S&P 500 continued to perform at around 10% over a 22 year period I would reach my target so I thought selecting an ETF with hedging would reduce the chances of me not reaching my target. Also the "iShares S&P 500 EUR Hefged UCITS ETF" uses hedging and has a lower expense ratio than Vanguard VOO.

I can see what you mean though. Would most Irish people investing in a fund which tracks the S&P 500 not choose a fund with hedging? I assumed it would be the standard thing to do but maybe not.

Thanks.


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## Marc (18 Jan 2016)

There really is no point in hedging equity investments

The volatility of a basket of currencies is around 20 whereas equites are of the order of twice that. 

Definitely hedge global bond investments but wasting money to hedge equities


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## Cian McCann (19 Jan 2016)

Thanks for linking to the table landlord it made the tax on ETF's a lot clearer, sorry I cant really answer your question on liquidity. 
I can see what you mean, adding an extra .4 to the expense fee for hedging is a lot of expense considering currency changes could have little impact, or even a positive impact. I read the link containing information on the ETF's provided by SPY, VOO and IVV and I cannot see any reason not to choose VOO in my position.

Can someone clear up 2 things before I decide to choose a ETF without hedging please.

Q1.
Am I right in thinking that after I purchase shares in VOO I should keep track of exchange rates in case the EUR was to increase against the USD which would mean my investment would not be making the gains (assuming it makes gains) it appears to be making when I look at the S&P 500? It seems like an extra overhead for someone like myself who is inexperienced. 

Q2.
Would it be possible that the exchange rates could change enough to mean I should either stop buying shares in VOO monthly or even sell my shares? I know no one can predict changes in the EUR/USD, I am just wondering how great of a possibility is it that I would have to act or otherwise be making big losses due to exchange rates.

Thanks for the help.


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## landlord (19 Jan 2016)

I would not be so overly concerned over changes in currency assuming your time window is more than 10 years.  Yes if the euro strengthens over that time and you have invested in funds in which the underlying companies trade exclusively in dollars you will suffer somewhat,  but in reality your fund will probably have more currency diversification than you think and of course the euro could weaken further too.  Either way hopefully over a 10 year period the profit made would greatly exceed the currency risk. 
You could invest some of your money in  a European based ETF eg. a EU STOXX 50 tracking index denominated in euros if you are worried about currency fluctuations.


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## Cian McCann (19 Jan 2016)

landlord said:


> I would not be so overly concerned over changes in currency assuming your time window is more than 10 years.  Yes if the euro strengthens over that time and you have invested in funds in which the underlying companies trade exclusively in dollars you will suffer somewhat,  but in reality your fund will probably have more currency diversification than you think and of course the euro could weaken further too.  Either way hopefully over a 10 year period the profit made would greatly exceed the currency risk.
> You could invest some of your money in  a European based ETF eg. a EU STOXX 50 tracking index denominated in euros if you are worried about currency fluctuations.


 
Thanks for the help I think I will go with Vanguard Voo in that case but ill look into some European based ETF's before I decide for sure.


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## cremeegg (20 Jan 2016)

Cian McCann said:


> If the S&P 500 continued to perform at around 10% over a 22 year period I would reach my target



Do you understand that this is a really big IF. 

Like winning the lottery big.

A plan based on the S&P doing 10% a year for 22 years is for the birds.


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## Sarenco (20 Jan 2016)

The annualised return of the S&P500 (with all dividends reinvested) was less than 9% over the last 22 years and that ignores the effects of taxes, investment costs and inflation.

At current valuations, a 22-year projection based on a 10% annualised return is wholly unrealistic IMO.


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## Cian McCann (20 Jan 2016)

cremeegg said:


> Do you understand that this is a really big IF.
> 
> Like winning the lottery big.
> 
> A plan based on the S&P doing 10% a year for 22 years is for the birds.





Sarenco said:


> The annualised return of the S&P500 (with all dividends reinvested) was less than 9% over the last 22 years and that ignores the effects of taxes, investment costs and inflation.
> 
> At current valuations, a 22-year projection based on a 10% annualised return is wholly unrealistic IMO.



To be honest the idea came from a video made by a gamer/investor I follow on YouTube. If you search "woodysgamertag million in 22 years" it will come up. 

The more research I have been doing I think it may be better to build a more diversified portfolio rather than invest all the money into just an S&P 500 index fund.


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## so-crates (20 Jan 2016)

Cian McCann said:


> I just got my first job and I am going to invest 1000 euro a month into a fund which tracks the S&P 500


Not to suggest you cannot afford it or discourage you from trying to invest (or if you choose, save, or a combination of the two) but €1000 pm would be an unusually large amount to have available to invest or save from your first job. I would wonder how sustainable it would be over the long term, or even over the next two years. 

I think you need to investigate a little bit more. It might also be worthwhile sitting down with a qualified financial advisor and getting their opinion on your specific circumstances.


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