# Buying shares as a regular savings plan



## RichInSpirit (25 Nov 2011)

I have an interest in the stock market and I've recently adapted a buy and hold strategy for my chosen shares which I believe strongly in but are in general fairly battered at the moment. But rather than buying a once off large quantity of shares with a lump sum, I'm putting aside a small sum every week and attempting to buy a constant value of shares per week. Using buy orders rather than having to manually buy. And at the price levels for that week. And holding most of the shares for an indefinite period into the future. 
I've back tested this method back to various dates in the past and it appears to reduce the loses during a downward market. Not eliminate losses but significantly reduce losses. Conversely it also reduces profits in a rising market but I'm willing to live with that. 
I'm treating this as my own special savings scheme and keeping good records to see how it will go.


----------



## ClubMan (25 Nov 2011)

RichInSpirit said:


> But rather than buying a once off large quantity of shares with a lump sum, I'm putting aside a small sum every week and attempting to buy a constant value of shares per week. Using buy orders rather than having to manually buy. And at the price levels for that week. And holding most of the shares for an indefinite period into the future.


Sounds like a buy and hold strategy with euro cost averaging?


----------



## RichInSpirit (25 Nov 2011)

ClubMan said:


> Sounds like a buy and hold strategy with euro cost averaging ?



Yes it sounds like the Euro or Dollar Cost Averaging all right. Thanks for the links !
And it sounds very similar to the way that I've paid into savings policies and pensions that I've paid into in the past. Which were a constant amount per week or month. But they were saving policies & pensions sold by financial institutions and this time I'm trying my own hand at it in my own way. 

I am thinking of selling a certain proportion per year to take a profit which I intend to reinvest. But I still have to look at that side in more detail. Going to do a forward looking plan and try some "what if ?" scenarios.


----------



## ClubMan (25 Nov 2011)

I have been making regular contributions to various pension and unit linked investment plans over the past decade or so. It pains me to look at the statements these days. Just saying...


----------



## RichInSpirit (25 Nov 2011)

ClubMan said:


> I have been making regular contributions to various pension and unit linked investment plans over the past decade or so. It pains me to look at the statements these days. Just saying...



If you looked at your amount paid in to the policies to date and did an exercise on paper where you had put your gross amount into your policies in a lump sum back at when you started your regular payments, I wonder how would your position now look different? 

Different worse or better I wonder?


----------



## Rory Gillen (28 Nov 2011)

You have half the strategy right if you don't mind my saying so. Regular Investing is a time-honoured approach to dealing with volatility but as the saying goes 'you can't make a silk purse out of a pigs ear' and Regular Investing can't cope with a long drawn out bear market which we have had since the late 1990s. The developed equity markets were grossly overvalued then, but better now, and very cheap in Europe now. Nonetheless, even over the difficult 12-year period, Regular Investing would have protected your capital even if you got little return on it.

But I would question the second side of your strategy. If I understand you correctly you are buying your own stocks? Nothing wrong with that as long as you understand how to assess risk in them and diversify. Remember that risk in stocks changes over time so they need to be monitored and it is a more difficult task than many private investors realise. Recall the banks wee safe as houses for decades only to morph into leveraged property plays that few could understand at the time. An alternative is to buy listed funds (i.e. funds quoted on the stock exchanges). This way you avoid the risk of specific stocks while getting the benefits of regular inveting. In addition, listed funds are cheap to deal in and the two main types are exchange-traded funds (passive index tracking) and invetment companies (actively managed). Something to ponder. 

Rory Gillen


----------



## RichInSpirit (30 Nov 2011)

Thanks Rory for the thumbs up ! 

I hadn't even heard of dollar cost averaging before starting this thread, you learn something new every day. 
Yes I've heard about having diversity in your portfolio and heard of exchange traded funds. 
The indices could be regarded as the ultimate balanced portfolios. 
But some of the ETF's indices etc. are very expensive to buy into on a regular basis only putting a small amount in. 
They would suit larger pockets for sure !


----------



## Chris (1 Dec 2011)

One thing to keep in mind is that transaction costs can quickly eat into your profits. Dependent on the amount you are going to invest each mo th this can have a huge effect.


----------



## bigbustour (1 Dec 2011)

Chris said:


> One thing to keep in mind is that transaction costs can quickly eat into your profits. Dependent on the amount you are going to invest each mo th this can have a huge effect.



 That’s what I was thinking, if its a regular 'small' amount the transaction costs would make this a bit prohibitive or do we have different definitions of small


----------



## RichInSpirit (2 Dec 2011)

Chris said:


> One thing to keep in mind is that transaction costs can quickly eat into your profits. Dependent on the amount you are going to invest each mo th this can have a huge effect.



That's very true about the transaction fees for small size trades. You would have to find the most economical broker (or method) to suit your needs.


----------



## RichInSpirit (8 Dec 2011)

Re:Brokers, I'm doing my ' Dollar Cost Averaging ' using financial spread betting and my own spreadsheet to keep track of the process. Transactions are free . The overnight funding charges are minuscule. I'm staying under 1:1 leverage.

Re.Charges from Stock Brokers , I recently got charged €26 account maintenance fee for my regular share account on which I conducted no share trades in well over a year.


----------



## RichInSpirit (10 Jun 2015)

Update.
Never got off the ground with my original plan, but now I'm 2 weeks in on my new special savings plan, with some alterations to my original plan. I'm starting from a very low level and using the spreadbetting as my broker. 
I've done projections on it and that's why the plan is back in action.  I mightn't hit my projections and I might exceed them. 
From reading here and elsewhere I think that the tax man may figure in the plan too, but it's nicer knowing that at the beginning rather than getting a shock at some point down the line.
Another update promised in 5 years time!


----------



## Brendan Burgess (10 Jun 2015)

ISEQ Overall Index 

25 November 2011: 2,521

Today: 6,153

Increase: 144% 

I wonder if you have missed the boat? 

Stop messing with complicated spreadbetting and projections which are fairly meaningless. 

Just start buying shares. 

Brendan


----------



## Fella (10 Jun 2015)

I agree with you Brendan I think it's best to get stuck in as early as you can.

I want/wanted regular investment in shares I went with a part euro cost averaging strategy , I've done lots and lots of research and the info on this site has been invaluable , in my opinion it's best to buy an all world ETF over individual shares , it means you can buy a small bit into thousands of companies at once with only one transaction fee , you get diversification , you pay 33% tax after 8 years but you don't have to pay USC and prsi like on shares so it's much of a muchness . 

I put a large amount in and add to it regularly as my overall wealth goes up I want to have a certain percentage of it in stock market . Don't listen to anyone who says the markets at over valued or under valued imo nobody knows they are very efficient , I'm sure there is some kind of arbitrage available to stop the ETF's becoming inefficient. 

I buy every few months as I need to make a transaction every quarter to avoid fees I also don't know exactly how much I will earn so the amount I buy varies .

The killer for me is no loss relief on ETF's that's why I picked one only it's not ideal but it's worth remembering the ETF I picked holds 1500 or so companies so if I was to try replicate that in buying shares it be very very expensive and time consuming .


----------



## Sarenco (10 Jun 2015)

A few points:-


The exit tax on EU-domiciled investment funds (including ETFs) is currently 41% (not 33%).  This exit tax is payable on each "chargeable event", which in practical terms means every time you receive a dividend (obviously not relevant to accumulating funds) or sell/redeem your shares, with a deemed disposal every eight years.  In contrast, directly held shares (including investment trusts) and non-EU ETFs (which come with other tax problems) are subject to the normal income tax regime on dividends and CGT on capital gains (with available loss relief).

Historically lump sum investing has beaten "euro-cost" averaging roughly 66% of the time for a balanced portfolio over 10-year rolling periods.  Put another way, drip feeding your investments beats lump sum investing about a third of the time, with a reduced risk of a dramatic drawdown.

There are certainly very good reasons to invest in an "all-world" index fund, where you simply rely on the market to decide what shares/sectors/countries will be the winners but it is possible to net off losses on one fund against losses on another, provided they are within the same umbrella.  To take one example, the index funds on Rabo's platform are all within the same (Luxembourg) iShares platform.  As such, it is possible to tilt in favour of a particular market within the index fund space without adversely impacting your tax position if that's your preference.

At current valuations, regulators (e.g. the FCA) have generally required product providers to reduce the returns shown in their client projections.  In other words, while nobody can predict the future, the expected returns on global equities is considerably lower than has historically been the case given current valuations.
Hope that's helpful.


----------



## Fella (10 Jun 2015)

Thanks sarenco great post as always , I do know that it's 41% but I typed 33% apologies thanks for clarifying .

I typed a question in other thread basically I'll ask again as it's relevant if I buy the same ETF multiple times sometimes I make a profit but not always is loss relief available because it is just one etf?


----------



## Sarenco (10 Jun 2015)

Fella said:


> Thanks sarenco great post as always , I do know that it's 41% but I typed 33% apologies thanks for clarifying .
> 
> I typed a question in other thread basically I'll ask again as it's relevant if I buy the same ETF multiple times sometimes I make a profit but not always is loss relief available because it is just one etf?



I'm afraid loss relief is never available - you simply pay tax on the (net) amount received (or that you are deemed to have received every eight years).

Here's a link to the Revenue Guidance Note on calculating the tax payable on chargeable events:

[broken link removed]


----------



## Fella (10 Jun 2015)

Thanks Sarenco, Marc answered me in another thread going to sell everything and leave cash in bank earning nothing can't see any viable way of investing now


----------



## Sarenco (10 Jun 2015)

I'm not saying whether or not you should invest in equities (whether or not that is a good idea depends on a variety of factors) but you should never let the tax tail wag your investment dog!

Personally, I think that investment trusts are probably the most tax efficient way for for most Irish tax residents to create a diversified portfolio of equities outside a pension wrapper as things stand.  If you want to look further into this option, take a look at the AIC website (it's the industry body for investment trusts).  ITs are the original collective investment vehicle - some have existed since the 19th century - so they are not fly-by-night companies.  You will have to do your own research (as always) but a basket of half a dozen venerable ITs (like Bankers, Foreign & Colonial, City of London, etc.) might fit the bill.


----------



## Fella (10 Jun 2015)

Thanks very much Sarenco ,  

The risk is too great when there is no loss relief , I just can't see any way around ETF's now , I don't worry about the price of equities or whether they are going to go up or not but if I am dollar cost averaging or buying regularly then there is a large risk that I could break even or worse and make a few thousand on early purchases and lose a few thousand in later purchases therefore I won't be equal as I assumed but down after paying the 41% exit tax , its just criminal. 

I'm going to sell up tomorrow and take some time to think about my options, going to end up with a rather large sum on deposit earning 0 interest until i find my way again , put so much time into this ETF research maybe I was too naive and should of consulted professional advice instead of trying to do it myself. 

Can I ask you what you have invested in yourself if anything ?


----------



## Fella (10 Jun 2015)

ok I like these Investment trusts traded as shares and you pay 33% tax when you sell , it's all good , but are they only in GBP ? Thats a bummer buying now while the euro is so low compared to the pound.


----------



## Gordon Gekko (10 Jun 2015)

Guys

US domiciled ETFs are taxed just like shares. No exit tax, no 8 year event, loss relief available and CGT/income tax.


----------



## Sarenco (11 Jun 2015)

Well don't forget that with loss relief from CGT you can carry losses forward but not backwards so it wouldn't help in the scenario that you've outlined.  

If you have losses available (for example on bank shares, investment properties, etc.) then that makes the case for investing directly in equities/ITs as against funds even more compelling but again I would emphasise that you should never let the tax tail wag the investment dog - tax loss harvesting is really a minor benefit at best over the long term.

While I think the current tax regime for index funds is pretty awful, I wouldn't immediately jump to the conclusion that you should necessarily bail out and go 100% to cash - it very much depends on your overall personal circumstances.  Don't forget that you will have to pay DIRT (and possibly PRSI) on your deposit interest and at least with accumulating funds you get 8 years of roll-up before the deemed disposal.

Are you sure you are maximising your pension contributions (including AVCs if relevant)?  People often seem to forget that you can invest in equities within a retirement account...

As regards my personal situation - trust me, you wouldn't want to repeat my mistakes!


----------



## Sarenco (11 Jun 2015)

Gordon Gekko said:


> Guys
> 
> US domiciled ETFs are taxed just like shares. No exit tax, no 8 year event, loss relief available and CGT/income tax.



That is certainly true in terms of the Irish tax position. 

I don't want to go over old ground but hopefully we can agree that US domiciled ETFs are not designed with non-US investors in mind and come with US specific tax issues/complications.


----------



## Sarenco (11 Jun 2015)

Fella said:


> ok I like these Investment trusts traded as shares and you pay 33% tax when you sell , it's all good , but are they only in GBP ? Thats a bummer buying now while the euro is so low compared to the pound.



You will certainly have currency conversion costs (there are plenty of posts on here as to this can be minimised), stamp duty (0.5%) and broker commissions on acquiring shares in ITs.  However, your currency exposure is to whatever currency the underlying securities held by the IT are denominated - not necessarily GBP.


----------



## landlord (11 Jun 2015)

Fella.....everything that your discussing now has been driving me mad for a few weeks now....
I have a fairly large lump sum to invest and its a choice between....

1. Investment Trusts. (CGT at 33% with loss relief), (dividends as income tax 20/40% plus PRSI and USC).  Great diversity of assets available, Actively managed---good/bad???.
My concerns are do the fund managers abilitys justify the higher TERs
I just googled the TER of City of London Trust and found it was actually lower than I thought....0.4% and foreign and colonial 0.5% and both trusts appear to have outperformed the benchmarks over the last few years. (Or is that just the sales talk on the prospectus?)
My other concern is as Fella says buying anything in Sterling at the moment seems poor value now and a huge risk long term, considering over 10-20 years I would be fairly sure the Euro would strengthen, eating into your potential gains, when you convert back to Euro. Currency costs to consider too. 
Are all investment trusts distributing? Anything accumulating in my eyes is one less tax headache!!!!

2. US Domiciled ETFs. Tax treatment is the same as she has an investment trusts (CGT at 33% with loss relief), (dividends as income tax 20/40% plus PRSI and USC).  Great diversity of assets available. Only distributing ETFs no accumulating ETFs (tax headache!!! ). Conversion costs and currency risk when purchasing them (dollars), again due to the possibility of a strengthening of the Euro over time. 

3. EU/IRISH Domiciled ETFs.  Complicated tax structure 41% tax on gains and distributions, 8 years deemed disposal. Although there are accumulating ETFs (tax heaven!) Also some of these are denominated in Euros, for example Vanguard have several on the Amsterdam and Paris stock exchange , so no currency conversion costs, but I guess the currency risk of a strengthening Euro still exists. 

My wish list....
Simple tax structure preferably (taxed as shares)
Accumulating if possible
Low cost
Diverse portfolio
No currency conversion costs 
Reduced currency risk 
And Heidi Klum to be my personal asset manager!!!


----------



## Sarenco (11 Jun 2015)

Just to make the point again that your currency exposure is to the currency in which the assets of the fund/IT are denominated - not to the currency in which the shares of the fund/IT are denominated.


----------



## Sarenco (11 Jun 2015)

landlord said:


> Fella.....everything that your discussing now has been driving me mad for a few weeks now....
> I have a fairly large lump sum to invest and its a choice between....



...if you want to invest in collective equity investments. 

Bear in mind that paying down debt, for example, is always a risk-free, commission-free and tax-free option...


----------



## landlord (11 Jun 2015)

Sarenco said:


> Just to make the point again that your currency exposure is to the currency in which the assets of the fund/IT are denominated - not to the currency in which the shares of the fund/IT are denominated.



Sarenco you have mentioned this a few times now and I am not certain I and probably others fully understand it....
This is how I see currency risk....
Is this correct?

Say you invest in a U.S. WORLD FUND.....Double currency risk...
1. Euros are converted to dollars to purchase the fund. You invest for 10 years and during that period the value of the Euro against the dollar strengthens. When you sell your portfolio after 10 years your profits would've been dampened by the increased value of the Euro. 
2. If you buy this ETF, you will be exposed to currency risk within the ETF.  For example, the base currency of this world ETF fund is USD, but this world ETF will invest in many different countries stocks and therefore in many different currencies. If the fund invests entirely in non U.S. stocks for example and during the investment period the dollar strengthens, then the value of the fund in dollars would be less.


----------



## Sarenco (11 Jun 2015)

Say you exchange your euro for dollars at a ratio of 1:1 and invest in a fund whose shares are denominated in dollars and invests exclusively in US stocks.  After 10 years, say the NAV of the fund, expressed in dollars, has gone nowhere but you could now convert dollars for euro at a ratio of 2:1.  So in dollar terms you've gone nowhere but in euro terms you have doubled your money.

Now, let's say the same fund (pool of assets) issues euro denominated shares.  While the fund's NAV has still gone nowhere in dollar terms, you still double your money in euro terms simply because the relative value of the dollar in which the fund's assets were denominated has doubled.

Does that help?


----------



## landlord (11 Jun 2015)

Sarenco said:


> ...if you want to invest in collective equity investments.
> 
> Bear in mind that paying down debt, for example, is always a risk-free, commission-free and tax-free option...



I guess you are referring to paying down my RIP mortgage debt.  At ECB+0.75%, even a descent bank savings account after DIRT would earn more than that......but point taken!!!!


----------



## Fella (11 Jun 2015)

I'm going to do some research on these Investment trusts as in which ones to buy and sell off all of my ETF's now i'm done with ETF's they are a non runner for me. My Saxo account is in Euro I just had a look at the fees they charge - 

_Currency conversions of trading costs as well as profits and losses from trading activities are done using the mid-spread FX Spot rate when you close the position, plus/minus 0.5%_

That doesn't seem to bad , thanks for your replies Sarenco and landlord , i'll post up what I invest in if thats allowed, maybe you will do the same Landlord, there are lots of sites that list trusts and comparisons of them. 

My last issue was that Euro is relatively weak now compared to the past but I suppose I shouldn't speculate on currency movements it could move for or against me in future. I think though for my own peace of mind I will use a sterling cost averaging in this case and buy into these trusts with an initial lump of say 25% of what i had invested in ETF's and buy more every few months , over the next 10/20 years I will be buying at weak and strong points on currency scale.


Just in relation to Sarenco's point on " _but you should never let the tax tail wag your investment dog!" _surely at a certain tax level you have to take serious considerations to the tax implications, with no loss relief 41% exit tax the only way i could ever see irish domicilied ETf's been an option is if you just put one lump sum in to one ETF and never touched it again as regular topping up is too risky imo.


----------



## landlord (11 Jun 2015)

Sarenco said:


> Say you exchange your euro for dollars at a ratio of 1:1 and invest in a fund whose shares are denominated in dollars and invests exclusively in US stocks.  After 10 years, say the NAV of the fund, expressed in dollars, has gone nowhere but you could now convert dollars for euro at a ratio of 2:1.  So in dollar terms you've gone nowhere but in euro terms you have doubled your money.
> 
> Now, let's say the same fund (pool of assets) issues euro denominated shares.  While the fund's NAV has still gone nowhere in dollar terms, you still double your money in euro terms simply because the relative value of the dollar in which the fund's assets were denominated has doubled.
> 
> Does that help?



VUSA *Vanguard S&P 500 ETF *
is available on the New York(dollars), London(GBP) and Amsterdam or Paris(EURO) stock exchanges. 
The underlying assets are US stocks IN DOLLARS. So you are saying that regardless of which exchange you buy it on and in which currency, your risk is the strength of the dollar when you come to sell. I get this!!, but I can't see how my example above is not correct?


----------



## landlord (11 Jun 2015)

I am now swayed towards buying a few EU/IRISH Domiciled accumulating ETFs......
Assuming for example a 16 year investment, with hopefully, over that V long period no capital loss (the lack of loss relief then being no issue), there would be very little work required in managing the tax issues.(just the deemed disposal at 8 and 16 years and no dividends to account for). 

I don't suppose there are any accumulating investment trusts ?
Sarenco.....you mentioned a couple of times that investment trusts (which are UK based in GBP) are subject to 0.5% stamp duty (like UK shares). I have written down in my notes that there is no stamp duty on investment trusts. I just contacted TD Waterhouse and the response I got was "that's correct there's only stamp duty on the FTSE 350 stock". I have just sent an email back to confirm this (thinking Sarenco is never wrong !!)  and asked them to check specifically the London bankers trust (BNKR).


----------



## Fella (11 Jun 2015)

I'm trying to find on revenue where it says investment trusts are treated like shares for CGT and loss relief can't find it anywhere , i know most here say they are treated like shares but would like to find it in writing before diving in again and realising that Revenue haven't clear guidance on this and they will probably realease a note like they did for ETF''s and say they are gross roll-up , revenue site is a joke trying to navigate it.


----------



## landlord (11 Jun 2015)

Fella said:


> I'm trying to find on revenue where it says investment trusts are treated like shares for CGT and loss relief can't find it anywhere , i know most here say they are treated like shares but would like to find it in writing before diving in again and realising that Revenue haven't clear guidance on this and they will probably realease a note like they did for ETF''s and say they are gross roll-up , revenue site is a joke trying to navigate it.



Read this from Rory Gillen ...
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 (plus USC and PRSI on gross dividend), gains at the CGT rate and loss relief should be available.


----------



## landlord (11 Jun 2015)

Sarenco, Fella,.....information back from TD WATERHOUSE just now.....

I've just checked on this specific stock, (BNKR-UK bankers investment trust) and amongst investment trusts, it appears to be somewhat of an anomaly. Basically, if the market cap is below 170 million, then you aren't charged stamp duty. However, any assets with a market cap above that figure, are in fact subject to stamp duty, I'm afraid. BNKR's market cap is at  738.71 million, and as such, stamp duty would be charged.
It's an HM Revenue and Customs regulation as the stock trades on LSE, and it's charged at 0.5%. 
Our system picks it up automatically and we take it into account, when you place the trade i.e. it's factored into the consideration.

..........as if things weren't already complicated!!!


----------



## Sarenco (11 Jun 2015)

landlord said:


> I guess you are referring to paying down my RIP mortgage debt.  At ECB+0.75%, even a descent bank savings account after DIRT would earn more than that......but point taken!!!!



Hi landlord

I was really just trying to make the broader point that paying down debt is often the optimum use for disposable income that is not required for short or medium term needs, rather than commenting on your own circumstances.

I think you would struggle to find a sight deposit today that yields more than around 0.75% after DIRT, PRSI and fees.  Even if this net rate exceeds the effective interest rate on your RIP mortgage debt (allowing for the fact that 75% of the mortgage interest is deductible for income tax purposes), you still have to bear in mind that you are taking a credit risk with the deposit - the bank and any deposit guarantee scheme might go bust.  You might view this risk as minimal but it's still a risk that you would want to get paid for taking.  The extent to which you would want to be rewarded for taking this additional risk is obviously a matter of judgment.


----------



## Sarenco (11 Jun 2015)

landlord said:


> VUSA *Vanguard S&P 500 ETF *
> is available on the New York(dollars), London(GBP) and Amsterdam or Paris(EURO) stock exchanges.
> The underlying assets are US stocks IN DOLLARS. So you are saying that regardless of which exchange you buy it on and in which currency, your risk is the strength of the dollar when you come to sell. I get this!!, but I can't see how my example above is not correct?



That's it exactly - your currency exposure in that example is to USD.  This may well have been what you were saying above but I found the second part of your example somewhat confusing so I thought I'd restate the example in slightly different terms.


----------



## Sarenco (11 Jun 2015)

landlord said:


> Sarenco, Fella,.....information back from TD WATERHOUSE just now.....
> 
> I've just checked on this specific stock, (BNKR-UK bankers investment trust) and amongst investment trusts, it appears to be somewhat of an anomaly. Basically, if the market cap is below 170 million, then you aren't charged stamp duty. However, any assets with a market cap above that figure, are in fact subject to stamp duty, I'm afraid. BNKR's market cap is at  738.71 million, and as such, stamp duty would be charged.
> It's an HM Revenue and Customs regulation as the stock trades on LSE, and it's charged at 0.5%.
> ...



For all practical purposes, stamp duty (technically stamp duty reserve tax) is charged at a rate 0.5% on the acquisition on shares in an IT (there are a few rare exceptions to this general rule but I don't want to over complicate things). You don't have to write a cheque for this amount - it's deducted automatically like an additional trading spread.


----------



## Sarenco (11 Jun 2015)

Fella said:


> I'm trying to find on revenue where it says investment trusts are treated like shares for CGT and loss relief can't find it anywhere , i know most here say they are treated like shares but would like to find it in writing before diving in again and realising that Revenue haven't clear guidance on this and they will probably realease a note like they did for ETF''s and say they are gross roll-up , revenue site is a joke trying to navigate it.



Hi Fella

ITs are shares like any other and there has never been any real ambiguity as to how they should be treated for tax purposes in Ireland.  They are not subject to the funds tax regime because, well, they're not funds!

One additional thing to get a handle on with ITs are the discounts/premiums to NAV at which they typically trade, whereas ETF will always trade at NAV.


----------



## Fella (11 Jun 2015)

Thanks Sarenco great advice as always , I've been reading a lot about trusts since yesterday I am surprised that they outperform ETF's , I've 10k in my Saxo account going into a trust now ,i'm going to slowly sell my ETF's and buy trusts. Thanks for all your help. Have you invested in these yourself?


----------



## Boyd (11 Jun 2015)

Fella said:


> Thanks Sarenco great advice as always , I've been reading a lot about trusts since yesterday I am surprised that they outperform ETF's , I've 10k in my Saxo account going into a trust now ,i'm going to slowly sell my ETF's and buy trusts.



Any good reading you'd recommend on these? Im still torn between accumulating UCITS ETFs and something that doesn't require the eight year deemed disposal rule. Buying non UCITS ETFs seems like hassle, so maybe trusts is the answer....


----------



## Gordon Gekko (11 Jun 2015)

Sarenco said:


> Hi Fella
> 
> ITs are shares like any other and there has never been any real ambiguity as to how they should be treated for tax purposes in Ireland.  They are not subject to the funds tax regime because, well, they're not funds



There is actually plenty of ambiguity, and there are plenty of advisors who contend that they are funds.

Revenue's view is that some investment trusts are funds, but it is only their view.

Investment trusts typically are not funds because they are not regulated in the same manner as (say) a UCITs structure and because they are closed ended (i.e. new units are not created, the trust generally does not redeem investors' shares and in order for shares to be sold, a willing buyer must be found).


----------



## Sarenco (11 Jun 2015)

Gordon Gekko said:


> There is actually plenty of ambiguity, and there are plenty of advisors who contend that they are funds.
> 
> Revenue's view is that some investment trusts are funds, but it is only their view.
> 
> Investment trusts typically are not funds because they are not regulated in the same manner as (say) a UCITs structure and because they are closed ended (i.e. new units are not created, the trust generally does not redeem investors' shares and in order for shares to be sold, a willing buyer must be found).



Sorry but I strongly disagree.

Investment trusts (by which I mean fixed capital investment companies) have been taxed under the general income tax/CGT regime in Ireland for decades and I am at a complete loss as to why anybody would think this position ever changed.

I have never seen an opinion from any reputable tax adviser with any recognised expertise in this area as to why shares in an investment trust should be taxed any differently to shares in any other company.  Who are these mysterious tax advisers that suggest otherwise?

We actually now have three, Irish incorporated, investment trusts (REITs are a type of investment trust) and nobody has ever suggested that shares in these companies would be taxed under the funds regime.  Why would the position be any different for UK incorporated ITs?

Variable capital investment structures (whether authorised under the UCITS Regulations or any other relevant funds legislation) are specifically designated as benefiting from the tax regime applicable to authorised collective investment vehicles (where no tax is imposed at the fund level) by virtue of their authorisation.  ITs enjoy no such benefit.

There really is no ambiguity - ITs are not taxed as funds simply because they are not funds.

The fact that any individual tax adviser or Revenue official mistakenly thinks otherwise doesn't change this position.


----------



## Gordon Gekko (11 Jun 2015)

Well, for starters there are numerous investment trusts that operate discount control mechanisms. Which means that NAV and the unit price are correlated. Which makes the investment a "material interest" for tax purposes. Revenue's own view is that if the divergence between the two is less than 5%, the investment trust is a fund.


----------



## Sarenco (11 Jun 2015)

That's certainly news to me - can you direct me to the relevant guidance?

ITs have been operating discount control mechanisms for a very long time - when did Revenue suddenly decide that by successfully applying such mechanisms they should be treated as funds?  What about ITs that invest in assets other than publicly traded securities (where the published NAV is a guideline at best) - are they still treated as funds in these circumstances?  Is the fact that they are not be treated as funds in the UK for tax purposes ignored?  Or the fact that they wouldn't be treated as funds if they were incorporated in Ireland?  What about ITs that do not trade at a discount to NAV or those that trade at a premium without any market intervention are they somehow treated as funds?  What happens if an IT stops operating a discount control mechanism - do they somehow revert to being treated as shares?

I would suggest that argument really doesn't stand up to any degree of scrutiny.


----------



## Gordon Gekko (11 Jun 2015)

Sarenco

I have met with Revenue to discuss this issue and done significant work in this area. Aberdeen Asian Income is just one example of an investment trust which should probably be treated like a fund for tax purposes. It is most definitely a complex area and far from clear. For example, I am aware of one Big 4 firm who were of the view that ALL investment trusts should be taxed as funds until recently.


----------



## RichInSpirit (11 Jun 2015)

Points all taken on board Brendan. But I'm not swayed from my plan. 


Brendan Burgess said:


> ISEQ Overall Index
> 
> 25 November 2011: 2,521
> 
> ...


----------



## Sarenco (11 Jun 2015)

Gordon Gekko said:


> Sarenco
> 
> I have met with Revenue to discuss this issue and done significant work in this area. Aberdeen Asian Income is just one example of an investment trust which should probably be treated like a fund for tax purposes. It is most definitely a complex area and far from clear. For example, I am aware of one Big 4 firm who were of the view that ALL investment trusts should be taxed as funds until recently.



Are you referring to the Aberdeen Asian Income Fund Limited?  That company is incorporated in Jersey and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988.  Very difficult to argue that a company is not a fund when it is treated as such under the laws of its own domicile!

Would you care to name the Big 4 firm in question?  I would be astonished if any Big 4 firm ever formed such an opinion but I can check this quite easily if you would care to name the firm.


----------



## Fella (12 Jun 2015)

username123 said:


> Any good reading you'd recommend on these? Im still torn between accumulating UCITS ETFs and something that doesn't require the eight year deemed disposal rule. Buying non UCITS ETFs seems like hassle, so maybe trusts is the answer....



Well I currently have the MSCI world UCIT ETF thats accumulating , my intention was to sell this but I'm trying not to make impulsive decisions (for once!) Its a case of more money = more problems.  

I bought all of my MSCI world at almost the same price so I think i'll sit on this for a while the loss relief won't be a major problem but i'm certainly not buying any more.  The gross roll up and exit tax just doesn't work alongside dollar cost averaging in my opinion as you are likely to buy at times when it is over valued and at times when undervalued and when you sell you will be paying a sinful 41% tax on your gains without been able to deduct your losses first which should be illegal .

I'd say if you have a lump sum to invest and can pick one ETF thats accumulating and suits your needs then its perfect. Forget about it for 8 years.

I wanted to find on revenue site myself where it said investment trusts are taxed at x% but of course revenue would never make it that easy for someone to find. I'm guessing that because the investment trust is a share that it comes under shares taxation and there is no need to make a separate post about it , but i still think Revenue should make special reference to it to help novice investors like myself.

I just googled investement trusts and read about them on a few sites , Sarenco mentioned AIC website which is very good , I sorted the trusts by TER ( this may not be the best method ) as i want low cost , I then looked at that NAV discount or premium from little reading I've decided not to pay over 5% premium or to take a trust with an under 5% discount , I then just had a look at previous returns and charts to give myself and idea of volatility and had a look at the gearing of the trusts , the performance of the trust in comparison to similar trusts and the holdings , dividend yield etc.  Googling investment trust portfolios brought up a few sample portfolios . There is good reading on trustnet .com and morningstar uk  , I am shocked at how much these trusts outperform ETF's even without them been tax favourable had I read all this about trusts I would have went with trusts over ETF's , you can only buy them or they are mainly on the london stock exchange and in GBP which is the only downside but i suppose having have my net worth in another currency is some diversification in itself. 

I'm just reading the posts above and there may still be some grey area of how trusts are taxed which is unfortunate I know Sarenco is fairly certain but this is where the lack of clear guidance from revenue leaves things open to interpretation , I am going to ring revenue today and see can I get a clear answer.


----------



## landlord (12 Jun 2015)

Fella .....
Please let me know with all that research if you stumble across any investment trusts where the asset manager targets  non-distributing stocks.   I really want zero income and no tax headache !!
Thanks.....


----------



## Gordon Gekko (12 Jun 2015)

Sarenco said:


> Are you referring to the Aberdeen Asian Income Fund Limited?  That company is incorporated in Jersey and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988.  Very difficult to argue that a company is not a fund when it is treated as such under the laws of its own domicile!
> 
> Would you care to name the Big 4 firm in question?  I would be astonished if any Big 4 firm ever formed such an opinion but I can check this quite easily if you would care to name the firm.



Sarenco

The regulatory aspects of that fund are completely irrelevant in this context. The tests for "fund taxation" are "regulation" and "material interest" for collective investments in "good" jurisdictions. But for collective investments in "bad" jurisdictions (like Jersey), it's the "material interest" test only. Aberdeen Asian Income is subject to "fund taxation" because of the relationship between the market value of its shares and its overall NAV. The regulation that you refer to is meaningless in the context of Irish taxation.

It's hard to agree with your view that the Irish tax treatment of investment trusts is obvious and straightforward when you yourself seem to be confused by it!

Gordon


----------



## Fella (12 Jun 2015)

Why do revenue make is so complicated surely there is no benefit in it for them ?

We had someone here the other day speaking about conexim I think they are a financial advisor and was unsure of an 8 year rule towards a product , I think ETF taxation is clear now after revenue released guidelines my fear is they release further guidelines later to say investment trusts are taxed similar to ETF's . I emailed revenue today but they haven't replied yet .

We have some financial advisors or here just wondered would they say what they advise clients to invest in in Ireland ? Between direct investment in shares / trusts or ETF's ? Id imagine pay off debts and top up pension are ahead of that but for someone with no debts and pension maxed . Thanks 

Is Ireland the worst country in the world to be an investor ? It looks that way to me , the more money I accumulate the more sympathy I have with the super rich who move there tax affairs to another country to escape paying extortionate rates of tax on savings and investments.


----------



## Sarenco (12 Jun 2015)

Gordon Gekko said:


> Sarenco
> 
> The regulatory aspects of that fund are completely irrelevant in this context. The tests for "fund taxation" are "regulation" and "material interest" for collective investments in "good" jurisdictions. But for collective investments in "bad" jurisdictions (like Jersey), it's the "material interest" test only. Aberdeen Asian Income is subject to "fund taxation" because of the relationship between the market value of its shares and its overall NAV. The regulation that you refer to is meaningless in the context of Irish taxation.
> 
> ...



Gordon

I referenced the applicable Jersey regulation to make the point that the Aberdeen Asian Income Fund Limited is authorised and otherwise treated as a fund (or a collective investment vehicle if you prefer) in its own domicile, Jersey.  The material interest test is certainly relevant to the Irish tax analysis in this case because this company is an offshore fund.

UK incorporated investment trusts are not funds.  They are fixed capital, public limited companies that are not authorised or regulated as funds or treated as funds for tax purposes in the UK.  Shares in investment trusts are and always have been taxed in Ireland under the income tax/CGT regime in the same manner as shares in any other publicly traded company.  Unlike the position with a fund, shareholders in an IT have no beneficial interest in the assets held by the IT.

Whether or not the shares in an IT trade at a premium or discount to their self-published NAV is irrelevant to this analysis.  ITs, including REITs, are not required to be authorised as funds and are not entitled to be treated as funds for tax or regulatory purposes.

There really is no ambiguity.


----------



## landlord (15 Jun 2015)

Fella said:


> Well I currently have the MSCI world UCIT ETF thats accumulating , my intention was to sell this but I'm trying not to make impulsive decisions (for once!) Its a case of more money = more problems.
> 
> I bought all of my MSCI world at almost the same price so I think i'll sit on this for a while the loss relief won't be a major problem but i'm certainly not buying any more.  The gross roll up and exit tax just doesn't work alongside dollar cost averaging in my opinion as you are likely to buy at times when it is over valued and at times when undervalued and when you sell you will be paying a sinful 41% tax on your gains without been able to deduct your losses first which should be illegal .
> 
> ...



Fella just out of curiosity which provider did you go with for your world MSCI ETF. Was it I shares?


----------



## Fella (17 Jun 2015)

landlord said:


> Fella just out of curiosity which provider did you go with for your world MSCI ETF. Was it I shares?



I use Ishares , I'm was reading loads about investment trusts there is endless information on the internet not sure if that is a good thing or not . I'm just too busy at the moment to make a concrete decision about my financial future , I'm transferring 5k a day into Saxo so I am ready to go when I decide what I am going to do. I have come back to the idea of keeping the MSCI world ETF and adding more to that so that I have a large lump sum and make that my initial investment , then like yourself either buy berkirshire hathway or a fund or just buy an individual stock at random every few months when I save more money , I have no real plan which annoys me , I'm 34 now and i'll likely see a few crashes before I ever take this money out but is should appreciate in value over time. I believe that the markets are efficient so I'm getting par value whenever I buy. I should have listenned to Brendan's advice and just lumped all my cash into the stock market in one go. Buffet says stick all your money into a low cost tracker and keep 5% in cash , I feel like i'm not brave enough to make that move as much as i would like to . I wonder what Buffet's advice would be to an Irish investor who has 41% exit tax every 8 years.

Have you made a decision on what you are doing Landlord?


----------



## Fella (17 Jun 2015)

I was looking at a few funds that are accumulating earlier landlord , I like this FTSE tracker
http://www.fundslibrary.co.uk/funds...ss_doc_simplified_prospectus&user=hl_web_test

Legal and general class c its TER is only 0.06%

I seem to able to get the same TER  same index trackers in investment trusts as I can in ETF's


----------



## landlord (18 Jun 2015)

Fella said:


> I was looking at a few funds that are accumulating earlier landlord , I like this FTSE tracker
> http://www.fundslibrary.co.uk/funds...ss_doc_simplified_prospectus&user=hl_web_test
> 
> Legal and general class c its TER is only 0.06%
> ...



This is an UNLISTED UK unit trust.....I think? When I phoned a couple of these companies e.g. Fidelity last month, they said they would not accept investors on the irish tax system.
I have set out my investment plans and reasoning at the end of this thread.

http://www.askaboutmoney.com/thread...-but-virgin-stock-market-trader.193863/page-3

I know you're not supposed to time the market but I feel I need to wait until this Greek situation is sorted before I jump in.

Here are some listed FTSE 100 ETF accumulating UCITS trackers
https://www.justetf.com/en/find-etf.html?query=FTSE+100


----------



## Fella (18 Jun 2015)

Cheers you mention this headache about filing a tax return for dividends , I am trying to find out how to do that to see hassle it actually is , as usual its very hard to find info on the revenue website , is there a key post on how to pay dividend tax anywhere ? I can't find one.


----------



## landlord (18 Jun 2015)

Fella said:


> Cheers you mention this headache about filing a tax return for dividends , I am trying to find out how to do that to see hassle it actually is , as usual its very hard to find info on the revenue website , is there a key post on how to pay dividend tax anywhere ? I can't find one.



http://www.revenue.ie/en/tax/it/leaflets/guide-pay-file.pdf

Look at panel E and F

I have to admit I havnt looked through this guide properly myself!!


----------



## landlord (18 Jun 2015)

Fella just out of curiosity assuming you are an average earner and will be paying on the dividends income tax at 40 %, USC at 7 or 8 % and PRSI at 4 % total = 51% or 52% and over a year 5 year investment period you sell up, having received for example GROSS 5000 Euro dividends after 5 years and 5000 Euro gain on the investment trust.
5000 gain at 33%      = 1650 tax
5000 dividend at 51%= 2550 tax
*TOTAL                        = 4200 tax* on investment trust (or u.s. ETF) (slightly higher if you are in the 8% USC category)

for a EU UCITS ETF
5000 dividend at 41% = 2050 exit tax
5000 gain at       41% = 2050 exit tax
*TOTAL                         = 4100 tax* on EU (UCTIS) ETF
Assuming this EU ETF was accumulating and you earned 10,000 gain over the 5 years then the total would also be 4,100 and no extra paperwork (due no income) over the 5 years...I think I am probably wildly estimating/simplifying things there though.

With no experience in stock market investing I have no idea if this ratio gain/dividend (5000/5000 as i have used) is close to what you can expect, i guess it depends on whether the trust targets high or low income (dividend) stocks? but food for thought......
However Regarding picking an investment strategy based on tax issues we must remember what Sarenco keeps banging on about......

We shouldnt forget Sarencos advice though about his ill fated investment doggy with the bionic tail.....or something like that.....


----------



## dub_nerd (7 Jun 2016)

Fella, (or anyone else here), I wonder if you took the plunge on any UK investment trusts last year as you were considering, and what the experience has been? I'm considering the same, and keeping an eye on any volatility in either the EUR->GBP exchange rate or share prices coming up to the Brexit referendum. (Yes, I know one is not supposed to try to time the market ... but I've never really accepted that).


----------



## RichInSpirit (7 Jun 2016)

Hi Dub Nerd! With a good mathematical brain, you should take a look at the spread betting. It's simple but powerful maths. And most importantly it's outside the interests of revenue.


----------



## dub_nerd (8 Jun 2016)

I admit to knowing very little about it, but isn't spread betting just gambling ... with the house guaranteed to win by controlling the spread? Where does the maths come in?


----------



## Fella (8 Jun 2016)

Spread betting is just gambling you can't win unless you have an edge that can beat the spread. 
Dub_nerd I've bought investment trusts in GBP yes I'm regularly investing more money into markets as part of my plan , I just stick blindly to my plan of invest regularly if my spreadsheet says buy 5k of foreign and colonial tomorrow and Sky news tells me sterling could drop 50% tomorrow I'll still stick to my plan. 
Sterling is what it is imo it's at a fair price based on the percentage price of a Brexit or not. I've not much interest of a Brexit happens or not but if I had I'd just back it on Betfair in a straight yes no bet. 
Unless you have information that others don't have re Brexit then everything is factored in to prices I don't believe there is any edge to have so buying trusts now or afterwards is also a form of gambling .


----------



## dub_nerd (10 Jun 2016)

Thanks for the info!


----------

