# Wisdom tree ISEQ 20 ETF relatively new



## landlord (29 May 2015)

A relatively new low cost fund (0.49% TER) has recently opened up on the Irish exchange. The Wisdom tree ISEQ 20 ETF, with dividend payments distributed semi annually.

http://www.ise.ie/Media/News-and-Ev...er-of-ETFs-lists-ISEQ-20®-ETF-on-the-ISE.html

As an inexperienced investor I would consider buying into this fund as part of maybe a 20% portion of a mixed portfolio.

Pros-

No currency conversion costs.

I am concerned that over a 10-20 year period the Euro will strengthen and de-value profits from non Euro denominated fund. A Euro denominated fund like this mitigates the risk.

The fund offers a relatively mixed portfolio of Irish assets.

Total expense ratio TER a reasonable 0.49%

No stamp duty.

Wisdom tree has over $50bn AUM (Assets under management) globally

Cons

Gross roll up rules apply including no loss relief, gains taxed at 41%, deemed disposal after 8 years. Not sure how dividends are taxed under these rules ?

Any other thoughts concerns?


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## Sarenco (29 May 2015)

Dividends payments are treated as a chargeable event - the 41% exit tax applies.

While there is no stamp duty payable on the ETF shares, the fund itself will pay stamp duty on acquiring the underlying shares (this is not reflected in the TER).

If you are happy to restrict yourself to Irish shares, you might consider simply buying shares in the underlying 20 publicly traded companies, roughly in proportion to their market cap.  You would save yourself the 0.49% TER and would be subject to the usual income tax/CGT regime. 

I would point out that you are already very exposed to the fortunes of the Irish economy given your extensive residential property portfolio, which might indicate that a global (or at least a broader Eurozone) portfolio might be more appropriate in your circumstances.


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## landlord (29 May 2015)

Thanks Sarenco......good advice!!
Quite strange that the total expense ratios TERs do not include all costs for example the stamp duty you mentioned!!   Although I suppose this would be mainly a cost for the initial outlay of the fund  and once up and running it would be fairly infrequent for stocks to fall out of the top 20 and new ones (with the 1% stamp duty) to have to be purchased.
Are there any other costs that the TER doesn't include?

Just out of curiosity,  if dividends are paid twice a year for this or another EU based ETF, then  I assume dividend withholding tax comes off at source at 20%?
Are you saying then the additional amount which takes it up to your marginal rate of tax is paid after 8 years.....sorry still confused on this.


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## Sarenco (29 May 2015)

No, 41% is the current rate of exit tax payable on a taxable event (including receipt of a dividend payment) in respect of an EU-based ETF shareholding - it's not income tax. 

There is no withholding on distributions from the (Irish domiciled) ETF itself.  Withholdings may apply to distributions from the underlying portfolio shares held by the ETF. 

So, you would have to self-account to Revenue in respect of any distribution or gain on transfer and pay exit tax at a rate of 41%.  In addition, there is a deemed disposal every eight years where you pay 41% tax on any unrealised gains (as though you had sold the ETF shares).

The tax regime for investment funds (including ETFs) is pretty draconian which is why I am of the view that investment trusts are generally a better option for collective investment in equities outside of a pension fund. 

As an aside, I am often surprised at the number of people on here that invest in equities outside of tax-deferred retirement vehicles, given that the fact that the vast majority of people don't even maximise their pension contributions.  Each to his own I suppose.


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## Sarenco (29 May 2015)

Sorry, I missed your query re TERs (sometimes called the ongoing fund charge or OFC).

In a nutshell, the TER captures all service provider fees that are charged to the fund.  In addition to the fund's manager, you will also have a depositary, administrator, directors, lawyers and auditors.

The TER essentially excludes all portfolio trading costs including brokerage commissions, bid-offer spreads, stamp duty, etc.  Obviously these costs cannot be predicted with any accuracy in advance so are excluded from the TER.


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## Boyd (29 May 2015)

Sarenco said:


> The tax regime for investment funds (including ETFs) is pretty draconian which is why I am of the view that investment trusts are generally a better option for collective investment in equities outside of a pension fund.



Can you give some info and/or links about where to read up on investment trusts in Ireland. I've been investigating the ETF route quite alot these days, but don't know much about trusts.




Sarenco said:


> As an aside, I am often surprised at the number of people on here that invest in equities outside of tax-deferred retirement vehicles, given that the
> fact that the vast majority of people don't even maximise their pension contributions.  Each to his own I suppose.



Few reason for this IMO:
1) I think that people are afraid of the lock-in long (I mean really long) term. With pension products you cannot access the cash until you are at retirement. Granted most investments in ETFs should be circa 20 years anyway, but if you really needed to cash out, you could. With pensions you cant.

2) Most people already have a pension and are happy with what they are contributing, similar to myself. Hence, they/I would like to have another investment option that allowed me to grow excess cash somewhat aggressively outside a simple deposit account and also outside a pension. I would think this is another form of diversification, in that you don't pump all your cash into your pension investments.

3) Since you are locked into the pension, you are at the mercy of government legislation, which may change over time. Who knows, when I reach retirement, maybe the government will be taxing pensions at 60%. I'm obviously using hyperbole here but you never know. People don't like losing this much control - take the pension levy as an example of how the government have no issue plundering our retirement savings.


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## Sarenco (29 May 2015)

http://am.jpmorgan.co.uk/investment-trusts/explained/what-is-an-investment-trust.aspx

Here's a video from JPMorgan that gives a pretty good explanation how investments trusts work.  Also, the industry body (AIC) has a lot of detailed information.

This blog might give you some ideas on how to create a portfolio of ITs depending on whether you are focused on growth or generating an income:

http://www.johnbaronportfolios.co.uk/

Other than the three recently established REITs (which are a particular type of investment trust) there are no Irish investment trusts.

I certainly take the point that pensions are subject to a considerable degree of political risk but isn't everything?  Look at the changes to income tax, CGT and the taxation of investment funds over the last decade.  I take the view that it is difficult enough to make decisions based on what we know today without trying guess what might happen tomorrow in terms of tax changes, interest rates or stock prices.

I also take the point that people feel they are ceding too much control due to the fact that they can't access their funds for a long time.  The Minister broke the seal on this one slightly in a recent budget by allowing access to AVCs and you're right that in general you can't access the funds until retirement. 

I suppose what surprises me is that so many people appear to have sufficient savings available to fund their lifestyle and their retirement and invest in shares with their after-tax savings.  I must be doing something wrong!


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## landlord (29 May 2015)

RE : INVESTMENT TRUSTS/COMPANYS
Some snippets of my research and also info from Rory Gillen's excellent book ...."3 steps to investment success"
Investment companies, also called investment trusts or closed end funds are listed on the stock exchange. They are relatively low cost and risk controlled. There are now approximately 350 of these on the FTSE.
These are closed end funds meaning, say they initially issue 1000 units and no more. From these a portfolio of stocks are bought. The NAV net asset value of the fund is 1000 x the share price (say 2 Euro) = 2000 Euro. If you buy 1 unit from the stock market and pay 2.2 euro for it, the fund is trading at a premium, however if you pay 1.9 euro it was trading at a discount. If the share price is below its net asset value (I.e. Trading at a discount) one needs to investigate why there is less demand for this share before buying it. Listed FUNDS (ETFs) are generally governed by the financial regulator however listed INVESTMENT COMPANIES such as these are governed by the companies act which gives strong regulatory protection and security even if the fund manager goes bankrupt. They can offer a range of diverse portfolios with no entry and exit costs.  I guess the management costs of these ACTIVELY managed funds would be higher than PASSIVELY managed ETFs?
The website WWW.trustnet.com provides information about these investment companies including price and track record etc...

Perhaps someone else could summarise the tax issues associated with these. (Stamp duty, roll over, loss relief, dividends, CGT, etc.......)

Ok just found this on Rory Gillen's website......


_*Investment trusts:*_ are not dealt with in the Revenues guidelines. Our interpretation is that because there is no link between the value of the fund's assets and its share price that they are more akin to shares/securities. In that case, dividends to be taxed at your marginal rate, gains at the CGT rate and loss relief should be available.


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## landlord (30 May 2015)

Sharenco you mentioned.....
There is no withholding on distributions from the (Irish domiciled) ETF itself.  Withholdings may apply to distributions from the underlying portfolio shares held by the ETF.

Sorry the terminology is confusing me....is there a difference between the (distribution) dividends of the underlying portfolio of shares and the fund dividend? If so when is a fund accumulating/capitilizing and when is it distributing?

Also you mentioned...
So, you would have to self-account to Revenue in respect of any distribution or gain on transfer and pay exit tax at a rate of 41%.  In addition, there is a deemed disposal every eight years where you pay 41% tax on any unrealised gains (as though you had sold the ETF shares).

For a EU based ETF, Looking at this practically, when a dividend is paid, I guess it will be automatically paid into my online stockbroking account.  Is this 41% tax on the dividend paid immediately or at the end of the 8 year period, as in at the end of the 8 years you tally up your gain from the fund with all your dividend payments and pay 41% tax (via a form 11?)

Separate question....
As well as income tax at ones marginal rate, USC and PRSI are also due on the gross? income from share dividends and US domiciled ETFs?

Also are there any accumulating rather than distributing listed UK investment company's ?


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## Sarenco (30 May 2015)

The income relating to an accumulating fund unit will be retained by the fund and re-invested in the relevant securities.  The underlying securities held by the fund will still make distributions to the fund, whether or not it's an accumulating fund, and these may be subject to withholding tax.  

Distributions or gains on disposal of fund shares must be returned to Revenue in your annual tax return.  In addition, every 8 years you are deemed to have disposed of your entire holding (even if you haven't) and you pay tax accordingly.

Distributions on EU-based ETF shares are not subject to income tax, USC or PRSI - they are subject to the 41% exit tax.  Distributions on US ETF shares are subject to US withholding tax and Irish income tax, USC and PRSI.  

The AIC website that I referred you to gives the trailing dividend yield of all investment trusts shares.  I'm afraid you will have do some leg work yourself!


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## landlord (30 May 2015)

Sarenco thanks....the AIC website has a fantastic glossary of terms.


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## galway_blow_in (31 May 2015)

landlord said:


> A relatively new low cost fund (0.49% TER) has recently opened up on the Irish exchange. The Wisdom tree ISEQ 20 ETF, with dividend payments distributed semi annually.
> 
> http://www.ise.ie/Media/News-and-Ev...er-of-ETFs-lists-ISEQ-20®-ETF-on-the-ISE.html
> 
> ...




biggest negative is that most companies on it are very expensively valued

the DAX is 25% cheaper than the ISEQ right now


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## landlord (31 May 2015)

galway_blow_in said:


> biggest negative is that most companies on it are very expensively valued
> 
> the DAX is 25% cheaper than the ISEQ right now



What exactly does that mean?

Expensively valued ..... as in the share prices of the stocks are trading at a premium? I.e. Above their net asset value 
How do you know that the Dax is 25% cheaper.  Where does that information come from?

I looked over your post again about vanguard ETF's on the Amsterdam stock exchange and found this.

http://www.etfstrategy.co.uk/vangua...n-nyse-euronext-in-amsterdam-and-paris-48652/

The TERs look good, also the fact that they are denominated in Euro avoids currency exchange fees. Shame about the complex tax issues.
From your earlier comments is the Amsterdam stock exchange over valued, as these ETFs are also available on the French stock exchange.


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## Sarenco (31 May 2015)

galway_blow_in said:


> biggest negative is that most companies on it are very expensively valued
> 
> the DAX is 25% cheaper than the ISEQ right now



This is essentially the same as saying that the multitude of market participants in the global equity market have mis-priced both the Irish and German markets.  You may of course be proved correct but I don't see how you could possibly say this with any degree of confidence.


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## landlord (31 May 2015)

Sarenco, I have to consult that AIC website glossary of terms every time you write a post!!!! Ha ha
But it's all part of the learning experience!!


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## Sarenco (31 May 2015)

landlord said:


> What exactly does that mean?
> 
> Expensively valued ..... as in the share prices of the stocks are trading at a premium? I.e. Above their net asset value
> How do you know that the Dax is 25% cheaper.  Where does that information come from?
> ...



The stock exchange where an ETF is listed has no bearing on the NAV of the ETF.  The exchange is simply the place where the securities are traded - most European ETFs are listed on multiple exchanges but trade at essentially the same price regardless.


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## landlord (31 May 2015)

Sarenco said:


> The stock exchange where an ETF is listed has no bearing on the NAV of the ETF.  The exchange is simply the place where the securities are traded - most European ETFs are listed on multiple exchanges but trade at essentially the same price regardless.



I understand that, but would  galway_blow_in  have meant that THE INDIVIDUAL stocks within this fund would be overvalued, (I.e. If you bought any of them outside of the fund it would be trading at a premium) therefore this fund in its entirety would be overvalued compared to for example a vanguard world ETF fund?


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## Sarenco (31 May 2015)

landlord said:


> Sarenco, I have to consult that AIC website glossary of terms every time you write a post!!!! Ha ha
> But it's all part of the learning experience!!



Ha!  Sorry, I know the jargon is pretty intimidating at first.  You should probably make sure you have a good grasp on how different fund structures work before you get into the details of ETFs, tax, etc.



landlord said:


> I understand that, but would  galway_blow_in  have meant that THE INDIVIDUAL stocks within this fund would be overvalued, (I.e. If you bought any of them outside of the fund it would be trading at a premium) therefore this fund in its entirety would be overvalued compared to for example a vanguard world ETF fund?



Fair enough but that is really just saying that the market price (the aggregate value judgment of all buyers and sellers in the market) of the underlying securities is wrong.  Maybe it is but without knowing something that the rest of the market doesn't know, I don't see how this could be stated with any degree of confidence.  Don't forget that all available public information is already reflected in the price of the underlying securities.


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## galway_blow_in (31 May 2015)

landlord said:


> What exactly does that mean?
> 
> Expensively valued ..... as in the share prices of the stocks are trading at a premium? I.e. Above their net asset value
> How do you know that the Dax is 25% cheaper.  Where does that information come from?
> ...




you refer to a number of different issues there but im only going to address the topic of the thread , let me provide you with two different links , one details the ( dollar denominated ) ishares etf which covers Germany,s DAX , see the PE of the fund ( its 16 )

the other covers the irish market and the PE is 19  , this fund is very similar to the new one launched by wisdom tree

http://finance.yahoo.com/q?s=EWG&ql=1

http://finance.yahoo.com/q?s=EIRL&ql=0

the difference in valuation is just shy of 19%


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## galway_blow_in (31 May 2015)

Sarenco said:


> This is essentially the same as saying that the multitude of market participants in the global equity market have mis-priced both the Irish and German markets.  You may of course be proved correct but I don't see how you could possibly say this with any degree of confidence.



are you saying the valuation of a market is always on the money ? , even it is , as someone who tries to find value if I can , id be more comfortable today buying the DAX than the ISEQ , id be more comfortable buying the DAX than the S+P today as well by the way as the S+P has a PE of 19 and the strengthening dollar is likely to hit American corporations earnings to some degree


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## galway_blow_in (31 May 2015)

landlord said:


> I understand that, but would  galway_blow_in  have meant that THE INDIVIDUAL stocks within this fund would be overvalued, (I.e. If you bought any of them outside of the fund it would be trading at a premium) therefore this fund in its entirety would be overvalued compared to for example a vanguard world ETF fund?



the ETF provider is irrelevant , beit vanguard ishares of wisdom tree , the wisdom tree Russia etf has a PE of around six right now

im judging the index overall , the index has plenty of companies which I think are very good and would be happyt own long term , i just think a PE of 19 is high , especially for a small country


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## Jim2007 (31 May 2015)

galway_blow_in said:


> you refer to a number of different issues there but im only going to address the topic of the thread , let me provide you with two different links , one details the ( dollar denominated ) ishares etf which covers Germany,s DAX , see the PE of the fund ( its 16 )
> 
> the other covers the irish market and the PE is 19  , this fund is very similar to the new one launched by wisdom tree
> 
> ...



You are comparing a large cap index to at best a micro index, it is meaningless less!


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## galway_blow_in (31 May 2015)

no idea what you mean , the iseq is an index of large cap irish companies

the DAX is the main index of german large cap companies

the etf,s i provided links to on yahoo finance show both dax and iseq indexes


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## galway_blow_in (31 May 2015)

just in reply to my last post , i realise the ISEQ contains some very small companies but the wisdom tree ETF in question , is made up of large companies , that they would be considered relatively small by international standards is not all that relevant , Austria would not have any larger companies in its main index yet the ishares Austria etf  ( EWO ) has a PE of 16 right now


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## landlord (1 Jun 2015)

galway_blow_in said:


> you refer to a number of different issues there but im only going to address the topic of the thread , let me provide you with two different links , one details the ( dollar denominated ) ishares etf which covers Germany,s DAX , see the PE of the fund ( its 16 )
> 
> the other covers the irish market and the PE is 19  , this fund is very similar to the new one launched by wisdom tree
> 
> ...



....thanks I didn't realise that a fund itself can have a price to earnings ratio. 
So you are saying that the DAX fund with a lower PE of 16 is better value than irish market fund with a PE of 19. That makes sense!!
Now for the stupid question....I don't see how you get from PE 16 compared to PE 19 gives a difference in valuation of just shy of 19% ?.....thanks


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## Sarenco (1 Jun 2015)

galway_blow_in said:


> are you saying the valuation of a market is always on the money ? , even it is , as someone who tries to find value if I can , id be more comfortable today buying the DAX than the ISEQ , id be more comfortable buying the DAX than the S+P today as well by the way as the S+P has a PE of 19 and the strengthening dollar is likely to hit American corporations earnings to some degree



No, I'm saying that if you say that a particular market, sector or security is under or over valued, using whatever metric you favour, you are taking a different position to the aggregate position arrived at between all buyers and sellers in the market.  Obviously everybody can calculate PE ratios so that information is already reflected in stock prices.


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## Jim2007 (1 Jun 2015)

galway_blow_in said:


> that they would be considered relatively small by international standards is not all that relevant



Well clearly you have a lot to learn when it comes to calculating value and assessing risk!  But at the end of the day it is your money to loose or is it the OPs.


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## joe sod (1 Jun 2015)

Because Ireland is a very small market a few big companies can dominate the index. For example there probably has not been much change in the top 20 companies in the german index as they are global dominant companies in the last 10 years. There has been dramatic change in the Iseq in 10 years. In 2005 the index was dominated by the banks so your portion invested in the banks would have been wiped not as bad as 100% bank shares but still substantial. Now it is dominated by the food companies who are on the crest of a wave but how long can that last, they are trading at very high P/E ratios in the expectation that the trend will continue. But Glanbia and Kerry are not global dominant companies, whereas Bayer, Basf , BMW are, that makes a difference. Even in banking it was much safer to invest in Deutsce bank or HSBC than Bank of Ireland because they are huge diversified banks


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## galway_blow_in (1 Jun 2015)

Sarenco said:


> No, I'm saying that if you say that a particular market, sector or security is under or over valued, using whatever metric you favour, you are taking a different position to the aggregate position arrived at between all buyers and sellers in the market.  Obviously everybody can calculate PE ratios so that information is already reflected in stock prices.




its not always wise to simply follow the market , a follower would have bought the S+P at the start of the year and would be up around 1% today , someone who took a more nuanced view might look at the likes of the DAX at the beginning of the year and they would be up around 16% today , you appear to be saying the market is always right , were those who were selling irish property in mid 2006 wrong , they certainly were in the minority


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## galway_blow_in (1 Jun 2015)

Jim2007 said:


> Well clearly you have a lot to learn when it comes to calculating value and assessing risk!  But at the end of the day it is your money to loose or is it the OPs.



slightly glib - reductive  reply , are you saying smaller companies ( relatively speaking ) are allowed a higher PE , I pointed to how the Austrian market which contains companies which are no bigger than those which make up the ISEQ , has a PE which is only 16

why exactly  is the irish market entitled to a higher PE than the DAX ?


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## galway_blow_in (1 Jun 2015)

joe sod said:


> Because Ireland is a very small market a few big companies can dominate the index. For example there probably has not been much change in the top 20 companies in the german index as they are global dominant companies in the last 10 years. There has been dramatic change in the Iseq in 10 years. In 2005 the index was dominated by the banks so your portion invested in the banks would have been wiped not as bad as 100% bank shares but still substantial. Now it is dominated by the food companies who are on the crest of a wave but how long can that last, they are trading at very high P/E ratios in the expectation that the trend will continue. But Glanbia and Kerry are not global dominant companies, whereas Bayer, Basf , BMW are, that makes a difference. Even in banking it was much safer to invest in Deutsce bank or HSBC than Bank of Ireland because they are huge diversified banks




that to me implies the ISEQ should have a lower PE than the DAX as the DAX is made up of giant companies which have for decades , had a global reach

oh and the iseq has not changed as much as you suggest , CRH is still by far the largest component and was ten years ago , AIB is the standout absentee


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## Sarenco (1 Jun 2015)

galway_blow_in said:


> its not always wise to simply follow the market , a follower would have bought the S+P at the start of the year and would be up around 1% today , someone who took a more nuanced view might look at the likes of the DAX at the beginning of the year and they would be up around 16% today , you appear to be saying the market is always right , were those who were selling irish property in mid 2006 wrong , they certainly were in the minority



I'm not saying the market is always "right".  I'm simply saying the market for publicly traded securities is highly efficient and captures the combined views of all participants in the market as to the appropriate price to assign to all securities at any particular point in time.


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## landlord (1 Jun 2015)

Galway_blow_in.....

I think Sarenco might be saying, what technique other than price to earnings ratio are are you using to find value that hasn't been already priced into the market?
I think everybody on ask about money.com might be asking that one ha ha !!


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## galway_blow_in (1 Jun 2015)

Sarenco said:


> I'm not saying the market is always "right".  I'm simply saying the market for publicly traded securities is highly efficient and captures the combined views of all participants in the market as to the appropriate price to assign to all securities at any particular point in time.




I tend not to focus at a particular point in time , I see little which suggests the index of irish shares should have a much higher PE than the german DAX , I take a long term view however

the weak euro will benefit Germany more than any other country due to its huge export sector , im happy that the irish economy is doing well but irish equities are richly valued right now , glanbia , paddy power , Ryanair , all richly valued


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## Sarenco (1 Jun 2015)

Fair enough.  I wonder why other market participants do not share your view?


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## galway_blow_in (1 Jun 2015)

Sarenco said:


> Fair enough.  I wonder why other market participants do not share your view?



there are a myriad of reasons why  indices are at different price multiples in different countries , Russias market vectors etf  is closer to a PE of 5 than ten right now due to the huge drop in oil prices and the weakening of the ruble  , its very cheap objectively speaking but because there is likely to be an oil glut for quite some time and because the usa is squeezing Russia from every direction , market makers feel Russia is a waste of time , market makers tend to take a very short term view much of the time

a PE historically is a useful simple measure of value , of course there is more to it than this but when it see the iseq at 19 and the dax at 16 , I know which one im more comfortable putting my money in , id also be more  comfortable putting money in the s+p at 19 than the iseq as its the ultimate indice in terms of diversification , liquidity , historical strength


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## Jim2007 (2 Jun 2015)

galway_blow_in said:


> im happy that the irish economy is doing well but irish equities are richly valued right now , glanbia , paddy power , Ryanair , all richly valued



These are at best micro caps and have no business in the portfolios of the majority of investors, so weather they are under or over valued should not be a concern to most people.

And if you take something like Glanbia, a look at some of the other matrix ratios suggest that it may not be as over priced as you think.  Which is precisely why you have to do a lot more work to determine value than just looking at the P/E ratio as you are doing.


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## galway_blow_in (2 Jun 2015)

Jim2007 said:


> These are at best micro caps and have no business in the portfolios of the majority of investors, so weather they are under or over valued should not be a concern to most people.
> 
> And if you take something like Glanbia, a look at some of the other matrix ratios suggest that it may not be as over priced as you think.  Which is precisely why you have to do a lot more work to determine value than just looking at the P/E ratio as you are doing.





funny how you say glanbia has no place in the portfolio of the majority of investors yet then go on to defend its valuation 

anyway ,  surely a basic valuation like PE can be used by average investors , I mean many wise people believe that the average investor ( and I am one ) is better off owning index funds than individual companies , I would proceed from that basis by suggesting an index fund with a lower PE is likely to  be a better buy , afterall , there are tonnes of excellent stocks out there , its merely a matter of buying them at the right time , surely the same applies with index funds ?

the two indexes in question here happen to be the DAX and this ISEQ type wisdom tree fund , were the two indexes in question the more similar sized  DAX and the French CAC , would you think the DAX is a better buy as its PE is 16 compared to the CAC which has a PE of 17 , both are large markets by European standards

is your problem with my theory the fact that I am comparing a large European country with a small one


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## Jim2007 (2 Jun 2015)

You cannot use the P/E ratio of an index the same way as for a company because it is a composite, it depends directly on the constituents - if an index is overweighted with financials it will have a low P/E simply because financials tend to have low P/E ratios, nothing to with over or under valuation!  By the same token, growth stocks and micro caps tend to have high P/E ratios and so an index constructed of such stocks would be expected to have a high P/E as well.


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## joe sod (4 Jun 2015)

also with regard to Iseq it has already recovered strongly from the lows it reached in 2011, however the iseq now comprises different companies than it did in 2007 so the recovery is by different companies, the banks are still penny stocks and they were a huge part of the iseq valuation in 2007. Also it has poor diversification, there are no oil companies (exploration does not count), no energy companies (no gas and electricity suppliers), no big pharma as far as I know, no infrastructure like ports, railways and pipelines.


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## galway_blow_in (6 Jun 2015)

joe sod said:


> also with regard to Iseq it has already recovered strongly from the lows it reached in 2011, however the iseq now comprises different companies than it did in 2007 so the recovery is by different companies, the banks are still penny stocks and they were a huge part of the iseq valuation in 2007. Also it has poor diversification, there are no oil companies (exploration does not count), no energy companies (no gas and electricity suppliers), no big pharma as far as I know, no infrastructure like ports, railways and pipelines.




having a major oil company in your index will weigh it down right now , its why a FTSE 100  index fund will struggle , BP and SHELL are a significant proportion

one of the reasons I like Germany so much right now is that there are no oil majors in that country


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