# Best way to invest in equity? (outside of a pension)



## FireDuck (8 Jan 2020)

I'm looking for the best way to invest in a diversified portfolio of equities (outside of a pension).
Ideally something similar to a world index like the *MSCI World Index*.

*My situation:*

Emergency fund is maxed out.
Pension contributions are maxed out.
Don't want a mortgage for the foreseeable future (won't be in one location for more than 2/3 years for the next decade or two).
Don't want bonds for 20 years (E.g. state prize bonds).
I want to invest in 100% equity as I'm still early in my career (hence have time on my side to recover from the next recession).

*I've looked into:*

Passive index tracking ETF's.
Picking individual stocks (mirroring the top of an index).
Buying into an investment trust (treated liked stocks as far as I know).
The investment trust seems to be the way to go.

Are there other ways to get into a low cost broad based equity fund or is the investment trust the way to go?
If so any information on IT's that you have would be helpful.

____________________________________________________________________

Below is my research on places I could invest.

*Passive equity index ETFs (taxation is too high)*

ETF's are not tax efficient.
They are taxed with exit tax on gains every 8 years.
I did a very rough calculation, and compared with the way stocks are taxed you end up with around 36% less money post tax after 32 years (so ETFs really don't seem like the way to go).
*Pick individual stocks (risky, time consuming, and not diverse enough)*

You could create your own portfolio which tracks the top 20/30 stocks in the MSCI World Index Tracker, and rebalance twice per year.
You could rebalance only on buys to avoid too many taxable events.
This is a lot of work and you're still only diversified among 20/30 stocks.

You don't get the tax benefit of an accumulating fund with this strategy.
This strategy takes time and is risky, but you do get the benefit of only getting taxed at the CGT rate when you sell.
*Investment Trust*

Investment trusts seem to be treated as stocks rather than unit linked funds (meaning you get taxed with CGT rather than Exit Tax, and no deemed disposal).
There are IT's out there that are diversified and have a low expense ratio (such as FCIT (F&C Investment Trust)).
Downsides are that:
There don't seem to be accumulating trusts available.
There don't seem to be as many IT's available compared to ETF's.

A consideration to keep in mind is that Revenue could decide down the line that IT's are classified as unit linked funds.


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## Zenith63 (8 Jan 2020)

FireDuck said:


> compared with the way stocks are taxed you end up with around 36% less money post tax after 32 years (so ETFs really don't seem like the way to go).


I’m curious about how others will feel, but 36% really doesn’t sound that bad to me over such a long timeframe. It’s the difference between 4% growth and 2.6% growth per annum; I’m not sure how confident anybody should feel about matching any of the big indices themselves and not being off by 1.4%?  You’ll need to constantly rebalance the portfolio, paying CGT, stamp duty, foreign exchange and broker fees along the way, and you cannot just pick the top 10 companies in a hundred company index because the company at 99 may be the one that brings all the growth, and the number 1 may be gone over a timeframe like that.
Just saying I would not rule out ETFs based on those figures.


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## Marc (8 Jan 2020)

Just published my guide on this very subject 

https://view.joomag.com/stock-market-monthly-saver/M0723039001578395978


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## FireDuck (8 Jan 2020)

Zenith63 said:


> 36% really doesn’t sound that bad to me over such a long timeframe.


I know ETF's are pretty much the lowest cost things you can purchase. That F&C Investment Trust I mentioned has a pretty low expense ratio of 0.57%, now I'm guessing it has extra hidden costs (more for FCIT here).

Do you think that the extra annual management charges on an investment trust like FCIT vs an ETF would add up to a difference of something close to 36%?



Zenith63 said:


> It’s the difference between 4% growth and 2.6% growth per annum


Could you explain these numbers a bit more please?



Zenith63 said:


> I’m not sure how confident anybody should feel about matching any of the big indices themselves and not being off by 1.4%?


I agree, somebody mentioned it to me recently and the idea has been lurking in my mind, but the more I think about it the more it sounds like a terrible idea! 



Zenith63 said:


> you cannot just pick the top 10 companies in a hundred company index because the company at 99 may be the one that brings all the growth, and the number 1 may be gone over a timeframe like that.


That's a very good point.


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## FireDuck (8 Jan 2020)

Marc said:


> Just published my guide on this very subject
> 
> https://view.joomag.com/stock-market-monthly-saver/M0723039001578395978



Great timing!

The guide talks about investment trusts specifically, or about different equity investments?


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## Marc (9 Jan 2020)

The guide is specifically aimed at a regular saver using just investment trusts but there is a link to our more detailed tax guide for Irish investors which covers UCITS; non EU ETFs in much more detail 






						Joomag
					






					view.joomag.com


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## Sarenco (9 Jan 2020)

Marc said:


> Just published my guide on this very subject
> 
> https://view.joomag.com/stock-market-monthly-saver/M0723039001578395978


It’s a shame that’s behind a paywall.

Hardly in the spirit of AAM.


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## Fella (9 Jan 2020)

Sarenco said:


> It’s a shame that’s behind a paywall.
> 
> Hardly in the spirit of AAM.



I can't think of what could be in it that is not freely available on the internet already .


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## Gordon Gekko (9 Jan 2020)

Marc, what investment capability does your firm have? What’s the scale of your compliance function? Who’s picking the investment trusts? What sort of due diligence has your company done on the selected investment vehicles? Where are the assets held?


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## llgon (11 Jan 2020)

I've paid my few euro to have a look at Marc's guide and thought I would post a brief review of it that may assist others to decide if they should do the same.  I don't have a lot of knowledge of investing in equities but I am looking to do this more and a regular saver type product would appeal to me.

The guide is 32 pages long.  It is my first time using joomag and I have not found it particularly user friendly.  I cannot zoom in on the pages either on my laptop or phone making some of the finer detail unreadable.  It might just be me though.  The first four pages are those that can be viewed on the link for free.  Following this there is information on suitability, information on saving for children, how these savings can be held and some tax assessment of individuals and couples holding trusts.  There are a few pages on Brexit and currency risks and then detail on two named investment trusts providing regular saving options, three pages on one trust and two on another.  There is then a little information on the process of opening an account, some background on Global Wealth and an outline of Bare Trusts.  It finishes with a costs disclosure for one of the Trusts which I could not read due to the small print.

My main conclusion after purchasing and reading this is that it is only really useful for someone who is looking to open an account in a child's name and gift them the money to be invested.  This is alluded to in the introduction that can be read for free but I think it should have been more explicitly stated.  Those considering a regular saving plan generally should be able to easily access the information elsewhere for free as Fella has mentioned above.

Furthermore I believe that the tax advice given regarding individuals and couples investing for themselves is wrong.  Marc looks to have got confused between effective and marginal tax rates.  He has sourced figures from Social Justice Ireland dealing with effective tax rates and presented them on a graph as marginal tax rates.  I'm by no means a tax expert and obviously Marc is free to correct me on anything I say here if he wishes.  I should add that there is also a disclaimer on the first page regarding the tax advice given.

I felt that there wasn't enough information given about the Trusts, the account opening and operating procedures and Global Wealth's role in these.  There is an invitation to contact them for further information if interested but having paid for the guide I was disappointed not to learn more.

So although I am looking to invest regularly in equities (similarly to 'Fireduck') I did not find the guide worth paying for.  However if someone is looking to invest in a child's account it probably would be.  I have not done any research to see if the same level of detail about this is freely available online but I would doubt it.


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## Gordon Gekko (11 Jan 2020)

Standard Life have a ‘bare trust’ product which is very user friendly. People don’t tend to like life companies but their big advantage is around the tax filing. No filing or payment obligations arise for people who invest via life companies. Whereas Investment Trusts and ETFs create an obligation to submit a tax return and keep track of dividends and gains. There is a lot to be said for simplicity, i.e. be mindful of the fees, avoid lock-ins, be mindful of the 1% levy, and use the most diversified global equity fund option.


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## FireDuck (12 Jan 2020)

llgon said:


> I've paid my few euro to have a look at Marc's guide and thought I would post a brief review of it that may assist others to decide if they should do the same.  I don't have a lot of knowledge of investing in equities but I am looking to do this more and a regular saver type product would appeal to me.
> 
> The guide is 32 pages long.  It is my first time using joomag and I have not found it particularly user friendly.  I cannot zoom in on the pages either on my laptop or phone making some of the finer detail unreadable.  It might just be me though.  The first four pages are those that can be viewed on the link for free.  Following this there is information on suitability, information on saving for children, how these savings can be held and some tax assessment of individuals and couples holding trusts.  There are a few pages on Brexit and currency risks and then detail on two named investment trusts providing regular saving options, three pages on one trust and two on another.  There is then a little information on the process of opening an account, some background on Global Wealth and an outline of Bare Trusts.  It finishes with a costs disclosure for one of the Trusts which I could not read due to the small print.
> 
> ...



Thanks for the overview - the guide doesn't look to be what I'm looking for.

I'm looking for information on investment trusts as a primary investment vehicle for investing in equities outside of a pension wrapper for an Irish resident.


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## FireDuck (12 Jan 2020)

Gordon Gekko said:


> Standard Life have a ‘bare trust’ product which is very user friendly. People don’t tend to like life companies but their big advantage is around the tax filing. No filing or payment obligations arise for people who invest via life companies. Whereas Investment Trusts and ETFs create an obligation to submit a tax return and keep track of dividends and gains. There is a lot to be said for simplicity, i.e. be mindful of the fees, avoid lock-ins, be mindful of the 1% levy, and use the most diversified global equity fund option.



Do you think a Standard Life bare trust would be a better place to invest for a 100% global equity compared to say F&C Investment Trust (benchmark is FTSE World Equity)?

FYI I don't know anything about Life Company offerings.
They have never appealed to me - but maybe I've been wrong to ignore them.


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## RedOnion (12 Jan 2020)

FireDuck said:


> Do you think a Standard Life bare trust would be a better place to invest for a 100% global equity compared to say F&C Investment Trust (benchmark is FTSE World Equity)?


The idea of a bare trust is to invest money for someone else - it's legally theirs. I've a very similar one set up with New Ireland for my children. If investing for yourself, you just do it without the bare trust.

There are fees with a life product. For a monthly saver, I completely agree with @Gordon Gekko re simplicity. If you're putting away 200 per month, the fees (above investing directly yourself) aren't going to be material, and saves you filing tax returns every year. All the admin is taken care of, and tax dealt with at source. Personally, and I haven't done detailed analysis on this so I might be corrected, I'm happy letting a balance of 25k build up there.

However, if you're starting off with a lump sum of 100k, I'd stay clear.

There is a huge amount of analysis available on Investment Trusts in the UK market.


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## Daddy Ireland (12 Jan 2020)

Money Observer has a lot of articles on Investment Trusts.


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## nad (27 Jan 2020)

Hi Fireduck
Im just wondering if you just  have invested in any funds yet or are you still gathering ideas  as i'd be interested to know what your conclusions were..


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## Techhead (9 Feb 2020)

So mabs and all those zurich investor accounts need to dispose of cgt every 8 yrs on top of account fees.. hmm is this really the only way to do it outside of a pension??... the tax messing along sounds like such hassle!


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## Gordon Gekko (10 Feb 2020)

That’s the point; there is no tax messing; it’s all taken care of at source by the life company and, as a result, there’s no obligation to submit a tax return.


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## yygaurav (29 Apr 2020)

HI @FireDuck 

Did you make any progress on this? I am interested to find out about it. 

Another question: Does this make sense after a person has maxed out on a pension? ( can this option be considered for long term investment)   

thanks a million


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## Silvius (30 Apr 2020)

I'm also interested in finding out more about this. For anyone out there that has gone down the road of investment trusts as a solution to equity investment outside a pension, how did you pick them and how many trusts would make up a diversified portfolio?


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## PaxmanK (2 May 2020)

Im interested in this too.
Back at the start of the last recession there were solidarity bonds on offer that paid 50% after 10 years.
I wonder if similar will be available soon?
Its the whole tax situation that puts me off investing in ETFs.  Far too fiddly and murky.

And I was looking at this page.





__





						+Digital – Fund Centre
					





					investorhub.financialexpress.net
				




So investing a regular sum into one of or more of these would take care of taxation for you?  What are the downsides?  High charges?

Do you just create an account pick a fund a monthly amount and off you go?  No yearly tax returns to worry about?
Or am I missing something?  I probably am.

Thanks.


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## RedOnion (2 May 2020)

PaxmanK said:


> So investing a regular sum into one of or more of these would take care of taxation for you? What are the downsides? High charges?


Higher charges, and 1% government levy on all investment. But tax is dealt with at source.
I save some money through a similar product, putting money in monthly. Money is taken by DD, I don't have to worry about buying or selling anything, the temptation to try time the market, and no tax returns.


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## NoRegretsCoyote (3 May 2020)

PaxmanK said:


> Back at the start of the last recession there were solidarity bonds on offer that paid 50% after 10 years.
> I wonder if similar will be available soon?



Not a hope!

Government is paying close to 0% to borrow on the markets.


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## Lisboa (24 Aug 2020)

FireDuck said:


> I'm looking for the best way to invest in a diversified portfolio of equities (outside of a pension).
> Ideally something similar to a world index like the *MSCI World Index*.
> 
> *I've looked into:*
> ...







nad said:


> Hi Fireduck
> Im just wondering if you just  have invested in any funds yet or are you still gathering ideas  as i'd be interested to know what your conclusions were..





yygaurav said:


> HI @FireDuck
> 
> Did you make any progress on this? I am interested to find out about it.




Also looking for any progress or updates!


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## Younginvestor93 (26 Jan 2021)

Lisboa said:


> Also looking for any progress or updates!





FireDuck said:


> I'm looking for the best way to invest in a diversified portfolio of equities (outside of a pension).
> Ideally something similar to a world index like the *MSCI World Index*.





llgon said:


> I've paid my few euro to have a look at Marc's guide.
> Did you make a decision on IT's?



Me too!


nad said:


> Hi Fireduck
> Im just wondering if you just  have invested in any funds yet or are you still gathering ideas  as i'd be interested to know what your conclusions were..





yygaurav said:


> HI @FireDuck
> 
> Did you make any progress on this? I am interested to find out about it.
> 
> ...


Precisely what I am looking at aswell? If anyone made decisions on it.


Silvius said:


> I'm also interested in finding out more about this. For anyone out there that has gone down the road of investment trusts as a solution to equity investment outside a pension, how did you pick them and how many trusts would make up a diversified portfolio?


This is my question also, I'd like to find ijt the best ones and whether people have picked one like the Scottish Mortgage Trust abd gone all in or diversified in a few of them?


Lisboa said:


> Also looking for any progress or updates!



Great thread, thanks to all who contributed!


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## FireDuck (9 Mar 2021)

yygaurav said:


> HI @FireDuck
> 
> Did you make any progress on this? I am interested to find out about it.
> 
> ...


This only makes sense after you've maxed out your pension really.
The pension is a way to invest without being taxed for decade (and then it's income tax, not CGT and deemed disposal),
Once your pension is maxed out and you're looking for ways to grow wealth and you don't want a mortgage, investing in something like an Investment Trust seems like a good option (as you don't trigger deemed disposal as it's a stock, and you have nice diversification like an ETF).



Lisboa said:


> Also looking for any progress or updates!





Younginvestor93 said:


> Me too!
> 
> Precisely what I am looking at aswell? If anyone made decisions on it.
> 
> ...



No progress as of yet, I've been reading up on individual stock picking (this is more fun money, not a huge amount) to spend my extra cash on.
Still staying away from the ETFs, but I still think the UK Investment Trusts are a good idea.


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## noproblem (9 Mar 2021)

I was advised lately to transfer money from  a couple of cautiously managed funds in Standard life and Zurich (as they no longer get active management) and will more than likely lose money over the next few years. I transferred those investments into the same company's , Zurich's Prisma 4 and Standard Life's My folio market 111. I do understand i'm taking a chance with more risk, but the cautiously managed funds are mostly in Goverment bonds, Banks, etc and I reckon the advise I got was good. Anyone have some insight on this and their opinion please. Just seems that at the moment with practically no interest to be earned out there that funds are a goodish way for the amateur investor to do ok.


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